Moisey Uretsky: Digital Ocean

“It’s a classic case where you have to be contrarian. It seems like the worst idea in the world to start a cloud hosting business. We didn’t know any better.”

Moisey Uretsky is the cofounder of Digital Ocean, a leading cloud hosting provider based in New York.

“It’s the usual immigrant story. My parents moved to America when we were four or five. We were poor and didn’t have much money so our parents focused on education.”

Moisey told me about his early years, and how he started working on technology with his brother Ben.

“I was bored during my first summer break and my brother had a job at a data center company and I just started reading books about it. Two weeks later he told me to take over as a sysadmin. From there we started our first company.”

Prior to Digital Ocean, Moisey worked on ServerStack, a hosting business similar to Digital Ocean. He also tried to start a hedge fund analytics company, which he had difficulty making successful.

“I did make one sale. I had some sales experience from ServerStack. The first year was just me working and pretending to be four people. But ultimately, product-market fit in that category is extremely complicated. It’s pretty much a nightmare. I don’t envy any financial services startup.”

Moisey has built on the learnings from ServerStack and his financial services company.

“It was tremendously formative. We made every single classic business mistake. This was a decade ago when there wasn’t much of a New York City startup community. We didn’t understand how to attract customers or market properly. We weren’t able to capture the success that was available in the space. It’s easy to start, but it’s hard to scale.”

Digital Ocean was founded in a time when the field was rife with competition. Amazon Web Services, Heroku, Google App Engine, Rackspace, and others had created a market that seemed saturated.

“It’s a classic case where you have to be contrarian. It seems like the worst idea in the world to start a cloud hosting business. We didn’t know any better.”

“What was missing from all the other providers was simplicity. I have a background as a developer and a sysadmin, and yet they were still too complicated for me.”

“With AWS, the learning curve is very steep. It could be a little daunting for people just starting out. There are a lot of things that are no longer relevant that you are forced to think about. These are carryovers from days when hard drives were counted in megabytes not gigabytes.”

Everyone else was putting engineering first, and not product first. “If you get a bunch of engineers together, often times you are going to get an engineering-focused solution. We always went backwards from the product side instead of the engineering side.”

Moisey found himself personally delighted by the product that Digital Ocean was building.

“It took us about six months to build Digital Ocean. When we spun up that first server, I was like ‘this is amazing, all I want to do is build a Rails app and spin up some more servers.’ We knew that if we could deliver that feeling to other customers we were on to something.”

He pointed out similarities and differences between Digital Ocean and Heroku. The two companies both allow easy onboarding for someone looking to deploy an application to a hosted environment. But Digital Ocean offers more options for simple yet advanced configuration–a huge upside for businesses that need to iron out small problems that magnify upon a business’s event of scale.

“When you get past the point of hitting product-market fit, you can experience really fast dramatic growth. At that point, you want to be more hands-on. All of those 1% errors that you could ignore with 100 users, they begin to creep into the picture.”

“With Heroku, it’s a bit more curated, but when it doesn’t fit your product, you might need to go find something else.”

This spectrum between ease of use and configurability parallels the spectrum from small business use cases to large business use cases.  “That’s why AWS is so large.” Large businesses require lots of knobs to turn, so those customers historically have had to turn to Amazon Web Services. Digital Ocean has found a sweet spot along that configurability/ease-of-use spectrum.

Digital Ocean was started as a spinoff project from ServerStack. This strategy leveraged both the hardware and the domain expertise which the Uretskys already had.

“If you look at start-ups that have hardware as well as software–it’s a lot harder. If you have never bled in a data center, you don’t know about the problems you are going to encounter.”

“We ran two companies at the same time. Eventually, Digital Ocean had to acquire Server Stack. Server Stack was like the incubator for Digital Ocean. We learned from the mistakes we made. Without the experience of Server Stack, we would not have been able to build Digital Ocean into what it is today.”

Digital Ocean’s customer service complements its easy-to-use product offerings. I asked if it was difficult to scale the support team.

“The way to scale anything is you get a good product. If you have a good product, you get less support questions. If you hire aggressively, you get less support questions. It’s a thing you put into your mission statement early on. When we didn’t have much funding, there was probably a 50% chance that I would be answering a customer’s support question.”

Moisey told me about his experience growing up with his eventual cofounder Ben.

“We came to America, and we were always passionate about computers, but we were really poor. We got a computer when we were 13 and used AOL and a dial-up modem. My mom was starting to use Visual Basic, and I stole her book and printed out the huge Windows API because I wanted to make my own app. I got about halfway through. It was doing stupid stuff that kids do. Cracking software and whatnot.”

“We always had a strong work ethic. One thing leads to another, I never had a resume, never worked a job. You never see things from the perspective of an employee if you’ve never been one. You always think about how you can push forward.”

“For me and Ben, it was a situation where he had a job and I stopped by to learn stuff and he gave me a job. The company we were working for was going out of business. Working with family is a unique dynamic. One thing that I can say for certain is that whatever the dynamic is with the brothers, that will be the dynamic within the office.”

Locating a tech company in New York has its perks as well as its hazards.

“Ten years ago, it would have been [difficult]. But today, you have a large number of local VCs and Silicon Valley VCs with local offices. The thing is, the best people are always hard to find. The benefit to New York is that there are people that get burnt out on other cities. And there all of these offices for Twitter and Facebook and Google,” and employees are sometimes willing to leave those companies for Digital Ocean.

“Technically speaking, we should be in San Francisco. But we love New York.”

I asked a question about what sort of economic boom we are in, which he answered with subtlety.

“The internet as a whole is still growing. Developers as a whole are growing more as a sector than any other degree. And we’ve been doing this for twelve years. Because we’ve already gone through a downturn, and it didn’t really affect what we were doing, we’re optimistic.”

“Until you can stream HD right to your Oculus Rift, we haven’t reached peak internet usage.  There’s still a lot of growth in the emerging markets. Globalization had a lot of negatives and a lot of positives. We can really be a part of that globalization of information.”

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Nancy Hua: Apptimize

“Anyone should be able to innovate and express themselves at any time. The barrier to them is going to go down to almost zero. That’s what all of technology is for.”

Nancy Hua is the CEO of Apptimize, a company developing software which equips developers with A/B testing and analytics for their Android and iOS applications.

Coming out of school, Nancy pursued algorithmic trading.

“When I was at MIT I interned at Merill Lynch. That’s when I got interested in finance. I could tell that it was the kind of thing I would like.”

“With algorithmic trading I could tell that it had immediate feedback. When I was a kid I always wanted to do science. I didn’t acknowledge other options in the universe. The minute I tried research, I instantly realized it was not what I could do. I need something that is instantly competitive and gives feedback in what I’m doing.”

That type of quick feedback was the same feeling that users of Apptimize would later be empowered by.

“I left finance because I knew what the future was going to look like if I stayed, and it wasn’t exciting to me.”

“When I think about the people who are having the most impact in the world, I don’t think about the richest people. I think about the scientists and the innovators.”

Nancy disagreed with the unsubtle condemnations of algorithmic trading, exemplified by Michael Lewis’s Flash Boys.

“There are different types of algorithmic trading. The type that we were doing was really good for the world. Most people don’t know why capital markets or financial instruments exist. But to have a really good first-world economy, you need this kind of structure.”

“It’s automating things that people are doing on the floor. Nobody actually trades in the pit any more.”

There is a distinct contrast between the cadence of algorithmic trading and that of running a web 2.0 company.

“I had no idea what starting a business meant. Algorithmic trading is about challenging yourself, and it’s isolated. You have your team, and all the data that’s coming in from the exchanges, but you don’t have customers. It’s much more insular.”

“People definitely get addicted to it. There’s a tighter feedback loop than in my current business, so in that sense it was easier. But I like that [operating a business] is harder. You have to make a bigger bet on the future.”

Nancy described the origin story of Apptimize.

“My co-founder and I were working on a lot of different projects when we made our AB testing framework. We prematurely made this thing because we had an app that needed AB testing.”

“We had some friends that had an app called Robot Invader, who put our framework on it. And all of a sudden we were installed in tens of thousands of users.”

“I liked that we could let people innovate better and faster.”

“We let anyone change their apps in real-time for AB testing and optimization and targeting. It’s how all of the top apps in the app store work.”

“Think about your favorite app. Do you know how many product iterations it took to make it so good? It’s probably hundreds or thousands. The average product does not have time for that.”

“It can take a start-up on average two dozen iterations to get users. If you are waiting for 24 product iterations, your product is going to die before it gets off the ground.”

“A lot of the AB testing that our users are doing is to free up developer time.  The apps that don’t have AB testing infrastructure set up are in a period of constant redesign. They push out an app, and then they don’t work on it any more because they are building a new version of an app. That’s kind of crazy because you aren’t learning about what you have done.”

“It’s much more efficient.”

“The main thing I learned from The Lean Startup is that you want to instantly validate what you have done. As part of the development process, you have to instantly see that it affects metrics, and that you can test a hypothesis.”

“You need to see your users using your product, and you need to know what they do. What are they doing the first three minutes they are using your product? What were they doing before they used your product?”

Apptimize supports developers who need this sort of speedy testing and validation.

“I like the idea of eliminating developer time as much as possible. The vast majority of what we think we need developers for are not what we need developers for.”

Anyone armed with Apptimize can alter functionality of an application despite not having a technical background.

“Anyone should be able to innovate and express themselves at any time. The barrier to them is going to go down to almost zero. That’s what all of technology is for.”

“All you will need eventually is your own creativity and a web browser.”

The current culture at Apptimize is ideal to Nancy.

“You start a company or join a small company so you can have a big impact the culture. To only work with exactly the people you want to work with you have to start a company.”

One theme at the company is self-improvement.

“I’m aggressive about making sure I’m getting better. If you don’t improve dramatically in an environment like ours over time, you are going to get crushed. The environment gets more competitive over time.”

I asked if she agreed with the Peter Thiel philosophy that competition is for losers.

“Comparisons are odious. But you need to always think about comparative advantage. When I think about competition, it’s a signal if we are losing a competition, that we are doing something wrong.”

Nancy quoted Box CEO Aaron Levie when describing how she thinks about Apptimize’s existential risk.

“I want to be the one disrupting other industries, not being disrupted. The only way to do that is to know more than everyone else, and to not be disrupted. I’m always worried about something coming out of left field and disrupting my industry.”

“I want to make sure we are a driver of that change, and not just a passive recipient.”

While she doesn’t believe that Silicon Valley is in a bubble, she does point to certain thematic fundamental risks among some companies.

“A lot of these companies don’t have a vision. Some start-ups have a product, but then they need to manufacture a vision. In those cases, they should really think about whether they want to pursue that into a whole company.”

In closing, Nancy provided a piece of wisdom that aligns with her two primary goals in life: to enable and empower people, and to connect with people.

“There’s more that you have in common with anyone in the human race, even if you really hate them, than you would with someone who is not a human being. We’re really programmed to think we aren’t like each other and won’t get along. That’s just not true–it matters what happens to someone, even if they don’t have the interests or privileges of your situation.”

“We are all responsible for those random people that we never see.”

“It’s hard for people to think on that level. Fifty years ago, there’s nothing you could do to effectively help that suffering. But now, that’s not true. We have a lot of wealth and a lot of resources and we can all help each other if we can change how we think about it.”

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Balaji Viswanathan: MBAs, Entrepreneurs, and India

“The education system in India has created dreams and ambitions, but by not having the right markets and institutions, it has made people desperate.”

Balaji Viswanathan is an entrepreneur, writer, and engineer. He writes about education, technology, and the changing social landscape of India.

Among his many pursuits, teaching others gives Balaji the most energy. His current platform for educating others is MBA Bootcamp.

“We try to provide a way to provide an aggressive MBA program online, and to find ways to fix the education system. The education system is broken in terms of accessibility.”

Balaji started an online university several years ago that did not work out, and he sees modern MOOCs repeating some of the same mistakes that he made. “The primary mistake is going after the big mass of people. Coursera is going after hundreds of thousands of people, and there is no exclusivity. People don’t take it seriously. If you make the entry barrier low, the exit barrier is low.”

MBA Bootcamp seeks to correct some of those problems.

“People go to school to make networks, and the existing online schools do not focus on making networks.”

“A hybrid approach is needed. Everyone in an MBA class has a similar purpose. The people are all pre-vetted.” When something is pre-vetted, you don’t need to wonder whether the person next to you in class is a jerk.

“Many of the MBA programs are at such a price point that it prices out 99% of the entrepreneurial people. That’s why we want to bridge the gap. The traditional model is so expensive. But there are some benefits. But it is very expensive to pay for to network.”

The key to a successful online education platform is to be selective on the right criteria.

“The vetting could be on entrepreneurial abilities rather than money.”

“There is no perfect standard for vetting. But we want to filter on the entrepreneurial mindset. To do that, you have to show what the previous things you have started are. You could have written a book, created an album, created software.”

Balaji’s first funded company was Zingfin, which used social media data to predict stock market trends. He told me the story behind Zingfin’s creation and its inability to succeed as a product.

“In 2008 Lehman crashed. That day, I was interviewing for a subprime trading desk at Barclay’s.”

“Before that time, I was very active in an investment club at Microsoft. I was doing some day trading in oil and gold. I started writing blog posts about the coming recession. The week Lehman crashed, I shorted the entire financial sector.”

“Within Microsoft, people had worries and fears about the coming crash. But the broader market sentiment did not have access to that insight.” This was the inspiration for Zingfin.

Zingfin was a compelling product with obvious potential for value-add. But it faced immense technical and market challenges.

“I botched one of the sales rounds. In a video we made, I was poking fun at how financial advisors were overpaid. It went against us.” The bank he was trying to sell Zingfin to took it personally and was offended.

“They saw that we were not in the right mindset for them. This is how sales can fall through in the enterprise. If your messaging is even a little problematic, they can kill it.”

“We were caught with a product that needed to be deepened, and no funding.”

I asked Balaji if social media will ever be securitized. Will there ever be a day when I can buy a call option on Justin Bieber’s number of Likes or Retweets?

“A stock is something that creates value. A stock market is not a zero-sum game. But betting on Justin Bieber is a zero-sum game. If one person wins another has to lose.”

“Philosophically I’m against this, but someday there may be markets for it. When there is much more randomness involved, it is pure gambling.”

“If someone could prove it’s not totally random, it could make more sense.”

Balaji describes himself as having had “way too much school.” Despite having two masters degrees, he believes college is unnecessary for 99% of people; universities are institutions that are largely outdated.

“The whole lecture concept came from sermons. University was never meant to be a place to teach career skills.”

“Some of the ancient universities were completely free. People could come and have all these discussions. The only reason people came was to explore knowledge. There was a bunch of things they created in that place.”

“99% of us don’t care that much about philosophical aspects–we need career skills.”

If something like Quora could provide the philosophical knowledge, and another platform could let people network, and something else provided career skills, we wouldn’t need traditional universities so much.

“We spend the best four years of our lives in college. That is a time when we should be building stuff. The model I have been trying to propose the last few years involves building stuff.”

There are exciting projections about how the developing world will change over the next few decades. Billions of people are coming online for the first time. I asked Balaji how these projections would play out in reality.

“For India there are a lot of challenges. How are we going to educate a huge mass of people who are ambitious? When the markets are open, people get much more ambitious, but the education system has not worked. People are poorly trained.”

“When we are saying we will have 1 billion people coming online, how can we make sure these people have a job that gives them wages?”

“oDesk’s model could be built in a way where the developing world could use. It makes everyone into entrepreneurs. As a freelancer, you are taking control of your life. But the quality control is so low.”

“Nobody is going to give you a job. That 1950’s way of thinking is gone. That was a very unique time. In most of history, people have been entrepreneurs. That was how the world worked for thousands of years.”

“That was the industrial revolution. In the post-industrial revolution, people have to start acting like entrepreneurs.”

“The industrial revolution made college into a necessary institution. You go and study something for four years that prepares you for a lifelong career.” Now that is invalid.

“People are going to change careers every five years. People are getting forced into entrepreneurship. A big corporation is not going to train you, it’s not going to give you a pension.”

“Entrepreneurship is going to be the primary form of job creation.”

“The education system in India has created dreams and ambitions, but by not having the right markets and institutions, it has made people desperate.”

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Jacob Jaber: Philz Coffee

Jacob Jaber is the CEO of Philz Coffee, a coffee retailer with 17 locations around California. Philz is known for high-touch customer service, interesting blends, and lack of espresso.

“My dad was running a grocery store, and experimenting with a lot of coffee varietals and all these special blends. We didn’t use much machinery and didn’t have espresso. I’ve been involved since I was ten years old.”

“The best coffee in the world is the coffee that comes to your taste. At Philz, we have the platform to optimize for that. When you can talk to your barista or your chef, it’s a much more special experience. It may seem inefficient, but there is beauty in that inefficiency.”

“It’s really special. The concept is tightly tied to our values and our philosophy, and we love it.”

There have been three waves of coffee: the home brew wave of Folgers; the second wave of Starbucks; and now the third wave of high-touch coffee shops.

“Starbucks revolutionized the way people think about coffee. They are part of the second wave. There’s this third wave: the artisanal micro-roasters that put a lot of care into crafting the perfect cup, and procuring the highest quality beans. However, Philz is different–we are in the people business. And many people in the third wave think they are in the coffee business.”

“Our vision is to reinvent the coffee experience.” An example of that reinvention is the lack of espresso at Philz. “A lot of times it’s not about what you do, it’s about what you don’t do. We’ve converted a lot of latte drinkers into Philz drinkers.”

As Starbucks grew, the culture became diluted.  Jacob is focused on scaling the culture at Philz correctly.

“In the beginning, when my dad and I were working alone as baristas for 14 hours a day, we did great. It was hard, but we cared, it was ours, and we were committed to delivering a great customer experience. Bringing on our first employee was easy because we were right there with them.”

“Culture is the collection of normalized behaviors that occur regularly. First and foremost, you need a strong commitment to hiring people with the right values. And you want to have a training process that represents the culture of the company. We make sure our trainer is a cultural ambassador.”

“We spend several thousands of dollars to train one individual.”

Maintaining the culture at Philz is about simplicity and repetition. “I don’t say a lot of different things. I say the same things over and over again. Every conversation is an opportunity to reinforce why we do what we do.”

Jacob emphasized that he was not intimidated by the challenges of scale. “Business is common sense, not rocket science.”

“I get inspiration from people, but not so much from companies.” His biggest influence is his father, Phil. “My dad is basic–he’s authentic.”

Prior to becoming CEO, Jacob was occasionally fired by his father.

“In the early days of being a barista, he kicked me out in front of a line. I was almost crying. There were some arguments and disagreements over the years, but it’s gotten better.”

“When I was 16 or 17, I had to work 7 days a week, and some days when I’d finally get a day off, he’d call me in.”

“Every kid will disagree with their parents. I wanted to do a lot of things my own way.”

As a teenager, Jacob was not motivated by academics. But he excelled in work and hobbies.

“I wanted to get an outside experience. I worked at Abercrombie as a greeter. They told me they wanted me to just stay at the front and sell everything.”

“I never liked school. I hated it because I was forced to learn what I wasn’t interested from people who weren’t interesting. I used to play a computer game called Diablo. At first I sucked, but after eight months I was top ten. I can be incredibly focused.”

“I’ve always been motivated by excellence, impact, and learning.”

“There are a lot of similarities between games and business. Business isn’t complicated. What has helped me at Philz is my lack of experience. I come at things with a fresh perspective.”

“I imagine the best-case scenario and I aim for it. I learned that from the gaming. The game has taught me resilience and determination, and those are the same things that make someone successful at business.”

“I spend probably an hour a month looking at financials. I spend all my time with people. The output is the financials. I reward people for giving customers and team members a great experience.”

“Don’t focus on the results, focus on the inputs.”

“We don’t have a fear of money. We focus on doing what’s right, because we know it will reward us in the long run.”

“It’s simple. It’s all hard work. There’s no easy way out. You gotta work smart, and you gotta work your tail off. The simplest things matter.”

“Retail is tough. Every business has it’s own challenges. You can’t scale authentic human interaction. You have to hire great people, give them some guidance, and give them freedom. It’s not easy, but it’s really rewarding.”

“Being able to walk into our 50th or 60th shop where people are happy to be there–that’s success to me.”

Another scalability concern is providing food to customers. Many coffee shops fumble and wind up with subpar options.

“Food is very important. It’s the second highest sales item after coffee. I’m passionate about health and quality ingredients. But we never want food to overshadow the coffee experience, and we don’t want to prepare, so we want to find great partners–craftsmen who can provide the highest quality.”

Much of Jacob’s spare time is spent educating himself. Since he is young, he welcomes advice with a measured humility.

“I love learning so I read a lot. I love Quora. It’s one of the best websites in the world.”

“You gotta be smart enough to recognize when you don’t know it all. You gotta have responsibility and have people who believe in you. You gotta be open-minded, especially to elders. When you have those things, age is less important.”

“The issue is that you don’t know what you don’t know. But you also gotta be careful of getting too much feedback from the experienced folks. A lot of times, experienced folks have less of an open mind.”

“I’ve always thought for myself. I’ve never just taken what somebody’s said and believed it.”

His parting wisdom was to be authentic.

“Presentation is not as important as authenticity. I’m not the most tactful person, but I speak my mind.”

“You should be kind. Be authentic.”

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Stan Hanks: Enron Memoriam

Stan Hanks was the founding CTO of Enron Broadband, which collapsed with the rest of Enron when the corporation went bankrupt in 2001.

Stan left the company prior to the collapse, when he started to grow suspicious of the company’s strategy and leadership.

“At the time, one of our big recruiting challenges was hiring people in a highly competitive market. We actually had to compete with Google on hiring. This was ’96 or ’97 and we had wireless Internet everywhere in the building.”

“The corporate culture was always to hire the best and the brightest, and to make them prove they were the best and the brightest.”

Stan led an ambitious project to enable trading of bandwidth. Broadband as a commodity.

“To make this work, we had to get more bandwidth than we knew what to do with, and we had to create applications that required so much bandwidth that you could not use them in a non-commodity environment.”

“I was building the biggest IP network in the world. We were trying to find places to build capacity that nobody else had ever built. We had guys digging holes, laying fiber.”

“To make commodity trading make sense, you have to find a way to commoditize it in a way that makes sense in the industry. You have to find a pain point. In coal, or soy beans, the product is fungible–you can say ‘this is grade A, it has these characteristics, it provides this value.’ You know what it is, you can trade on price exclusively.”

“In the case of bandwidth, the price benchmark we used was not relevant to anyone in the industry. Over the course of time, that could have been rectified, but that was not the way things worked out.”

The bandwidth trading project was Enron’s equivalent of a moonshot project. But it was not an unprecedented challenge.

“Enron had created markets before. They had created markets for carbon transfer credits, and weather derivatives.”

Some of the technology worked, but Enron presented it as working even better. Enron’s mission was to optimize the stock price. Perception was prioritized over actualized technology.

“A lot of the things that transpired in the analyst conference in 2000 that sent a lot of people to jail talked about things in specific ways.”

“It was not possible to deliver on some of the technical promises. The streaming video–it worked, but it had issues. The server for Real Player had this huge memory leak, for example.”

“It was still a long way from being there. Saying ‘we have an architecture defined’ is different than saying ‘we have a finished building’.”

But upper management interpreted the situation selectively. Like the mark-to-market accounting with which Enron cooked its books, the plans for Enron Broadband were treated as a finished product.

“There was a characterization between what happened at WorldCom and what happened at Enron. At WorldCom, they misreported some revenue accidentally, and didn’t have the moxie to step up and restate things. At Enron, it just felt different. The tone and tenor was more of a carnie side show, where the game is rigged, and you know the game is rigged. You think you can knock the milk bottles over, but we’re gonna take your money anyway.”

“Overnight, our head count doubled. And there was a shift where decisions were no longer being made on the basis of long-term thinking. They were being made on the basis of mark-to-market accounting, and a trader’s book of business. But if you don’t actually have the bandwidth in place, you can’t sell it.”

“We had equipment, and stuff sitting in warehouses waiting to be deployed. But we had a real clear misunderstanding of what the business that we were in was looking like, and how we had to manage that relative to a traditional Enron business.”

“I had very candid talks with both CEOs, and I got resources allocated, and scientists and engineers. But there’s this feeling–an inconvenient truth. We really had to do something, we couldn’t just claim that it was done. And the extent to which that involved effort beyond what was imagined by the folks in Houston was really daunting.”

“The tipping point was when we started treating the entire business like a trading book. We had purchased this stuff that was sitting in warehouses but we couldn’t get permission to deploy it because it screwed up the way the books looked. And that’s really where things shifted, and nobody in the C-suite was willing to stand up and say anything.”

With traders taking precedent over technologists, Enron became a financial abstraction of its former self.

“The guys on the trade floor–some of them had engineering degrees. But Enron was a case of greed. People acted in accordance with their compensation. It made it really hard to form teams.”

“We ridiculously compensated people for making money for the company on paper. It was a real difference between how Skilling ran the company versus his predecessor.”

As technology has advanced, so has the potential for financial obfuscation. I asked Stan whether he thought there could be a corrupt technology company like Enron on the market today.

“I look at where the money comes from in these companies, and it makes you wonder.”

“I think of a herd mentality a whole lot. There were so many people building networks, and all of these guys talked as though they were going to get all of the bandwidth that existed. You couldn’t make any sense of it. As soon as someone cuts the price, everyone has to and it’s a race to the bottom. The telecom nuclear winter of 2001-2005.”

“I’m skeptical of herd mentality in everything.”

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Auren Hoffman: Non-Obvious Ideas

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Auren Hoffman is the CEO of LiveRamp. He has started and sold five businesses, and has started many more that have failed, he also invests in lots of companies. He writes about success and failure, and all of the lessons and observations he has gathered throughout his life.

“I don’t think failure is necessarily good. Failure definitely has consequences. But if we don’t ever fail, it means we’re probably not pushing the envelope. If you want to grow, you essentially need to be in a position to fail.”

People coming out of college usually take jobs with a 10% chance of failure. Auren argues that we should be taking jobs where we have a 1/3 – 2/3 chance of failure. “Whatever we’re doing, especially at work, we should be doing things that are really challenging to us. ”

It is often riskier to do things that society says are low-risk.

“Risk and failure don’t necessarily equate. You could be a high failure and low risk person. Being an entrepreneur in Silicon Valley is way lower risk than working at a big company. Your downside scenario is you learn a lot, you grow a ton…your worst case scenario at a larger company is you get stuck, you might not be growing much, you might be unhappy.”

“To be an entrepreneur is to be an owner. It’s about a mindset. You almost always want to be an entrepreneur, even if you don’t start a company.”

One risk of not being entrepreneurial is to develop a generic, non-unique set of traits. In the future, people will be divided into two buckets: those who are the best at what they do and those who are at risk of being outsourced or obsolesced through automation.

“Many more things will be automated in the future than today. If you are picking something to invest in for the future, you would want something that would have a very good return over the next fifty years–something that will not be automated.  Computers are much less likely to be good at left-brain thinking.”

Going forward, there will be less emphasis on systems-thinking, and more emphasis on creativity and judgment.

“Judgment is really important. One of the things that we’ve done a lot of in our society is to create all of these rules.  There’s no room for interpretation. In many situations, this doesn’t work. You can’t write down every rule, and having all of these rules leads to things moving at a slower rate. Having fewer rules with more emphasis on judgment often can work much better.”

“If you’ve ever read the bible, the two most famous sets of rules are The Ten Commandments, which is smaller and easier to understand, and Leviticus, which is this very weird rule book that is incredibly hard to understand and remember. It’s much easier to be in a society with The Ten Commandments than Leviticus.”

Auren referred to the famous Netflix Slideshare as an example of an organization succeeding with minimal rules.

“Netflix basically has one overarching rule: to do what’s in the best interest in the company. That incorporates a lot of judgment, and a lot of creativity. An employee needs to understand all of the basic facts of the company, and an employee needs to be applying judgment and some creativity.”

The past is probably a less effective bellwether for the future than our intuition suggests.

“Most people understand that the future is really hard to predict. There will be some changes that will change society significantly–that is the only thing that we can predict. We don’t know where that change will happen or how it will happen. The same strategy that worked in the last fifty years will not work in the next fifty years.”

“Using history to help predict it is all you can do. But the conventional strategy of putting money in stocks when you are young and switching it to bonds as you get older may be stupid in the future, even though it was smart in the past. Often people don’t question it. And not only do people make the fallacy of looking at history to predict the future, but they focus on local history, rather than taking the broader worldview.”

The highest upside investment, particularly in an indefinite future, is often an investment in one’s self. Education is something individuals should always be investing in, whether they are spending money or time in exchange for that investment. “People don’t realize that if they are smart and they believe in themselves, an investment in yourself will be the best investment they can make, especially if you are young.”

For each individual, there is a personal exchange rate between money and time. The aggression with which someone should convert money into time depends on her circumstances.

“I try to invest money into buying time. There are lots of ways to buy time. However, it’s not always available to people. And some people have lots of time and not a lot of money. Some young people have a spare forty hours a week, so buying time doesn’t make sense.”

“All my life I have been extremely conservative about how I have spent money–except when it comes to time. I will pay a higher price for something if I can get it faster. When I was younger I was less in a position to do that.”

In one answer about personal growth, Auren suggests using synergy between two skills to develop one unique skill.

“A combination of two skill sets is a new skill set. You become the best at your niche. Focusing is about playing to your strengths, and developing a strength that is hopefully better than anyone else in the world, and hopefully is useful to other people.”

Recognizing that most people have a unique advantage, it is often worth focusing on seeing the strengths of others rather than the flaws. This is as true in relationships as it is in management.

“Everyone has flaws. You have a choice–you can give them negative feedback and focus on their flaws. Or you can focus on their strengths. It’s a lot easier to have discussions when you have conversations that focus on strengths.”

An exception to this is when a flaw is so harmful, there is no choice but to address it.

“If a weakness is really getting in the way of your strengths, the way to grow your strengths is to focus on that weakness.” If you have a very debilitating weakness, it will probably be an impediment to building the strength. “But generally working on weaknesses has a massive diminishing return. Presumably these are weaknesses you have had all of your life, and they are there because they are incredibly hard to change. You are probably going to get higher dividends by focusing on strengths.”

Auren believes that the job of CEO is vastly more difficult than the next lowest job on the ladder. This difficulty is not necessarily offset by the joy of being in charge. “Most CEOs out there are not in charge anyway–they have board pressure, shareholder pressure.”

Individuals who spend time as CEO remain capable of later playing a role below the head of the organization.

“The vast majority of CEOs have spent their jobs in position where they were not CEO. They know what it’s like not to be in charge.” Further proof is Google’s success in acquiring companies and making the CEOs executives. “There’s a lot of ex-CEOs doing a great job at Google.”

As a CEO of a marketing technology company, Auren provided some authoritative information about advertising fraud. There are fleets of bots on the Internet viewing ads. It is a hard problem to distinguish between when a bot views an ad and when a human views an ad. As a result, advertisers are less sure of how much to pay for advertising space.

“Ad fraud is a pretty big problem today. Long-term, fraud in the ad space will definitely be solved, but I think it’s a short term problem. It’s like email spam in 2002.”

“Ad fraud is a subset of viewability, which is a big problem. If an ad is displayed and paid for by an advertiser, it is really important that it is viewed by the intended customer. This isn’t always the case today. There’s a lot of fraud and viewability issues and the industry needs to solve this problem, and I’m confident that we will.”

“If you think of marketing, we’ve been struggling with this for years. People can skip through commercials on their DVRs, or get up to go to the bathroom during commercial breaks.”

Ad fraud is priced into the online advertising market. “If we can eliminate it, we’ll see fewer ads shown, but the price of ads will go up.”

“It will have a net positive effect on the ad economy. It’s extremely problematic when you have an ad that is not viewed. In the future, we might never have ads that are paid for but not viewed.”

Who is making these bots that consume ads fraudulently?

“I don’t know. There is a lot of fraud on the Internet in general. There’s lots of hacking on the Internet, there’s lots of scamming and fishing. There will always be fraud, unfortunately. But I think the ad fraud is going to be much less of a problem in the future.”

Another topic in the advertising space is the delineation between content and advertising.

“Some of the best content is advertising. If you are subscribing to Groupon, you really want the content, but it’s advertising. Even a lot of the content that doesn’t have paid advertising is promoting a particular point of view. People often think that content and advertising is this church and state thing that can’t mix. But it can–and in responsible ways as long as one is clear about it. Today, most content is not clear.”

“If you think of my posts on Quora, it’s content but also I am advertising my point of view.”

Quora also allows him to crowdsource better grammar and style. “I have been a long-time consumer of Quora. I was a taker and not a giver until a couple months ago.  One of the non-obvious things I like about Quora is it makes my writing better.”

Auren concluded by emphasizing that resilience is a skill with high long-term value.

“One thing I’ve been thinking about a lot is the core skills that one should have in their life, and in their career. One of the skills I’ve been thinking about is resilience. Focus, and being great at something is really important if you want to become the best. Resilience is a little bit different. It allows you to put a floor on your earnings, and assure that you are never long-term unemployed. If you are truly resilient, you will almost surely never be in a position where you have long-term unemployment.”

“Developing skills that ensure resilience, especially for a young person, can be really important for society. It gives you a floor where you can always provide for your family at some level. For example, if you are good at sales, you are almost certainly resilient. Someone who is good at sales can almost always find a job that is higher than the median salary.”

“Having some sort of resilience, so you have a floor to your earnings and it doesn’t go from great to zero is very important. A lot of people get laid off because the economy is so dynamic, and as a society it would be great if we could talk about and teach more resilience–especially to people at a young age, so they think about and practice it, so they are not completely reliant on one thing.”

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Noam Kaiser: Investing in Israel

Noam Kaiser is a principal at Gemini Israel Ventures. He writes about venture capital, Israel, and atheism.

“That’s the thing about VC. When you come along for the first time they tell you that you are going to have to spend fifty percent evaluating deal flow and you have to spend the other fifty percent helping portfolio companies. What they don’t tell you is that you actually have to spend one hundred percent of your time evaluating deal flow and one hundred percent of your time supporting your portfolio companies.”

Gemini Ventures sometimes invests before the company even has a prototype. Contrary to what I expected, something like 20% of the companies Noam’s fund invests in only have a team and a Powerpoint.

“Sometimes you should engage the market with a minimal operational product rather than a minimum viable product. When you go out to market initially, you do not have a sellable product. Until you engage with the market, you don’t really know what they need.”

But Gemini is extremely selective. “We see 500 startups per year and we invest in maybe 4 or 5.”

As in my recent interview with Patrick Mathieson, Noam was expressive in how much he liked his job, as a result of the type of people he is able to interact with. “You spend the day with brave, courageous people. I love entrepreneurs.”

Noam once ran one of Gemini’s portfolio companies. I asked if the amount of sleepless nights he had as a CEO was proportional to the amount he has as a VC. “No, not by a long shot. Being a CEO–especially the CEO of a startup–is probably the loneliest position in the world. You live from one financial crisis to the next.”

VentureApp is a product Noam developed in response to seeing venture capitalists lacking software tailored to their needs.

“Venture capitalists still use Excel spreadsheets to manage deal flow. So on half a year of sleepless nights, I developed a system for dealflow management called VentureApp, and took it out on the road for nearly two years, then offloaded it to a financial services firm.”

There is no direct path to becoming a venture capitalist. The prototypical route involves starting a company, but Noam found his way to VC by being an “in-house entrepreneur” at a large company.

“My first job after graduation was a job in the Israeli satellite communications company. I purchased shows and movies from Warner Brothers, FOX…after a year of that job, I figured out that there was something that we in Israel were missing: webisodes. This brought about a small budget, and eventually it turned into the largest video content portal in Israel. After running that for another year, I started getting approached by many VCs.”

“I tried to be an in-house entrepreneur, which is something that I recommend wholeheartedly. I think this would be the most reasonable for people who get out of school but don’t have an idea for a business to start. You need to learn how to be an employee before you learn to run an organization.”

We discussed why Israel has been so successful in high-tech. As Alon Amit noted, military experience is an asset.

“One of the things you learn in the military is that you are trained to improvise. You are trained to look at a barrier or a problem, and see more than a single course of action. As a very young entrepreneur you are trained to start thinking about problems. So when you encounter a problem you are already prepared with a solution.”

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Michael O. Church: Hazards of Silicon Valley

Michael O. Church is a software engineer, blogger, and frequent poster on Quora. He writes about the pernicious, hidden attitudes and patterns hiding under the surface of Silicon Valley.

“As an industry, we don’t focus on the right things. We can do a whole lot better in terms of the companies we can create, the products we build. There’s a low quality of what’s being done. There are a lot of rich douchebags getting funded.”

Everyone agrees there are problems in Silicon Valley. There are problems in any culture. But what causes Michael O. Church to be so vocal?

“When I was seventeen I wanted to be a writer.  I studied Math because it was much more employable, but I’ve always had that inclination to write. As for the vocality, I’ve seen some really good people out there, but I’ve also seen some severe injustices.”

Michael argues that “we have this epidemic of criminally underqualified, well-connected individuals getting funded and acquired. In this frothy state, tech seems to be all about distractions.” Examples of distraction companies might include a new way to share photos, a new ad-tech company.

My counterargument to this was–if you are a twenty-something who wants to build a product, and your choices are to either go to Google and be the fifty thousandth engineer, or to go build a “distraction” company, the latter choice is of far greater value for the marketplace as a whole.

A distraction company may be trivial in what it provides to the marketplace. But it serves as a powerful set of lessons to the people who build it.

Michael responded, “The issue I have is not the existence of trivialities; that’s part of the experimentation process. My issue is more with the press and the venture capitalists. The adult supervision.”

“It’s not typical that a 22 year old gets funded, but if you act like Evan Spiegel does, you should not be running a company. This is a guy who represents a certain type of privileged, arrogant personality that I think just has to go.”

“Steve Jobs was a great businessman, but if you look at his cultural effects they were negative. The problem with Silicon Valley right now is that it celebrates the asshole. They are being held up as the type of person that we should aspire to.”

There is a dystopian color to Michael O. Church’s posts about technology culture. I asked him if his skew is a product of an unusually high number of negative personal experiences.

“We all pay attention to what we learn about, and through the blog posts that I write, I hear a lot more stories that are similar to my negative experiences. My actual attitude is not anger or hatred–it’s more disappointment. But I’m actually quite a happy guy.”

His writing is sometimes so fervently negative, he seems like a caricature of someone in Silicon Valley, rather than a real human. I mean this as a complimentary nod to his writing style.

He is creative and more self-aware than an occasional reader might presume.

I asked if it was a fair assessment that he errs on the side of being extreme when he is writing about something that upsets him.

“I would not use the word extreme, I would use the word impassioned. I’ll take a moderate stance but with a lot of force behind it.

“I feel like my generation needs to wake up. Right now, the people who are held up as wunderkinds, or on 30 under 30 lists, those people were produced by the baby boomers who we need to kick out.”

Some of Michael’s best writing is a recent piece on what he calls software politics. Anyone who has worked in a big technology company can identify with some of his assertions.

“In many companies, it’s not the best people who get the best projects. It’s the politically-enabled people. Software politics is all of the nonsense that has nothing to do with writing great code, solving problems, and building things. And there’s a lot of it.”

“If you are 22 years old right now, and you think software engineering is a low politics zone, you are going to be disappointed.”

One dimension of software politics is a distinction between two tracks: the managerial track and the principal engineer track. Both positions designate a higher pay grade and more responsibility.

Michael argues that it is much easier to become a manager than a principal engineer, which perversely leads engineers towards a managerial track.

“Companies need managers. There are managers out there that add a lot. But that’s not the selection process. I don’t think the ladder climbing proves anything other than that they are good at playing politics. Some people know how to play politics, and they are good managers, but I don’t see a correlation.”

Game design was our final topic of conversation. Michael designed a game called Ambition, which exemplifies some of his beliefs about the trade-offs between luck, skill, and fun.

“Card games are interesting in relation to the current trend in board games.” Influenced by the German style of board games, there has been decreased impact of luck within games.

“Monopoly was actually designed to be painful. The original game was called ‘The Landlord’s Game’. There’s a huge amount of luck. Relative to that, card games are hard because shuffling inherently injects a random variable into the game. But that’s OK”

“I engineered out the card luck, and I actually measured it. I’ve run simulations, and I found that about 3% of the variation comes from the luck of the cards. So I added some luck back into the game and it became more fun.”

“If you have a If you take out all the luck, you end up with a very dry game.

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