Category: Startups

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Finance Startups

Day 149 and Optimizing for Outcome

I came across a thread today by Sahil Bloom on human goal setting and the mental models we manipulate. He introduced me to Goodhart’s Law

When a measure becomes a target, it ceases to be a good measure. If a measure of performance becomes a stated goal, humans tend to optimize for it, regardless of any associated consequences. The measure loses its value as a measure! Goodhart’s Law is states “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” But the concept was popularized by anthropologist Marilyn Strathern. She generalized the thinking and called it Goodhart’s Law. “When a measure becomes a target, it ceases to be a good measure.”

I am fascinated by this tendency humans have of fixating on the things we think symbolize progress instead of the actual outcome. Sahil names a number of instances in which this has led to bad business outcomes. CEOs managing to short-term stock goals has been one that has long frustrated me.

Startup land is immune from this tendency either. I’ve seen product teams fixate on OKRs such that they never miss a single metric but fail to launch their product on time. Or a venture capitalist will toss out something like an ARR goal for a Series A only to have a founder chase that number for a year and still not get funded when they hit it. We think these goals are the goals in and of themselves. But really launching the product on time and closing the series A are the only thing that matters. As long as we hit our goals who cares what metrics we used?

This is of course set against the classic “what gets measured get managed” which is an apocryphal quote from business theorist Peter Drucker. It may in fact be total bullshit. It may be that measurement actually hinders management. Said rather well by Simon Caulkin

Measures set up incentives that drive people’s behaviour. And woe to the organisation when that behaviour is at odds with its purpose.

Lest you worry this is just a business problem when I was single in my twenties I made a spreadsheet of the various gentlemen I was dating. I felt like I needed a way to make the process more efficient so I starting weighting categories of characteristics that was most important to me. I like intelligent men so I started listing their college degrees. I liked men who were into quantitative thinking so I started noting if they worked in banking or academics. And well you can imagine how this took a turn for the worst. Instead of meeting smart men that likes to look at the world through numbers I met a lot of bankers that went to Harvard. I was optimizing for the wrong outcome.

Next time someone tells you that some metrics or goal is the only thing that matters stop and question if it makes sense for the long term objectives. I’m not saying bankers from Harvard aren’t smart but I’m also not saying that all smart men are bankers from Harvard. And that turns out to be a pretty crucial difference.

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Finance Startups

Day 146 and Gossip

Gossip drive the world. The stories we tell about other people reflect a lot. Even if we claim we don’t care what others think what others think moves the world around us. And I would posit that this actually isn’t a bad thing. It can drive closer bonds and increased connection.

There is a concept in evolutionary psychology called indirect reciprocity. Natural selection favors strategies that base the decision to help on the reputation of the recipient. Social interactions in which one actor helps another and is then benefited by a third party are key to cooperative reputations.

This isn’t just a systemic population level issue either. People who are more helpful are more likely to receive help. It’s uneven obviously and people can obscure their reputation. Depending on if you are up or downstream of helping or being helped, you make different calculations. Some people help more but they feel it’s worth the cost. They are downstream. Others accept more help because they are upstream. We are all making trades based on our position and arguably they are fair market trades.

How we decide to cooperate and with whom is driven considerably by reputations and shared value beliefs. Relaying reputation signals to bolster your capacity to connect to others is actually a key part of empathy. We need to establish psychological safety to partner with each other. Gossip helps us find suitable relationships. This is especially true in disciplines which require creativity. Quoting myself on the topic of psychological safety in venture capital.

If entrepreneurs are solving entirely new problems with high chances of failure feeling like they can trust their financial partners should be a top priority. Yet the atmosphere of distrust is pervasive. Venture capitalist and entrepreneur are constantly managing the information flow between each other.

Managing the information flow is a key component of gossip. Showing you understand their context, their fears and their reputations concerns helps you. An act we denigrate in popular culture actually helps you to deepen the relationships as each signifier breaks down space between two people and builds trust. So don’t knock gossip. It has evolutionary, societal and individual benefit. Just remember the ultimate outcome is about bringing people closer.

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Startups

Day 144 and Scars

I have significant e-commerce, direct to consumer and retail business experience. I’ve managed multi-million dollar P&Ls, worked on iconic billion dollar brands and started my own direct to consumer cosmetics line. You’d think with that experience I would be deeply bullish on my ability to pick up and coming startups in the space. But I don’t particularly want to invest in digital brands or online retail. And I think it’s scar tissue.

I’m not saying flat out“no” I won’t ever invest in a DTC business or an e-commerce startup (I have and I will again) but a little bit of knowledge can make it hard to preserve creativity and imagination. Many founders can come out of a space where they have dedicated years of their lives and simply want space away from their expertise. They know too much. They’ve seen things. The scar tissue that forms to keep you working during the long dark soul of startup pain is still tender.

When I mentioned this lingering pain others pointed me to other areas they struggled to hear pitches or invest because of experience. Rental businesses and neobanks from Maia Bittner, certain e-commerce verticals from Lee Edwards, fitness from Jason Jacobs. It’s a common phenomenon among founders.

I’ve got lots of opinions why certain kinds of businesses won’t thrive or have business models that won’t make the kind of return my own personal investing thesis demands. But the truth is that I now have enough expertise to simply know more than is good for me. Ironically this means I should spend more time as an advisor or consultant on certain kinds of businesses but it takes a special founder to coax it out of me. Because I do have valuable insights and I want to share them.

But the last thing I want to do is pass on the trauma of my own experiences. Founders deserve to have their psychological safety preserved so they can build the company of their dreams. Some painful insights from a founder that came before them might help them avoid some pitfalls, but if they take our traumas too seriously they may never find their own path. And that kind of backward looking “it will never work” or “trust me kid I’ve been around the block” attitude can really bring creativity down. So I will always share my honest experience with anyone who asks but I’m hesitant to ever let anyone take my lessons to close to heart. You very well may be the one that breaks through where no one has before.

So when someone pitches me their new retail startup or DTC brand or cosmetics concept I try to be honest that I may nit be the best fit. I’ve got scar tissue. And if a founder insists that I can help I will try. But remember not all skepticism, fear, distrust or dislike is about you. Sometimes it’s all about the trauma of having lived it before. Asking someone to live it again is the ultimate act of trust. And maybe just maybe we get to firm new scar tissue together.

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Startups

Day 125 and Working With Startups

One of the most frustrating aspects of startup life is the vendor startup relationship. There are so many pitfalls and disasters that can befall each side. That naturally leads to a lot of dysfunctions as each optimizes for their own needs, a process that unwittingly leads to the disasters we sought to avoid in the first place by trying to prevent issues.

From a startup’s perspective there are two key issues. Established businesses tend to be slow moving. They are slow moving as they have process and documentation. Nothing is more frustrating to a startup than needing a nimble partner that can throw shit at the wall only to get a meticulous vendor that documents all the shit that didn’t work in exacting detail. This isn’t to say that one shouldn’t report (in a remote first culture documentation is even more crucial) but 40 page decks on what happened will send a founder running.

From a vendor perspective startups are frustrating because they never have any of the assets, documentation or processes in place that make your job possible. Anyone who has become embroiled in a mess of half functional SaaS operation software knows what I mean. How are you supposed to deliver on a contract when all the basics you need from a startup are impossible to locate and occasionally contradictory?

The tension between the two workflows is clear. Especially because startups eventually become more process driven and operationalized over time and vendors are always looking for ways to become more nimble and cost efficient. So you’ve got two parties who want to become more like the other, but as they do that risks upsetting the partner that chose them for the opposite virtues. If this were a romantic relationship it would be heading for a breakup. “You’ve changed man!”

My best advice to vendors is to be as flexible as possible with startup clients. The faster you provide an output the more likely it is that the founder will come to rely on you. Most successful startup vendors simply roll up their sleeves and start producing. They don’t scope in too much detail or negotiate contracts that lock them in, no, successful startup vendors know they give themselves security and contract stability simply by giving a founder what they need every day. As you find more needs you act on it. You stay flexible till suddenly you’ve become the crucial partner that gets budget every quarter. As a startup grows becoming the indispensable partner means that you grow along with it. Your goal should be to have your client succeed at the same pace that you are succeeding.

My best advice to founders is to allow your vendors best traits to rub off on you. Paying attention to their competencies allows you to build up teams that support that. That then enables your vendors to perform even better for you as the fluency on expertise develops. Great marketing teams don’t just produce great marketing in-house but rather they allow it to flourish in the entire ecosystem. There is a reason why CMOs have winning agencies and winning agencies have great brands. The truth is that you will always get the most out of your vendors if you respect what they excel at and spend your time and money prioritizing that support.

The danger if you don’t make productive vendor startup relationships is two fold. One startups will waste valuable capital with a partner that was never a good fit. Two vendors will waste billable hours and employee energy on accounts that have a high probability of imploding. It’s a waste of money for both sides. But when it works well lol it’s absolutely money.

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Finance Internet Culture Startups

Day 119 and Status Narratives

I’ve mostly worked inside insular industries. There is something about disdaining a club and then slowly forcing it to adapt to me that I find appealing. My handle on Twitter “AlmostMedia” wasn’t actually meant to be a joke about the ephemeral nature of timeline driven content (though it is now) but was an inside joke about my first personal blog.

I wasn’t as comfortable being an outsider when I was younger so a common theme on my blog was about how I “almost” achieved insider totems and status but never quite did it right. I never felt like I was stylish enough, cool enough, rich enough or had enough status symbols. Now I kinda laugh at myself as I realize semiotics is as driven by the out group as the in group. I always had the power to be enough.

But thanks to this insecurity about being “almost” but not quite right I’ve achieved a pretty valuable skill set. I’m able to see what is coming, what will resonate, and most importantly what will have status. I’m not always great at the timing (I’m often too early) but I am very good at nudging narratives into the popular conception. I call this the Thursday Styles problem. Timing what is next is as much about knowing what is coming as when it will hit and doing what you can to control the pace.

I particularly like fashion and startups as as success is often a Thursday Style problem. Status narratives are driven by people who like to show off that they knew something cool was coming. Think of the trope of venture capitalists publishing a post about when they first met a founder timed with a company’s IPO. Music used to be like this too with snobs insisting “I knew them before they were cool” when a band blew up.

Status narratives often revolve around being first. Much of crypto is obsessed with showing off how early they were while also insisting to everyone that “it’s never too late” as they need to drive a status narrative that brings in more adoption. Being early generally only matters if you are also still around when it’s “late” and you always need more people to push you further into early. Even if most of the benefits are seen by late adoption we all want to feel like we won the status game of being early. But it’s important to remember we are all a little too early or too late. We are almost right. Which is enough for plenty of success.

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Chronic Disease Chronicle Startups

Day 114 and Resistance to Change

Crash landing my life into a medical sabbatical really fucked up my headspace. Around two years ago I was beginning to realize I didn’t have a choice in accepting that I was sick. My identity as an always on, gets things done, reliable, entrepreneur got replaced by an entirely new self conception as “ill person” in a matter of six months. In August of 2019 I disclosed that I was officially sick. I sold my company and was going on leave.

It wasn’t a pretty adjustment. And I’m probably lying to myself when I say it took months to accept. I hated the new me. I felt weak and out of control. Willpower and muscling through did very little to help an autoimmune disease. If anything that mentality of “working on the problem” made it worse as I needed to rest and let my doctors do the work. I was resistant to change.

I think I’m going through a similar transition now as I did in 2019. I began seeing a new doctor in Colorado in October of 2020 and I made more progress in six months than I did in the previous two years. I’m beginning to face a new identity change as it becomes clear that I won’t be “sick” forever. While autoimmune diseases aren’t like an infection, there is no “cured,” it is beginning to look like I will be healthy enough to live normally. You won’t be able to tell I’ve got anything wrong with me soon.

And I have to admit to myself it’s a mindfuck. The emotional and psychological work I had to do to accept losing my entire identity is happening all over again. Who the hell am I if I’m not sick?

You see for the past two years I got used to explaining to people I was a sick person. I was disabled. I needed accommodations. I couldn’t work in ways I felt I would be reliable. I came accept my identity as someone with physical limits. And I slowly figured out ways to communicate that new reality others who has previously seen me as this abled person.

I guess you could say I was at peace with my situation. The pandemic helped. I know it probably sucked for you but I really enjoyed having a year of my recovery coincide with others having to live the way I did. I know it’s selfish but it helped! I felt less alone.

And yet just as I’m finally feeling like I really got a handle on my new identity it’s not my reality anymore. I’m not going to be a sick person. And while I thought I’d be overjoyed it turns out it’s a little more complex emotionally.

Let’s try a comparison. Imagine you broke your arm. You keep it in a brace and you can’t use it while it’s healing. And then the cast comes off and you are unsure if you can go back to using your arm like you did. You used to move your arm without thinking. You don’t worry about applying pressuring or picking things up before the break. But after it’s scary. You don’t want to set yourself back. You are scared to lift things and scared to apply pressure. I am in that place with myself. I know that the break is healing. The cast is off. But the muscles are atrophied and I’m not sure I trust that everything is knit back together. But the reality is that soon I’ll have the all clear.

But who I am now? I’m not the entrepreneur I once was. That workaholic Julie won’t be coming back. But the disabled sick Julie won’t be with me forever either. And I’m a little scared about it what’s coming. Who am I going to be next?

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Startups

Day 112 and Unknowability

Human minds seem to prefer predictably. The back brain craves knowing what is coming even as our flighty consciousness seeks novelty. Talk about a tension that sucks. We’ve all seem just now much this is a recipe for misery when you live in a world with no predictability but easy access to low stakes novelty during the pandemic. We are twitchy, bitchy and miserable as we have no idea what our world will be like but we can dopamine drip our pleasure seekers with social media, food and substances for an enjoyable now.

I’ve written at length in this experiment about my frustrations with unreliability especially when it comes to my own body. It’s one of the hardest aspects of managing a recovery from an autoimmune disease. I need to be mentally strong enough to not let bad days shake my routines so I keep building towards the wider goal. I can’t be distracted by one data point. It’s about movement towards the goal. Ironically this is a skill I learned from startup life.

While the entire planet is getting a crash course in unpredictable futures now, startups are defined by their desire to solve problems that don’t yet have defined solutions. No one in a startup knows if the predictions will be right. If they are working on something that will have the intended outcomes is unclear. You work on faith. You trust that over a longer time frame the daily tasks and routines you push (sometimes we give them dumb names like OKRs to fake a sense of control) will actually get you where your mind’s horizon sees.

I sometimes wonder if those with religious faith would do better on average in startup life. We have some degree of comfort with the inscrutable. Mysteries are sources of joy rather than fear. We trust that there are things beyond our knowing and our control and yet we must live on despite that.

The obsession with data and trend lines and the potential for prediction, surety or knowing amuses me. Sure sometimes you can plan a lot. You should plan. You have some inputs that consistently deliver the predicted outputs. Your best guess are better than other people’s facts (thanks Spock!) But if it were all so neatly defined there would be nothing new to create. We wouldn’t be able to build value. It’s the undiscovered country that we seek.

In faith, in life, and in startups you must manage your squishy human mind that is constantly tortured by its own biology. We want to know and we want it to be predictable. But we also love the tickle of a new experience against our dopamine seeking biology. The spike of pleasure we find pleasure in the newness. That’s why we do it. And it’s on us to balance the tension between our need to predictably build and our addiction to novelty. Manage that and you may get far in your journey. Or it’s a miserable sine-wave that makes you nauseous as you go up and down trying desperately to bring the future forward between impulse and planning. It’s usually both if I’m honest. So if you don’t enjoy roller coasters I wouldn’t get on this ride. But if you do well you just might see God.

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Internet Culture Startups

Day 101 and Closed Ecosystems

The One of the most important novellas in the formation of my technical philosophy was actually written by a science fiction author Neal Stephenson. “In the Beginning there was the Command Line” should be taught in every history of computer science course. Go download it now for free and enjoy 70 pages of riffing on the utopian possibilities of open systems, the accessibility of closed systems and who is the ultimate winners of computing becoming a closed system (surprise it’s Disney).

The premise of the essay is simple. There are two core tensions in how computing has been distributed: open versus closed. The basic manifestations of which philosophy you pick have significant impact on what your users can build but also how accessible your machine or application will be to users. Stephenson focuses on the GUI or graphical user interface, perfected by the closed Apple computer universe, and how it has made computing infinitely more accessible to the masses while also taking away some of the power and flexibility of the original command line interface of prior generations.

In the battle for powerful and hard versus easy but more limited, Americans chose easy and the rise of the GUI began. Dicking around with your computer, let alone your phone, almost isn’t possible without graphical representations of computer programs. Even though said programs are ultimately manipulated several systems down on a command line (you know the “hello world” text interface you might have seen on some NCIS dad cop procedural hacker show) most of us have thoroughly bought into the desktop metaphor of the original Apple GUI. And yes this is old news. This problem of the GUI got won in the eighties. But the basic problem of open versus closed still rages on with us.

The current debate is most vivid on in the financial world with crypto, Bitcoin and decentralized finance as we all yammer on about DAOs and NFTs. But you see it in social media as creators become locked into closed platforms from which export of their content is almost not an option as without distribution and audience access their work means nothing. Creator economy businesses can make money from individual closed platforms but struggle to build businesses as they are too tied to one type of revenue stream. If they are big on say YouTube or TikTok but can’t take their audience elsewhere that’s an issue. Imagine a world where they could take their business with them not be locked into one revenue stream for a platform they cannot change.

What I’ve written here is more like an appetizer course for the philosophy debate and not an argument. I have an opinion in the debate which is that open ecosystems are better for more types of people but I’m also writing this on an iPhone. But I’m writing using WordPress on my own domain rather than choosing a closed platform like Substack. So it’s not exactly a simple binary outcome for anyone ever. Which is all the more reason to go read the novella now.

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Aesthetics Chronicle Startups

Day 99 and Swag

My favorite item of clothing in the pandemic has been a Facebook hoodie. It’s the perfect garment for long days indoors, not too heavy but not too light. It zips so it’s easy to get on and off. It has pockets for stowing my iPhone. It’s got a snuggly fuzzy inside but a smooth cool texture outside. I’m not sure I’ve been more dedicated to a piece of clothing.

Years of living in New York, where dragging dirt and debris in from the city was a real concern has made me a almost compulsive aficionado of “indoor clothes” which were not besmirched by the grime of subways and pavement. My Facebook hoodie remains my default “indoor clothing” top layer. At night I unzip it and place it carefully beside my bed. In the mornings if it is cold I put it back on before starting my day. The chances are good that if you’ve been on a Zoom call with me I’ve been wearing this hoodie. It’s just on screen and a strange affectation for someone that has literally never been a fan of the traditional Silicon Valley boy wonder aesthetic. The only item I have gotten more wear out of is a pair of Gucci boots I’ve owned for 12 years now.

To say that they are very different garments is an understatement. One is a thousand dollars worth of black Italian leather crafted into the Platonic ideal of day boots. They are feminine with tight knee high lines that maintain the slightly militaristic echo that typify the Italian school of fashion. The other is a baggy slouching genderless sack of blue with an embroidered white logo that splits with a zipper tight down the middle between Face and Book.

You would not imagine the owner of one garment was the owner of the other. Even when the tech plutocracy decided it wanted to play with high fashion status games (thanks Marissa) the two stylistic poles never really gained much common ground. Still tech has inspired a significant portion of modern fashion and fashion craves the semiotic power of Silicon Valley. I’m sure Willian Gibson could explain the common lineage but I doubt I have the chops. Nevertheless I do consider both pieces to be emblematic of my personal style. Something about utility I suspect. The two garments are not from entirely different worlds

Ironically I don’t use Facebook anymore (though I still have an account) and I don’t even support what the company has become. So you might think it’s odd I own a piece of swag from the company. I got the hoodie after I had already given up on the place. But I got it from a Facebook employee who I consider to be one of the best humans I have ever known. His name his Dan.

I didn’t ask him if I could write this little remembrance so I won’t give his full name. Thanks to the efforts of one of my investors he was an advisor and investor to one of my startups and was unfailingly the kindest person I had the privilege of working with. On a trip to visit him in Menlo Park he took me to lunch on the Facebook campus. We had tacos. Afterwards as we were walking we passed the swag store. I said that I thought it was a brilliant bit of marketing that they sold hoodies. Pop culture has long cemented the status of the hoodie with both the company and with founders in general. To have a specific Facebook hoodie seemed a powerful talisman filled with irony and hope. Without missing a beat Dan bought me one.

There was no way of knowing at the time, for either of us, that this garment would end up a significant figure in my daily routine. It remains an emotional link to Dan and the support he always showed for me. He never wavered in his belief in me. This is a trait he has demonstrated consistently with those in his life. One particular example is a dear friend of mine who worked at Facebook thanks to his efforts. She is also brilliant and kind and at the time Dan worked with her the victim of a deeply Silicon Valley crisis. The kind you might even associate with tech bros who wear hoodies with logos on them. An irony that is not lost on me. The tech industry truly contains emotional multitudes.

I’d encourage you to inspect the garment in your life that holds the kind of significance and emotional resonance that this hoodie does for me. Fashion exists in even the places we think are furthest from style. Like corporate swag. Like a Facebook hoodie. There is always a story and a reason behind what we wear. Indeed this was a topic I thought I’d make my life’s work when I first stumbled onto the internet. I kept a fashion blog on WordPress maybe starting in 2004 or so. I didn’t end up being a fashion critic. But I still get to blog about clothing if I feel like it.

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Startups

Day 98 and Rejection

The other night I got suckered into the infamous Slate Star Codex comment about feminists and nerdy men. If you are already familiar with the general contours of this debate, you can skip the introductory paragraphs and go straight to my theory on the sexual dynamics of rejection in investing. I’ll caveat a lot before that. I read the above piece because I was high and while I would normally not spend an hour on angsty shit, I get tunnel vision with THC sometimes.

I’m an occasional reader of the rationalist community and often enjoy and respect their whole thing. To be honest I hadn’t ever bothered to read the feminist dunking controversies as, frankly, I took Scott Alexander at his word that this post wasn’t really representative of his work, so why would I bother? But again, weed tunnel vision. And boy golly do I regret reading it as I’m writing about it now.

I don’t want to minimize what was clearly a heartfelt and traumatic episode for everyone involved but the TLDR on the piece is basically certain kinds of women do not recognize the trauma of nerdy socially awkward men. Feminists in particular wield a cudgel over nerdy men, who it is argued in this article are victimized. There is some long winded arguments about whether this is a systemic issue. I kinda don’t care and you can judge for yourself. I myself read it as the personal trauma of one man that is being projected out as some kind of theory of power hierarchies. I’m not in the business of scratching up traffic with moralizing on woke politics. If I am, I’ll start charging for the blog.

What I did think was interesting is that we don’t like to talk about how women get rejected and how often we are in the power position to say yes or no. I do believe women to be systemically oppressed by patriarchy. I also think men are oppressed by it. And yes, women cope with sexual violence. That’s not a yes or no situation. Women in patriarchy are granted the upper hand in certain power structures. We don’t really admit this in polite discourse.

Women are the ones that get to say no. It’s a weird fucking system but somehow we have this power. I’d give it back if I could quite frankly. I don’t think it’s biological but I do think it’s true-ish. I fucking hate being the one that says yes or no to advances. I like to pursue but it’s not always an option. I don’t like that women have the power to be desired more than men do. No one talks about the female gaze because lol. Women gain power by saying no. Men gain power by saying yes. How we got here is for smarter people than me.

But I do have a theory that women generally being the ones to grant permission is honestly why pitching capital is such a bitch for women founders and male investors. Women are generally the ones who create desire and say no. Men saying no to women feels weird for both sides. I’ve maybe had one dude say no to me for sex and literally hundreds turn me down for money. It’s a head trip. It’s a personal experience, yes, but it’s also just how pitching works. People say no. Men get turned down a lot and apparently it’s traumatic as fuck for them.

Women aren’t used to it and men like to say yes to women but money can’t say yes to every company as that’s not how investing works. And yes, professionalism exists and, no, it’s never appropriate to wield power over someone’s future with sexual advances. I don’t know why that’s so hard for everyone. Like we shouldn’t be in positions where work feels like sex but maybe we should admit that women aren’t as used to being rejected and men don’t like doing the rejecting. So sometimes this gets grossly out of hand and investors say no to investing money as it’s their jobs (and it’s not personal) but still want to find a way to say yes, so inappropriate shit happens.

I think rejection is just a weird dynamic that’s lopsided with heterosexual cisgendered systems. I’d love to get rid of it. It sounds like plenty of men would too. I’ve always been under the impression that this was the goal of feminism. Clearly we aren’t there yet.

Also don’t read Scott Alexander’s blog comments when high or you too may end up writing about rejection and gender in public too.