Summation

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.

Position Players verses All-Around Athletes

(This blog was first featured on VentureBeat)

Hiring managers face a dilemma similar to coaches: Should you hire someone who’s really good at one particular thing – or someone who is more of an all-around player?

The question is: should you optimize on experience (people you are confident that will get a specific task done) or on potential (people who are great all-around athletes but not as good at a task you need to get done now)?

Above all else, you should always hire A-Players exclusively.  Never hire people that are “good-enough.” You want GREAT people in your organization -- people that you love work with and people you’d walk through walls for.

The Position Player
The position player is someone who is amazing at one core thing that your company needs.  A professional football team has a ton of position players.  These are some of the best people in the world at their position (and they are highly compensated because of it).  When building a great football team, you need a great quarterback, linebacker, wide receiver, kicker, coach, groundsperson, doctor, and more.  You need people that are incredibly good at one key role and do it great consistently.

The All-Around Athlete
The all-around athlete is someone that is good at many positions but may not the very best at any particular position (like a winner of the Olympic decathlon).  A great athlete on the field is someone that has burst speed, endurance, hand-eye coordination, court-sense, and is a team-player.  In a company, a great all-around athlete is likely someone who is crazy smart, works really hard, has a great attitude, communicates well, and is a team-player.


So should your organization recruit the Position Player or the All-Around Athlete?
Answer: it depends on where your company is now.

Scaling mode
If your company is in scaling mode and you know what you are going to be doing for the next three years, you should optimize for position players.  While great position players are usually very expensive, they know how to do get their thing done extremely well.

If you are putting together the world’s best football team, you know you are going to need a great kicker.  It is going to be extremely hard to win without someone who can kick long field goals consistently, so it is extremely important that you find this person.  A kicker is highly specialized (they are probably not going to play any other position) and would be extremely difficult to retrain.  So you only want to invest in getting a kicker if you are sure you will need one for the years to come. 

Suppose your company is an ad network looking to build a portfolio of publishers. Someone who’s extremely familiar with the internet advertising space (perhaps someone who has helped build publisher networks in their last two jobs) would be the ideal choice. They won’t come cheap, but they may have the experience to attract world-class publishers.

Change mode (pivoting)
When you are in start-up mode (which might be for many years depending on the company), your business model is likely to change frequently as you pivot based on customer research and an evolving market. 

When you are in change mode, it’s best to optimize for hiring all-around athletes. There’s no sense spending time and effort recruiting the best field-goal kicker if next year you decide you want to play basketball instead of football.

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Avoiding early mistakes — and how to step on the gas

One of the common mistakes start-ups make is to immediately bring position players on board. It’s a risky proposition. While hiring position players will significantly increase the chance of success for your current model, it gives you little room to pivot. Any significant change in your business model might force you to swap out your team.

If you are tech company in change mode (or even if you are developing a “start-up” within a large company), start by finding talented software engineers. (Regardless of the company’s shifts, it’s a safe bet  you’ll need people that can write great code.)

Don’t get too specialized, though. If you hire a killer iPhone developer, that may backfire if you end up building back-end billing systems for large businesses.

For non-engineers, change-mode companies should optimize for people who are really smart, get stuff done, and can easily communicate complicated concepts. These people are likely going to be valuable in any setting.

When you finally enter scaling mode, you’ll be well-positioned to accelerate by hiring key position players. You’ll also likely have found that many of your all-around athletes have morphed into position players themselves. With a few additional hires, you can augment their strengths.

Summation:
If your company is on a straight road and you want to accelerate growth and propel the company forward, add position players.  If the road ahead is cloudy, optimize for all-around athletes.

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The number one reason people fail as entrepreneurs is that they never even try

The number one reason people fail as entrepreneurs is that they never even try

Try. The great Wayne Gretzky said that "You miss 100% of the shots you don't take."   Take the shot.  (Yes Holden, reach for the golden ring.)

My advice to entrepreneurs: spend less time evaluating the market and more time doing.  Just do. 

Ready, Fire, Aim ... and then repeat. 

It is alive! The Death of Email Has Been Severely Exaggerated

It is hard to go to a tech gathering these days and not hear the phrase “email is dead.”  Everyone says the same thing: “no one is going to use email in the future because my children don’t use email.” 

Saying email is dead is rational, understandable, and … dead wrong.   Email is here to stay and it is only going to get more, not less, critical to our lives.  

First the facts:
People spent more time in email in 2010 than any prior year.  The next biggest year was 2009.  The next biggest was 2008.  And so on.  And 2011 will certainly be the biggest year for email ever.   We are still on a rising trend as mobile devices are accelerating the growth of email.

The best proof of email’s continued ascendency is all the profit companies are making from it.   Given email is an old technology, it is incredible that there are hundreds of companies that make over $50 MM/year just selling email deliverability services. 

The Email Service Provider (ESP) space has been growing by 30% per year over the last several years.  Companies like ConstantContact (NASDAQ: CTCT), Responsys (NASDAQ: MKTG), ExactTarget, MailChimp, VerticalResponse, Blue Sky Factory, iContact, Cheetahmail, Datran’s Stormpost, e-Dialog, Silverpop, Sendgrid, YesMail, Eloqua, and hundreds of others are providing the ability to send billions of emails for millions of businesses.

While social media gets all the hype, the combined revenues of all the social media marketers pale in comparison to the boring email companies.  

And look how email has revolutionized industries.  Gilt Groupe – an email list for fashion items – now has a higher valuation than some of the most well known retail brands.  GroupOn has revolutionized services by sending them out to deal-seeking consumers via email.  And organizations like MoveOn have galvanized hard-core supporters through the simple use of an email list.

Even traditional retailers have massively benefitted from email.   Companies like the GAP, 1800Flowers, Buy.com, and others generate a huge amount of their revenue (and a larger amount of profit) from emailing their customers and letting them know about special offers and new products. 

Email marketing is expected to be the top area of investment spending among marketers in 2011.  Email drives more revenue than any other medium (even mediums like TV).  And email is almost certainly the highest ROI center in marketing.

The power of email is that it is asynchronous (the recipient can read it whenever they want), it can be personalized to the user (unlike a Twitter post where everyone reads the same message), it is inexpensive to send (unlike direct mail), free to receive (unlike SMS), it is very trackable, and it is easy to access for almost every American with a wallet.

Some definitions:
Facebook wall posts aren’t email (they are visible to everyone) but Facebook messages are (they are sent to only a small number of people).   While IM is not email because it is meant as a synchronous means of communication, SMSs might become just another form of email (though it will likely continue to have a higher cost).

All of us are overwhelmed by our inbox.  But information n overload is not confined to email: we’re becoming overloaded with our newsfeed, tweets, LinkedIn stream, SMS messages, RSS feed, and the dozens of other sources being thrown at us every week.  There will be more tools in the future to make the experience of using and managing email more enjoyable and more productive … and because of that, I don’t expect to email usage to peak for at least another 15-20 years.

None of this means email will stay the same.  It won’t.  Email is already getting more social, more filterable, more actionable, and more personalized.   We’ll see some great strides in email in the coming years and it will continue to evolve and become more important in our lives.  

  

hire the smartest, nicest, get-stuff-done-ist people in the world

hire the smartest, nicest, get-stuff-done-ist people in the world. then your company will be unstoppable

it is a simple formula:
Great Person = Super Smart + Massively Productive + Nice
1. Hire people that are scary smart
2. Hire people that get tones of stuff done
3. Hire people that are nice (nice people are undervalued)

Every business school should teach a class called "Built to Fail"

Failure is a badge of honor.  People need to learn how to fail.  If one never fails, one is setting their sights way too low.  

Aim high.  If you are succeeding more than 30% of the time, than aim even higher.

Why Entrepreneurs Should Ask VCs to Sign NDAs

Everyone who has ever raised money from venture capitalists knows that VCs don’t sign NDAs. Their reasoning is this: since they look at so many businesses and might fund a competitor, they cannot be encumbered by a non-disclosure agreement.

But I’m not sure that rationale makes sense.

What an NDA is

 An NDA is a legal contract that protects the confidentiality of ideas, knowledge, processes, and other information between two or more parties. NDAs are common practices in the business world where, in order to create strong and trusting relationships, you often need to share confidential and sensitive information.

Most business executives, especially those in the technology industry, regularly sign NDAs because they treat confidentiality very seriously. Also, most employees sign an NDA when they join a company (and sometimes they sign an NDA when they are evaluating whether to join a company).

What an NDA is Not

An NDA is not a non-compete or an exclusive. Just because you sign an NDA with Coke doesn’t mean Pepsi cannot be your customer. It does mean that any confidential information you received from Coke cannot be revealed to Pepsi (or to anyone else). The information from Coke is their property. They just agreed to share it with you for a specific reason and you agreed not to share it with anyone else.

Now let’s get back to the world of venture capitalists.  When you are raising money, it would be unfair for the VC to sign an exclusive with you since they might invest in your competitor.  But it is also unfair that they can take all your data and insights and just give it to a competitor that they might invest in.  

Here would be a sensible change to the fund-raising process:

• For the first meeting between the VC and the company (including the initial deck), an NDA should not be required. Any confidential information (like revenue numbers) can be left out of the initial deck.

• But for any additional meetings between the VCs and the entrepreneurs, an NDA should be in place. This will increase trust between entrepreneurs and VCs, foster a more open discussion and exchange of ideas, and underscore the seriousness of confidentiality of the process.

Of course, as an entrepreneur, I’ve never done this myself and I don’t know how VCs will react.  (Even as an angel investor, I have never been asked to do it).  Potentially, only entrepreneurs at hot companies could demand this.  But this small tweak to the process might further the trust between entrepreneurs and their potential long-term business partners (the VCs).

 

new packaging changes brands

Coke recently created new beautiful bottles.   makes me want to drink more soda.

The Entrepreneur vs. The Strategy Consultant

The Entrepreneur is very different from the typical McKinsey-esque strategy consultant. Both are extremely smart, driven, persistent, creative, and determined. But I have found that there are some major differences.  
    
First, entrepreneurs tend to take more ownership  
of their jobs. My definition of an entrepreneur is someone who steals office supplies from home and brings them to work.  
 
Second, most entrepreneurs I know tend to be B students in college. The entrepreneur never got straight A's because either: 
(a) She didn't care a lot about her grades, or 
(b) She was too busy doing other things to worry about her grades. 
 
I say "she" in this example, because most entrepreneurs are women. Far more than 50% of new businesses started in the U.S. are started by women. 
 
Entrepreneurs tend to be street-smarter than strategy consultants. Entrepreneurs are more practical, more focused on the bottom line, and more attuned to real-world contingencies.  
 
A typical strategy consultant job interview might go something like this: 
 
"I toss a coin. Heads you win $10,000. Tails you lose $6,000. Do you play this game? Why?"  

And a typical strategy consultant answer would go something like this:  
 
50% chance I win, 50% chance I lose. So my decision calculation goes something like:

 

Winnings: (0.5) * $10,000 =  $5,000

Loses:    (0.5) * $6,000  =  $3,000

                             ------

My net value of this game is $2,000

 

Therefore, even if I am very risk averse, I'll still play this game, because I can afford to lose $6K when the payoff is so much higher.  
 
A typical entrepreneur would look at this game totally differently and would ask a series of questions:  

* How do I know the coin is fair? Maybe tails is much more likely to come up. Can I test the coin by flipping it 500 times to see if it is consistent? Do I really want to waste my time performing and recording 500 coin tosses?  
 
* How do taxes affect my wins and losses? Is Uncle Sam going to take a huge chunk of my winnings but not recognize my losses? Can I only apply my losses to gambling gains? How are state and city taxes affected?  
 
* Do I have to pay in cash if I lose and do I get cash if I win? If that is the case, are we going to show up at the location with all the money? Will I be secure? Can I pay by credit card to get frequent flyer miles?  
 
* How can I be sure I will collect from you? Are we going to hold the money in a third-party escrow? How much will that cost?  
 
As you see, the entrepreneur lives much more in the rough-and-tumble real world where spreadsheet models don't always happen.  
 
Let's take another interview question as an example - this one straight from a major strategy consulting firm:  
 
"You're flying from London to New York and you are sitting in first class (because we only fly first class, of course). You happen to be sitting next to the CEO of the largest paper-clip company in Britain who is traveling to the U.S. to give a speech. He needs to know how many paper-clips are sold in the United States ever year. What is your answer?"  
 
The typical strategy consultant would use the basic plug-and-chug algorithm that every other smart interviewee would answer:  
 
"Well ... there are 300 million people in the U.S. and they each buy on average one box of paper clips per year ... and they each get six legal documents per year ... but now less paper is being used than last year because of electronic mail and all of us consultants saving paper by writing everything landscape ... so therefore there are 2.79 gazillion 
paper clips sold each year ..."  
 
The entrepreneur responds much differently:  
 
* What about those plastic triangle clips? Binder clips? Do they count?  
 
* Mr. CEO -- can I ask you how many paper clips are sold in Britain? Why would Americans use more paper clips per capita than Brits? UK has about 60 million people, the U.S. has about 300 million - that means we are about 5x bigger than you. So take the number of paper clips sold in Britain and multiply it by 5 and voila!!  
 
* This guy is an idiot ... He's in the paper clip business and he doesn't even know the number of paper clips sold in the U.S.! Is he just playing golf all day?? I hope he goes to the bathroom soon so I can call log-on to my E*TRADE account and short this guy's stock. No time to waste ...