Updates

Lately, I’ve felt increasingly conflicted. I’ve spent the past ten-plus years in the San Francisco Bay Area and Silicon Valley as an author, entrepreneur, and angel investor. The optimism here is endless, and fear does not exist. Yet, I grew up in Colfax, California, a small rural town three hours away where the biggest story in the local paper has been a heroin epidemic. The stagnation at home seems endless, and hopelessness is a norm.

Recently, I attended a small San Francisco dinner party hosted by a Google executive. Other attendees included several widely-known tech visionaries, and the focus of the conversation was robots, automation, and a future where people don’t have to work more than 20 hours a week. Never mind that John Maynard Keynes made a similar prediction in the 1930s, technology has given some people a sense of empowerment typically reserved for Gods.

Meanwhile, my cousin, Nick, who is a logger, nearly died from a meth and heroin addiction — a crisis that is sweeping a generation in rural America — before he courageously stepped into rehab, and now offers his recovery as a testimonial for others. Meanwhile, like many Americans my Uncle Joe, also a logger and truck driver, has nearly given up hope in America, and its leadership.

What America really lacks right now is a common sense of purpose.


Why Not Get on a Bus?

After traveling middle America on a cross-country bus tour this month with the BLK SHP (black sheep), a diverse group of entrepreneurs, writers, artists, and creative misfits, I’ve never been more hopeful. Uncle Joe and Nick would be inspired and uplifted by dozens of people we met on this trip — people who have persevered through deep pain, and somehow find hope through indescribable hardship.

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This was country-singer Barbara Mandrell’s tour bus (some call it a “glitter coach”), which you can rent as we did, as you can Willie Nelson’s old tour bus

Here’s the main thing I learned: in the middle parts of America — from Detroit to Kansas City to New Orleans to Omaha — people talk about place before self. In Silicon Valley, it’s usually just the opposite. That’s the opportunity.

The issue isn’t that the people in Silicon Valley aren’t good people. It’s that when we’re inside the bubble, we literally just don’t understand what’s happening outside the bubble.

A Big (Simple) Idea

At that San Francisco dinner, the question was asked: with so many people in America suffering today, how can we better utilize the entrepreneurial potential, networks, and technology of Silicon Valley to help reinvent America? The room went silent.

Let’s get them on buses. That’s the big idea. Let’s get America’s most prominent innovators, technology executives, and investors onto buses, and introduce them to the grassroots innovators who are reinventing America from the bottom up.

Let’s go to Detroit and meet the makers, entrepreneurs, and artists who reinventing themselves in seemingly war-torn buildings once housed auto parts makers 100 years ago.

Let’s go to Ferguson, Mo., where months after the riots young people are starting nonprofits and businesses to give people technology skills.

Let’s go to Louisville and see how GE has created maker spaces open to all, and how donated technologies are helping a generation of young people learn how to do 3D printing, prototyping, and design.

I hear that Steve Ballmer is trying to decide what to do with his philanthropy. Come with us on a bus!

Start by going home

Bill Campbell, the chairman of Intuit, is one of the most respected executives in Silicon Valley. He was one of Steve Jobs’ closest confidants and has been a primary mentor to Google founders Larry Page and Sergei Brin. Every year or two, he organizes a road trip with his friends to go to his hometown of Homestead, Pennsylvania, near Pittsburgh. It’s an old steel town. Campbell gave $20 million worth of technology and facilities upgrades — including 1,500 computers — to support education and skills for this century.

We can all follow Campbell’s example to lend a hand to our hometowns and beyond — to be a part of the solutions, rather than the problem. A little bit can go a really long way.

As significant and grave as the challenges facing America are, the work of coming together to reinvent and renew from the bottom up need not be a chore. When you spend time around people and places that have hit rock bottom, and yet instead of giving up hope find ways to come together, you can’t help but be inspired by their resilience, grit, and humanity. And, it’s a hell of a lot of fun to ride on an old rocker’s tour bus!

It might just be the most meaningful and uplifting experience of your life.

Get in

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Award-winning author Peter Sims shares some heartening research on how people like Steve Jobs, Chris Rock and Frank Gehry use small experiments to lay the groundwork for big creative successes. It’s an encouraging episode for all the creative types out there thinking they have to have it all figured it out from the get go. Also, Scott and Peter banter across a wide spectrum of topics including improving education, the empathy deficit in America, deliberate practice and the importance of marching to the beat of your own drummer.

In this episode you will hear about:

  • How big name creatives use small scale experiments to find and improve ideas
  • The many benefits of being a black sheep
  • The philosophical frameworks big companies use to innovate
  • The vital importance of deliberate practice and forming a growth mindset
  • How creative success requires the ability to persist through failure
  • Developing healthy life expectations: you don’t have to have it all!
  • Pixar’s “Plusing” technique to craft their beloved film plots
  • The Darwinian model of creativity
  • The drive to be unique vs. the drive to belong
  • Crafting a social group that cultivates your desired attributes
  • A most heroic undertaking: to be yourself in a homogenized world
  • The practical ability to teach yourself new skills
  • Peter’s thoughts on measuring creativity and creativity in different fields

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“Peter Sims is a best-selling author, co-founder of The Silicon Guild, and founder of The BLK SHP (“black sheep”) Foundation. His latest book is Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, which grew out of a long collaboration with faculty at Stanford’s Institute of Design (the d.school), as well as his previous work in venture capital. He was also the coauthor with Bill George of the best-seller True North: Discover Your Authentic Leadership, a member of General Electric’s Innovation Advisory Panel, an Innosight Fellow, and the co-founder of Fuse Corps, a social venture that places entrepreneurial leaders on year-long grassroots projects with mayors to tackle some of America’s most pressing problems.” –Blurb taken from Amazon.com

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It’s easy to forget that guilds once ruled the world. By the time Rembrandt painted his masterpiece “Syndics of the Drapers’ Guild” in 1662, the concept, and inherent intrinsic value of guilds, was already a 400 year-old idea. If you were a craftsman, or merchant, or clothier in the case of Rembrandt’s drapers, guilds offered members and society at large great benefits: ranging from education and apprenticeships to medieval forms of peer review, and all important stamps of approval. Rembrandt’s drapers, you see, were appointed by the Mayor of Amsterdam to oversee the quality of cloth sold in the city. It was a golden era for guilds.

A couple of hundred years later, by the 1800s, human nature, such as political opportunism and rent seeking, ultimately took its toll on guilds. The rise of free market capitalism broke apart former fiefdoms, and rightly so, for guilds had come to hamper innovation and competition.

As the Internet dis-intermediates virtually every industry value chain, the return of the guild is near.

I’m an author of nonfiction books, so let’s take the publishing industry first. At every step in the publishing process, it’s extremely valuable to have a strong peer network. If you want to write a book, the best people to speak with and learn from are experienced authors. Later, established authors can provide important endorsements of your work and, as we all learn at one point or another, one of the best ways to disseminate your new ideas is with the help of other authors. So, it stands to reason that rather than be a lone wolf, which many authors chose to be, a whole new level of learning, network expansion, and generative opportunities open up when you form strong communities with other authors.

At the same time, as the publishing industry tries to sort through the world after the Internet, the basic publishing business model has changed only in fits and starts. The well-researched patterns of resistance to change and innovation in established companies play out in publishing.

Publishers are structured and incentivized for a distribution-centric world, rather than an author or content-centric world. Yet, what has happened — like what happened a few years ago in the music industry — is that the nexus of intrinsic “value” creation within the industry has flipped completely on its head.

Before the Internet, the crucial value-add in both the book and music publishing industry was in distribution. If you were a musician, you needed a record label to make your records, promote your work for radio, and get you into the stores. In publishing, publishers — and only publishers — could get your books out to the world and into thousands of bookstores. They had pricing power with sellers and, well, power all around because they were the central gatekeepers.

That was then

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Not anymore, and not by far: the new value equation is between writer and audience (or band and audience).

You would think that publishers would redouble their efforts to develop strong relationships and value propositions for authors, but this has not happened. All but a few authors I know express dissatisfaction with their publishing experiences. If anything, like movies and music, in the search for hard to find profits, publishing has become more of a hit business.

In music, Live Nation rose up as the new power by forging big deals with top artists ranging from Madonna and U2 to Jay-Z where the money was: concerts. In publishing, especially the nonfiction “ideas marketplace,” as well as other knowledge centric industries, I expect to see something quite different: the rebirth of modern incarnations of guilds.

About six years ago, my friend and fellow author, Ori Brafman and I started organizing dinners for Bay Area authors. It was a simple enough proposition: let’s just have dinner and a glass of wine and exchange ideas about our work, as well as about the people we work with. The dinners were consistently a hit, full of laughter and learning, and out of which collaborations formed.

Jeffrey Peffer compressedThen, about three years ago, a member of the group, Jeffrey Pfeffer, the noted management theorist and professor at Stanford Business School, asked us: why don’t we form an agency model? It was a good question. Here we were, working hard on our books and articles, and obviously better off collaborating and coordinating our resources.

No one. I repeat: no one was going to do this for us. Again, like many industries, the industry is structured for a different era, with an inverted pyramid, focused predominantly on distribution, with the content makers on the other end. (The same is often true for the speaking market, where nonfiction authors often monetize their work.)

Hence, the re-birth of the guild: we banded together to form a new entity called “The Silicon Guild,” both to coordinate resources, collaborations and tools, as well as to do experiments in the new world of publishing. Everything we do is author focused.

Guilds established to build and strengthen peer ecosystems and collective resources are an obvious response. Software development, long an industry that reveals trends sooner than others, such as the lean software development movement now permeating start-ups and many industries, has also seen a rise in guild-like structures.

Even the venture capital industry, my former home, has begun to experience some of the same disruption and inverted pyramid. In the old days, when capital and networks to venture capital were scarce, entrepreneurs suffered in terms of valuations and value-added services. The VCs sat back and waited for the deals to come to them, and had the bulk of the power. Not anymore. Thanks to the rise of a distributed market for angel funding, such as AngelList, as well as YCombinator, the focus from the earliest stages of venture investing is on the entrepreneur.

No other established firm has capitalized on this shift in power (from investor to entrepreneur) than Andreessen Horowitz as I wrote about in “How Andresseen Horowitz is Disrupting Silicon Valley”. The thesis that Andreessen Horowitz has ridden to become the hottest venture firm in Silicon Valley right now — including raising an astounding $5 billion in capital in just a few years — is similarly (and perhaps surprisingly) simple: Everything we do is entrepreneur focused.

What Andreessen Horowitz is doing, in many ways, is creating an entrepreneur-focused ecosystem. They don’t call it a guild, but that’s essentially how it functions. Just the other day, one entrepreneur supported by A.H. introduced me to another; and, the network effect (and potential value) grows. A.H.’s 80-person team is hugely focused on supporting and serving that ecosystem.

In the music industry, middlemen used to dominate the process of producers reaching consumers (as described in Steve Albini’s recent and rich Guardian piece). At every stage of the process, you needed middlemen: someone to record your music, send out samples, carry your bags, you name it. Today, anyone can record a studio quality album in their own basements. Old lions like EMI who used to hold the keys to every piece of the value chain must settle for nursing its catalogs of IP for what its worth, while settling for low margin distribution deals.

John LegendOnce again, the artist (not the distributor) is now the center of the value equation, and yet musicians must also find new ways of monetizing their work. Concerts are a primary source of revenue for most artists, and people like John Legend are doing great. Legend makes great revenues on concerts, his music, and branding deals. Beyond the upper echelon, there’s a huge need for creative approaches to audience development (social media helps) and monetization, and we’ve seen a big rise in corporate branding deals.

Monetizing the relationship between artist and audience in many different forms is where the value is. The firms that are building the strongest talent-focused ecosystems in this new world of music, such as The Atom Factory, function much like new guilds.

If the inverted value equation in this new world is so clear, it begs the question: why don’t the established players adapt more quickly or often? To me, it’s simple: incentives. Because the new value equations must be rediscovered, established players are still structured, incentivized, and organized for what was. For example, we have no idea where new pockets of value can be uncovered with The Silicon Guild. We must experiment and invent.

As Alan Kay, the noted technologist says, “The best way to predict the future is to invent it.” If only Rembrandt could be alive to paint it.

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Just over the crest of the highest point on Sand Hill Road, amid a cluster of relaxed buildings that could easily pass as residential units, sit the offices of Andreessen Horowitz (A.H.). Inside, you enter a lobby that doubles as a library featuring some of the favorite books of Marc Andreessen, who originally made a name for himself as co-founder of Netscape, the early web browser, which sold to AOL.

There’s a wide array of books in the A.H. lobby – from highly technical tomes about coding to more popular and well-known best sellers that have been ingested by millions, like Built to Last by Jim Collins. Reflecting on the self-conscious nature of the book selection and placement, the receptionist describes how each book was selected for a reason. Each book has a story behind it, she says. There’s a lot of modern art, too, all around, and within the bowels of the offices once you’re past the reception, including Robert Rauschenberg paintings. It’s all part of the brand. Anyone who has worked in venture capital understands that the industry is driven by sales as much or more as by thinking or ideas. And, when it comes to marketing and public relations, one thing is certain: No Silicon Valley venture firm is as vociferous and aggressive with marketing these days as Andreessen Horowitz.

Ben Horowitz was a product manager at Netscape, then co-founded the software firm Opsware with Andreessen, which eventually sold to Hewlett Packard for $1.6 billion. Horowitz, who was chief executive officer of Opsware, is the effective manager, while Andreessen, who was the chief technology officer of AOL, is a technology genius. The two have been inseparable since launching Andreessen Horowitz in 2009, and the firm has raised about $4.0 billion since. That is an ungodly amount of capital raised, especially in such a short period of time. It took the firm where I once worked, Summit Partners, which is considered a top-tier firm as measured by returns, 15 years to get to that level. A.H. has done it in five. In a very short time, A.H. has become one of the hottest Silicon Valley venture capital firms with investments in Facebook, Twitter, Pinterest, Airbnb, Box, Foursquare, and Skype, a deal that earned A.H. investors a 4x return on the firm’s $50 million investment in 2009.

Nearly overnight, Andreessen Horowitz has leaped into the top-tier of Silicon Valley venture capital firms, and the firm’s momentum has only increased thanks to some combination of brilliant salesmanship and marketing — a new model that is highly differentiated as well as, it seems, more creative and more entrepreneur-friendly than the traditional venture capital firm model. We’ll get to that in a bit; Let’s start with the marketing.

Marc Andreessen and Ben Horowitz. Credit: Forbes.

The way Andreessen and Horowitz market their firm and themselves is by producing “thought leadership.” Horowitz penned a book about his experiences as an entrepreneur before becoming a VC entitled The Hard Thing about Hard Things: Building a Business When There Are No Easy Answers, which was well-received by everyone from Silicon Valley entrepreneurs to The Economist magazine. “These are halcyon days in Silicon Valley and other hives of entrepreneurship around the world,” the Economist review gushed, “Nobody knows this better than Ben Horowitz. One of the Valley’s most prominent venture capitalists, Mr. Horowitz was previously the chief executive of a prominent start-up and personally experienced what he dubs ‘the Struggle.’… Not all his advice is compelling, but there is more than enough substance in Mr. Horowitz’s impressive tome to turn it into a leadership classic.”

Meanwhile, Marc Andreessen is outspoken to say the least, and perhaps his most quoted phrase to date is, “Software is eating the world” (this even serves as the tagline on the A.H. company website). He jumped onto Twitter in earnest this past January, and hasn’t stopped tweeting since, accumulating over 25,000 tweets in that time-frame. He tweets about education, financial systems, political institutions, and, obviously, a lot about technology.

An analysis of Andreessen’s peripatetic tweeting revealed that Andreessen tweets between 50 and 200 times a day, with an average of 120 tweets a day. On one day, February 5th of this year, Andreessen tweeted over 500 times, including a lengthy discussion about the future of the news business. His feed is required reading around Silicon Valley, where Andreessen is highly respected for his intuition and insight especially about the Internet and software, according to my conversations with Andreessen’s fellow board members (Andreessen sits on the boards of eBay, Facebook, and Hewlett-Packard).

Andreessen takes to Twitter akin to how an impassioned preacher might take to the pulpit to deliver a big sermon on Sunday morning. Some refer to the Andreessen monologues as “rants,” while others refer to them as “meditations,” but regardless, a lot of people listen when he goes into pontification mode. He outlines his thoughts and points in sequential order, then pushes the tweets out one after the other, starting with “1/” then “2/” and so on. One recent example, from June 1st, involved robots and machines. Here is how it went:

“1/One of the most interesting topics in modern times is the “robots eat all the jobs” thesis; best book on topic: [a link to Amazon for the book “The Second Machine Age” by Erik Brynjolfsson and Andrew McAfee]” 2:10 PM — 1 Jun 2014

“2/The thesis is that computers can more and more substitute for human labor, thus displacing jobs and creating unemployment.” 2:11 PM — 1 Jun 2014

“3/At core, this is Luddism (http://en.wikipedia.org/wiki/Luddite ) — “lump of labor” fallacy, that there is a fixed amount of work to be done.” 2:12 PM — 1 Jun 2014

“4/The counterargument is Milton Friedman: Human wants and needs are infinite; there is always more to do. 200 years of history confirms.” 2:15 PM — 1 Jun 2014

“5/To avoid the Luddite mistake, must believe “this time is different”, that either (a) there won’t be new wants and needs (vs human nature),” 2:15 PM — 1 Jun 2014

“6/Or (b) It won’t matter that there are new wants and needs, most people won’t be able to adapt to contribute & have jobs in new fields.” 2:16 PM — 1 Jun 2014

“7/While it is certainly true that technological change displaces current work & jobs, and that is a serious issue that must be addressed…” 2:17 PM — 1 Jun 2014

“8/It is equally true, and important, that the other result of each such change is a step function increase in consumer standards of living.” 2:17 PM — 1 Jun 2014

“9/As consumers, we virtually never resist technology change that provides us with better products/services even when it costs jobs…” 2:18 PM — 1 Jun 2014

“10/Nor should we. This is how we build a better world, improve quality of life, better provide for our kids, solve fundamental problems.” 2:19 PM — 1 Jun 2014

“11/Make no mistake, advocating slowing tech change to preserve jobs = advocating punishing consumers, stalling quality of life improvements.” 2:20 PM — 1 Jun 2014

“12/So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep?” 2:22 PM — 1 Jun 2014

“13/First, focus on increasing access to education and skill development — which itself will increasingly be delivered via technology.” 2:23 PM — 1 Jun 2014

“14/Second, let markets work (voluntary contracts and trade) so that capital and labor can rapidly reallocate to create new fields and jobs.” 2:24 PM — 1 Jun 2014

“15/Third, a vigorous social safety net so that people are not stranded and unable to provide for their families.” 2:25 PM — 1 Jun 2014

“16/The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for safety net.” 2:26 PM — 1 Jun 2014

Pause. Deep breath. Twenty minutes passed. Then, it seems, Andreessen got a second wind:

“1/The flip side of “robots eat all the jobs” not being discussed: The current revolution in the “means of production” going to everyone.” 2:47 PM — 1 Jun 2014

“2/In the form of the smartphone (and tablet and PC) + mobile broadband + the Internet: Will be in almost everyone’s hands by 2020.” 2:48 PM — 1 Jun 2014

“3/Then everyone gets access to unlimited information, communication, education, access to markets, participate in global market economy.” 2:48 PM — 1 Jun 2014

“4/This is not a world we have ever lived in: Historically most people in most places cut off from these things, usually to a high degree.” 2:49 PM — 1 Jun 2014

“5/It is hard to believe that the result will not be a widespread global unleashing of creativity, productivity, and human potential.” 2:50 PM — 1 Jun 2014

“6/It is hard to believe that people will get these capabilities and then come up with… absolutely nothing useful to do with them.” 2:50 PM — 1 Jun 2014

“7/And yet that is the subtext to the “this time is different” argument that there won’t be new ideas, fields, industries, businesses, jobs.” 2:51 PM — 1 Jun 2014

“8/In arguing this with an economist friend, response was “But most people are like horses; they have only their manual labor to offer.” 2:55 PM — 1 Jun 2014

“9/I don’t believe that, and I don’t want to live in a world in which that’s the case. I think people everywhere have far more potential.” 2:55 PM — 1 Jun 2014

Phew. I’m exhausted just re-pasting.

Evidently, Andreessen is a freak of nature when it comes to the ability to process inputs and outputs – so much so that Teddy Roosevelt might have had trouble keeping up. But when it comes to his own sense of himself and his operating philosophy, he seems quite clear. In fact, Andreessen’s Twitter bio says a great deal: “FOR creators & contributors to technology, science, art, ideas, a better world. STRONG VIEWS, WEAKLY HELD. Proud solutionist since 1994.”

It’s also clear that Andreessen takes to Twitter as both a preacher, and a listener/learner because he often engages with people who reply to his tweets, and as was mentioned the back and forth can take his number of tweets into the hundreds on any given day.


Andreessen’s public persona, stated as an artistic identity (or aspiration), stands in stark contrast to the way most venture capital firms are oriented. When I worked as a venture capital investor some ten years ago, the hot firms were Kleiner Perkins, Sequoia Capital, Benchmark, and Accel. All of these firms had charismatic leaders with a gift for sales and marketing. In fact, anyone who has worked inside the venture capital industry learns pretty quickly that sales and marketing skills are prized more than just about any other skill, even technical expertise, because you have to get deals by winning entrepreneurs over. If you don’t sell in venture capital, you lose. Inside the belly of the industry, I heard the quote: “Second place is first loser” for the first time. It’s easy to laugh about, but that’s the mentality of the industry. And, you’re only as good as your last deal.

John Doerr of Kleiner Perkins worked in marketing for Intel before becoming a venture investor. Cloaked in prestige, these firms got the best deal-flow, since partnering with Kleiner meant a Gold Standard seal of approval. Kleiner made hundreds of millions of dollars for investors on the first wave of the Internet as well as technology pioneers in general, with investments that included AOL, Google, Amazon, Juniper Networks, Symantec, Genentech, Intuit, Sun Microsystems, and Electronic Arts.

Today, Kleiner Perkins still has a premium brand, and John Doerr is widely respected, especially by the senior states-people of Silicon Valley. Yet, as someone who works with or speaks with countless entrepreneurs, Kleiner Perkins is rarely a topic of conversation these days. Kleiner is becoming old school. As I’m sure even John Doerr would admit, Kleiner is no longer the “hot” VC firm. If anything, Kleiner is seen as a bit stodgy (as stodgy goes in Silicon Valley). Kleiner is old power, if you will.

The predominant old way of thinking about venture capital is that you: a) build up a great brand and reputation with a large portfolio of investments, b) hire partners who have individually strong brands of their own, and c) collect hefty management fees on each fund. The industry standard is a 2–2.5% yearly “management” fee, a figure that gets pretty large on a billion dollar fund. And, in my experience, not surprisingly, the senior people get a disproportionate slice of that management fee. At the same time, the venture capital industry has been a glaringly poor-performing asset management group, consistently under-performing the S&P 500. (For more detail on the struggles within the VC industry, a recent article on the Harvard Business Review Blog by Diane Mulcahy, a senior fellow at the Kauffman Foundation, entitled “Venture Capitalists Get Paid Well to Lose Money” is well worth reading).

That was then. This is now.

In a white paper on the subject of old power versus new power, Henry Timms, executive director of the 92Y in New York City and founder of the social media movement #Giving Tuesday, along with Jeremy Heimans, CEO of Purpose, write that old power is scarce, held by a few. Old power acts like currency. It is top down, and hierarchical; it commands. The old power pie is fixed – either you have it, or you don’t. Think of Washington DC or Hillary ’08 as old power. New power, on the other hand, can be multiplied and acts like a current. It is collaborative, non-hierarchical, open and participatory. The new power pie can be expanded the more nodes are added to the network. Think of Twitter or Airbnb or Obama ‘08 as new power exemplars.

These days, the title new power in Silicon Valley would go to either angel investors writ large, such as YCombinator, or Andreessen Horowitz, and not just because they are marketing the hell out of themselves and their ideas. The team at Andreessen Horowitz plays down hierarchy and seeks to be inclusive as it expands to nodes at the periphery of its network. A.H. sees everyone as a potential contributor to its network. Members of the team who I spoke with emphasize that the power of a network lies in its external nods (i.e. distant acquaintances) – a nod to inclusivity and the need to constantly expand the network. The firm’s strategy is nearly perfectly positioned for what entrepreneurs look for in a partner today.

For one, the emerging generation of Silicon Valley entrepreneurs has learned just how confrontational the relationship between venture firms and founders can be. Nick Bilton, a reporter for the New York Times, detailed just how acrimonious things can get between founders and boards in his recent book Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal, which details the clashes between Twitter’s board and founders Jack Dorsey and Evan Williams. Savvy entrepreneurs naturally want to avoid acrimony as much of that as possible, and one of the main ways they try to do that is to partner with venture capital firms that are either led by entrepreneurs or very “entrepreneurial friendly” – meaning for simplicity sake that investors are nice people, who understand the realities and inevitable ups and downs of the creative process. A.H.’s mission and public relations strategy is squarely aligned with entrepreneurs.

It’s all about the ecosystem

Of course, every venture firm naturally tries to market themselves as entrepreneurial-friendly. What differentiates Andreessen Horowitz is something else, something very different than Kleiner, Sequoia, Benchmark, or Accel have done. Using customer relationship management software as a foundation, Andreessen Horowitz seems to be creating one of the largest, most networked, and powerful ecosystem platforms in the world. It is an astonishingly simple idea that yet is disrupting old power on Sand Hill Road and in Silicon Valley venture capital.

I received a detailed tutorial on the A.H. software system from a woman whose job it is solely to build out the A.H. network. Here is how it works. Let’s say you’re an entrepreneur who wants to sell into General Electric. Well, a host of A.H. relationship managers can type “General Electric” into the system and presto: You see dozens of contacts within the A.H. ecosystem working at G.E., including Beth Comstock, senior vice president and Chief Marketing Officer. The software also specifies who from A.H. is the primary relationship owner, and when the last contact was made. All interactions get tracked, even emails, so that anyone at A.H. can review the relationship history. And, the large and growing team only increases the power of the ecosystem as they contribute to it.

It starts to sound a little freaky, and it definitely felt a bit transactional when I thought about my name being just another A.H. contact, but this is not like the Wizard of Oz, here. The A.H. team, from the top down, is very open about the A.H. proprietary system and network for anyone curious to learn about it. And, some of the smartest minds in business, including G.E.’s Comstock, are paying very close attention. Comstock is also taking steps toward using a similar ecosystem approach with G.E., as I’ll touch on later.

Entrepreneurs value a few things from VC investors, namely the ability to help hire good people and the ability to access customers. Ron Conway, who like YCombinator is considered by many to be a premier angel investor in the Valley, used to be seen as the most networked person in the Valley. He kept track of all of his key relationships in Excel spreadsheets that he and his team then sent to the entrepreneurs he backed so that Conway can make introductions to potential new hires or customers.


A.H. takes the relationship management system to a whole new level. The firm sees itself as a talent management company, and the model that Andreessen and Horowitz used comes from a very surprising place as far as innovations in Silicon Valley go: Hollywood.

Hollywood? Yes, Hollywood. It’s counter-intuitive, I know, but here’s the quick story.

When Andreessen and Horowitz came together in 2009 to start a firm after their time together at Opsware, they focused on recreating a talent management model like the one pioneered by Michael Ovitz, the founder of Creative Artists Agency. Akin to CAA, yet unlike traditional venture capital firms, A.H. employs dozens of people whose job it is build relationships with people who can help Andreessen Horowitz companies. In Hollywood, Ovitz’s model of talent management, agents spend a great deal of time building up their clients and developing their talents; the focus is on using relationships to advance the talent’s best interests. A.H. puts that model into motion to support all that it does to source, develop, and support entrepreneurial ventures. I was at an event hosted by General Electric in San Francisco last year where I saw the model in action.

G.E. hosted the event in a cool warehouse space in San Francisco’s creative and highly entrepreneurial “Dogpatch” neighborhood. As backdrop, there was a giant G.E. aircraft engine lit by reddish mood lighting, and the purpose of the day was to help G.E. build awareness and relationships. I was there in part because I was a member of a small innovation advisory panel assembled by Comstock to help G.E. think out of the box. Ron Conway was there, and said hello. So was Eric Ries, a best-selling author who wrote a book called The Lean Startup, a book that building products and services by releasing ideas quickly and learning from fast iterations about what works and doesn’t for customers. The book has become required reading for both Silicon Valley web entrepreneurs as well as most G.E. employees, thanks in no small part to G.E. CEO Jeff Immelt’s glowing endorsement. You get the basic picture.

Anyhow, at the event, I also ran into Suhail Doshi, the founder of mixpanel, a hot start-up in the mobile analytics space. I had met Doshi, who is in his early to mid 20s, previously at a dinner hosted by a mutual friend. Not only did we share a lot of laughs, I was very impressed with him. He was clearly a very focused and talented entrepreneur, and he displayed all the characteristics – curiosity, collaboration, drive, and resilience – that you see in the most successful entrepreneurs.

Peter Sims and Suhail Doshi at the GE event in San Francisco's Dogpatch neighborhood 2013.After Jeff Immelt and Comstock spoke, Doshi and I hung out by the giant engine, and decided to snap a picture. There to take the picture, about 20 feet away, were two people from Andreessen Horowitz. These two A.H. employees were at the event seems to network like crazy, but their first job was to talk with Doshi about how mixpanel was going and what his needs were. One thing that Doshi wanted to do was meet Beth Comstock since he hadn’t met her yet. The A.H. partners offered to help but since I knew Comstock well, I was happy to make the introduction. Doshi and Comstock ended up speaking for about 10–15 minutes, as other executives, many of them older, from more industrial companies, waited.

Ron Conway can only cover so much ground on his own. The same is true for John Doerr. Either of those highly successful Silicon Valley investors would like to help their entrepreneurs in any way they can, I’m sure. But the fact of the matter is that Andreessen Horowitz is the firm that has dozens of people out there acting as catalysts, relationship managers, and dot connectors for an ever-growing ecosystem to support entrepreneurial value creation.

The A.H. software tool allows the team to further delineate a contact to show how that person can add value to the A.H. entrepreneurs: Say this person, someone like Beth Comstock, has “enterprise-level” purchasing ability (i.e. the ability to spend a large sum), or is an “early adopter,” or whatnot. Again, A.H. team members constantly emphasize that value is created at the edge of the network, so they are very inclusive in the way they develop their ecosystem. You never know where the next Mark Zuckerberg is going to surface, so the A.H. team visits 20 college campuses a year in search of talent, often accompanied by people from their portfolio companies.

Unlike the small, hierarchical teams at most venture firms, the A.H. team is chock-full of “partners,” all of whom are specialists: there are 26 investment partners, 16 partners specializing in marketing, sales and business development (i.e. people who help build sales teams), 12 partners specializing in “technical talent,” basically an in-house recruiting firm to identify and track the best technical talent, 7 partners who specialize in recruiting executive talent, 9 partners who are pure marketing specialists, 5 partners who specialize in corporate development (i.e. helping A.H. portfolio companies with their exits), and 22 partners focused on “operations” or making sure trains run on time.

Not all partners are equal

Of course, not all “partners” are equal. In addition to Andreessen and Horowitz, the firm has seven general partners, all of whom are men: John O’Farrell, Scott Weiss, Jeff Jordan, Peter Levine, Chris Dixon, Lars Dalgaard, and Balaji Srinivasan. That’s pretty old school, but people inside A.H. insist that they are trying very hard to recruit a female general partner, going so far as to say there is a list of 300 prospects. The supply side has indeed been limited when you factor in that GPs at A.H. have all started and grown successful tech companies. Diane Greene, founder and CEO of VMWare, would be great, but she doesn’t seem interested in becoming a VC, and there are only so many Diane Greenes. Big changes are brewing as new women-led venture funds have spun out of Kleiner and other big firms. It’s only a matter of time for the new generation of female founder CEOs to come of age and exit their companies, ready for the fields of venture capital and A.H.

All of that said, I cannot emphasize enough how different the A.H. model is from the traditional VC firms. When I worked in the industry, the people we were there to serve were the senior people in our firm, and help them to be more successful. On every email, the culture was to address our notes from the most senior to the least senior. Our firm was structured to help the partners succeed, and helping entrepreneurs came after investment sourcing. Success meant making money. Period. Of course, A.H. is focused on making money as well, but based on the firm structuring alone, A.H. has flipped the traditional staffing model on its head, and is clearly focused on finding ways to create as more and more value from its network – and, ultimately to make entrepreneurs successful.

It’s interesting to see that so many people are considered “partners,” a noticeable absence of the hierarchy that defines most venture capital firm cultures. Most venture firms are driven by a handful of partners, and supported by vice presidents, associates, and analysts. What’s more, while in the past, some Silicon Valley venture firms had hired one or two people to help with market development, those people were seen as a nice to have. At A.H. specialists are the firm.

What I find most fascinating about the A.H. ecosystem model is that, while it may feel transactional, most innovative businesses of the future are going to have to be highly networked, and enable large ecosystems. There was only one Steve Jobs. For every other company – such as G.E., let’s say – the ability to innovate and grow is increasingly dependent upon drawing the best talent and ideas into the company’s ecosystem. So, for instance, we heard a lot about G.E.’s focus on “big data” at that event last year. Well, then a bunch of entrepreneurs, industry thought leaders, and venture investors walked away with a clearer understanding of G.E.’s assets and needs – making it all the more easy and natural for them to call Beth Comstock with a hot lead or idea. G.E., not surprisingly, established G.E. Ventures, a venture investing arm of its own in Silicon Valley to take advantage of just these types of opportunities. Companies don’t innovate, people do. The more companies can learn to act as platforms for innovation, as Apple or Facebook do so well, the more innovations can flourish. A.H. is just a networked platform for innovation, with a mission to help entrepreneurs and creators capitalize on opportunities with the best people and customers quickly.

While it’s clear that Andreessen Horowitz has bounced into the top echelon of venture capital firms, at least with respect to ability to raise heaps of capital quickly (an unheard of $4 billion raised just 5 years into existence), deal-flow, and the premier brands it has invested in, the commercial success of the model is still far from proven. Time will tell whether playing for the long-term relationships will translate into superior returns. What’s more, because A.H. has raised an astounding amount of capital, which leads to more and bigger investments by blanketing Silicon Valley and beyond with bets, the team will get spread more and more thin. The key question is this: what do entrepreneurs get out of it? Perhaps they can get better served by going with a firm where the partners aren’t overwhelmed. It all depends on the people involved.

One thing is certain: The new firm in town has made all the other venture capital firms look like white sheep, upended from a steady state by the rise of angel investing, and Andreessen Horowitz, perhaps the blackest sheep firm of them all.

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steve and ed

As the three-year anniversary of Steve Jobs’ passing approaches in October, complete lessons from his life and legacy are still far from written or understood. Walter Isaacson’s biography Steve Jobs, published soon after Jobs’ death in 2011, provided a formidable starting point, yet we still have a great deal to learn and understand about what made Jobs such a unique innovator and leader.

In studying Jobs closely over the past several years, I’ve become convinced that the common narratives we’ve heard neglect a central aspect of Jobs’ of genius and success. And, it’s something that we can all learn from, which is this: Steve Jobs was a superb collaborator with the people whom he respected and trusted.

Now, we’re all familiar with the common narratives about Jobs’ unique talents and success: that his unique genius was in his ability to foresee technology vectors and envision, design, and execute truly brilliant products and platforms — from the Macintosh to the iPhone to iTunes to Apple stores (as well as, it must be said, a host of ideas that failed miserably). As a leader, Jobs’ sheer force of personality and charisma motivated everyone involved — sometimes with a “reality distortion field” — to achieve mind-numbing perfection with products, down to every last detail of Apple’s packaging.

Yet, Jobs’ product genius and charisma cannot explain the parallel — and simultaneous — breakthrough successes at both Apple and Pixar Animation. Just contrast how Jobs led at Apple, where he by all accounts made the final product and branding decisions as the company’s “editor,” compared with the roles he played at Pixar. At Pixar, where Jobs was the chairman and primary funder during the company’s start-up years, Jobs played the role of chief business strategist and leader yet was nearly entirely hands-off from the creative operations and development of Pixar films. For example, Jobs never once participated in a story review session for a Pixar film.[1]

Instead, Jobs relied on John Lasseter, Pixar’s creative lead, Ed Catmull, Pixar’s lead technologist and president, and a small initial cadre of animators, including Pete Docter (who would go onto direct Monsters, Inc. and UP) and Andrew Stanton (who would go on to direct wall-e and Finding Nemo), to develop Pixar’s ways of working and processes. Jobs, for instance, gave Lasseter and company full leeway to establish Pixar’s approach to developing new ideas, including exhaustive storyboarding, as well as the company’s routine of animation “dailies,” the daily meetings where animators discuss their works in progress each day in order to advance and build-up or “plus” each others’ ideas.

Catmull, now president of both Pixar as well as Walt Disney Animation (a position Catmull has held since Disney acquired Pixar for $7.4 billion in 2006), was Jobs’ longest-running colleague, a working relationship that spanned 26 years. Catmull dedicates a chapter of his superb recent book Creativity, Inc. to what it was like to work with Jobs. Catmull, who has the least overt ego of any senior executive I’ve ever met, saw Jobs mature enormously over time, especially in the development of personal empathy and humility.

In fact, Catmull, sees Jobs’ life as having taken a classic Hero’s Journey arc.

From his widely-reported immature and often arrogant youth, Jobs by all accounts appeared to develop into a far more empathetic human being and wise leader. But that personal transformation would not have happened without what leadership scholar Warren Bennis described as “crucibles”  — those personal crises and setback experiences that shape us much like “medieval alchemists used in their attempts to turn base metals into gold” — and, that allow for personal and leadership metamorphosis.

Back to the beginning and how Pixar became Pixar thanks to a brilliant collaboration

Freshly fired from Apple at age 30, not even Jobs could have envisioned what Pixar would ultimately become when he bought the company from George Lucas in 1985. He had learned about the nascent company from his friend Alan Kay, the legendary technologist, on a walk along the railroad tracks in Palo Alto. Kay had attended the University of Utah to obtain a PhD with Ed Catmull, a brilliant technologist. Catmull, who wanted to do something great with his life’s work, decided at Utah that his life aspiration would be to make the first full-length digitally animated film. Most everyone thought he was nuts.

A few years out of graduate school, Catmull was recruited by George Lucas to run LucasFilms’ computer imaging division. The company made hardware to support digital animation for Lucas’ films, as well as other imaging technologies, such as MRI imaging. But after a couple of years of R&D work, Lucas went through a difficult divorce, and needed cash, so he had to sell the company. Enter Steve Jobs, the lone bidder standing after Lucas’ efforts to shop the deal around.

Despite the unproven market potential of Pixar’s hardware, Jobs had immediately fallen in love with the technology. In David Price’s excellent history of the company The Pixar Touch, Jobs originally believed the company would be the next great hardware firm.

In fact, when he bought Pixar, Jobs never believed that the company would ever make money on digitally animated films. Pixar would become the HP of imaging, Jobs predicted.

pixar image computer

As Price outlines, Catmull, Lasseter, and another early cofounder, Alvy Ray Smith, had always focused their dreams on making a full-length animated film despite the fact that the technology required to do so was believed to be at least a decade away. Jobs knew about their passion when he bought the company from Lucas. (Lucas had even told Jobs that the team was “hell-bent” on making animated films.) And, Jobs always appreciated that passion, but he valued their skills and talents even more. So, he allowed the team to make short animated films in order to demonstrate the value of Pixar’s hardware. Learning how to make short films extremely well was, in fact, how Catmull, Lasseter, and company learned how to tell animated stories, and to make the technology (software and hardware) to eventually support making a full-length digitally animated film.

It was an extremely difficult journey, and ultimately cost Jobs $50 million in personal investment.

After the hardware wouldn’t sell in the marketplace, Jobs pivoted Pixar’s vision and focus in the mid-1980s and let the world know that Pixar was going to be a great software company. That strategy lasted for an even shorter period of time. Close to bankruptcy, Pixar had developed its digital animation, technology, and storytelling capabilities and short films to the point where the company won the Academy Award for its short film Tin Toy in 1988. That was the clarion call Jobs needed. He then pivoted the company again, to focus on animated commercials, and soon enough, had a deal with Disney to produce the first full-length film: Toy Story.

And, so, while not even Steve Jobs could have predicted that Pixar would produce blockbuster digital films, Catmull and Lasseter never would have gotten there without Steve Jobs as funder, strategist, external negotiator and salesman. Given the agonizing setbacks and toils along that path, and regular need for capital, Catmull describes Jobs as “our protector.” It was a brilliant collaboration, with each person performing the roles best suited to their talents and experiences.

How to argue with Steve Jobs

Steve Jobs was obviously a extremely driven and demanding collaborator. Yet, with the people he respected and trusted, such as Catmull and John Lasseter, Jobs listened, shifted his positions when convinced, and even valued collaborators’ personal preferences. Catmull, for instance, described in an interview about Creativity, Inc. at Stanford University how he and Jobs would argue when making decisions.

Despite Jobs’ frequently confrontational style, Catmull says that he and Jobs never once got into a yelling argument. That would go against Catmull’s personal nature, something that Jobs evidently respected. “The way it worked was,” Catmull discovered, “That I would say something to him, and he would immediately shut it down because he could think faster than I could.” Catmull would then wait a week, give Jobs a counterargument to what Jobs said, and Jobs might shut it down again, and the pattern would repeat, sometimes for months, until the two reached a resolution. Catmull reflected on how those interactions unfolded:

In the end, one of three things happened: About a third of the time, he [Jobs] said, ‘Oh, I get it. You’re right.’ And that was the end of it. And, there was another third of the time when I [Catmull] would say, ‘You know what, actually, I think he’s right. The other third of the time, where we didn’t reach consensus, he just let me do it my way. Never said anything more about it.’[2]

Tellingly, over 20 years later, Catmull, Lasseter, Docter, Stanton, and many others have stayed at Pixar, often turning down very lucrative alternatives, and focused intently on developing the next generation of filmmakers and company leaders. Jobs wasn’t the visionary at Pixar, he was the glue.

The hero departs: If Steve Jobs (especially “the younger” Jobs) didn’t respect or like you, he gave the middle finger to collaboration, and could be a massive asshole

All of that said, Jobs’ often confrontational personality naturally rubbed a lot of people the wrong way. For instance, Alvy Ray Smith, a brilliant technologist, left Pixar during its formative years following numerous personality clashes with Jobs, which he describes in detail as well as to share his side of Pixar’s history (revisited) on his website.

Meanwhile, during Apple’s early years, Jobs could be nothing short of impossible. As his co-founder Steve Wozniak has said, a lot of people who worked with the younger Jobs despised him. “Some of my very best friends in Apple, the most creative people in Apple who worked on the Macintosh, almost all of them said they would never, ever work for Steve Jobs again,” Woz recently explained in an interview with the Milwaukee Business Journal, “It was bad.”

Wozniak explained that in his earlier years at Apple, Jobs pushed people to bring products out before they were ready, creating enormous strain on employees and creating rifts.

“He would directly confront people and almost call them idiots,” explained Wozniak. “But you know what? When they confronted him back and told him why they were right in understandable forms, he was just testing and learning, and he would respect those people and give them high privileges in the company.”

“That was one thing he did respect — someone who believed enough in their own ideas to speak for him, not just shut up and be shy around him,” he said.

Again, while it must be said, we’ve all heard Jobs stories like these, and this narrative. Jobs “the younger” leadership was often destructive and counterproductive. But, according to all accounts I’ve gathered, through a number of personal crucibles — most notably getting fired from Apple — Jobs grew his leadership and his ability to collaborate enormously.

The hero returns: Steve Jobs the remarkable collaborator

Despite the fact that Jobs burned countless working relationships with his style, especially early in his career, he developed a remarkable number and array of productive collaborations throughout his career with some of the most respected leaders in their domains. Owing to some combination of pure results and mutual respect, which included his willingness to listen to people he respected and reconsider his views, Jobs was a magnet for talented collaborators and partners.

A sampling includes: Pixar’s Catmull, the brilliant technologist who grew into a strong manager and leader (Catmull is frequently known inside Pixar as “The Pope”), as well as John Lasseter, a once-in-a-generation creative leader, once fired from Disney before he was hired by Catmull, and who is now Chief Creative Officer for both Pixar and Disney Animation. Meanwhile at Apple, Jobs forged a host of extremely effective, long-running partnerships, notably with senior vice president of Design, Jonathan Ive, who has led Apple’s design team since 1996, a partnership that has been well documented. Other very strong collaborations included Scott Forstall, the mobile software chief with whom Jobs partnered to design and commercialize the iPhone, as well as retail chief Ron Johnson, with whom Jobs worked closely to design and launch Apple’s stores.

Critically, Apple’s long-time Chief Operations Officer Tim Cook became the operational ballast to Jobs’ creative, marketing, and product genius. Before becoming Apple’s CEO after Jobs’ death, Cook led huge operational improvements and efficiencies throughout Apple’s supply chain, such as reducing inventories from 60 to 30 days. Not since Bill Hewlett and David Packard has Silicon Valley seen a partnership with such effective balance of innovation (Hewlett) and operations (Packard). (Mark Zuckerberg and Sheryl Sandberg have forged an impressive partnership as well.)

Now that Cook is CEO, the biggest question that I (and many others) have in the post-Jobs era at Apple is how well Cook will be able to build and maintain productive collaborations.

While there is a notable absence of female collaborators in the above list, perhaps Jobs’ most impressive partnership of all was with his wife Laurene Powell, whom he married in 1991. After years of relationships that exposed Jobs’ youthful arrogance and weaknesses, including the birth of a child who Jobs failed to initially acknowledge and support, Powell and Jobs forged what was by all accounts a remarkable partnership, including raising three children.

And, today, it is Jobs’ close collaborators who carry his legacy forward: at Pixar, Apple, Disney, as well as within philanthropy, which Powell leads admirably. Her current work includes College Track, a nonprofit based in East Palo Alto focused on increasing high school graduation rates for underserved students, as well as the Emerson Collective, which is focused on supporting the entrepreneurial spirit including through educational programs and reform.

And so, nearly three years after his passing, while Steve Jobs’ once-in-a-generation talents are gone, his dreams and values live on through his collaborators. To me, that ability to forge extremely strong and trusting collaborations was Steve Jobs’ real genius, and one that we can all learn from.

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Original article as it appeared in NYT here.

PREOCCUPATIONS

Daring to Stumble on the Road to Discovery

By PETER SIMS

AT the recent Aspen Ideas Festival, the New York Times columnist Thomas L. Friedman said that when he graduated from college, he was able to go find a job, but that our children were going to have to invent a job.

Jobs, careers, valued skills and industries are transforming at an unheard-of rate. And all of the change and uncertainty can make us risk-averse and prone to getting stuck.

Despite these realities, our education system emphasizes teaching and testing us about facts that are already known. There is much less focus on our ability to discover, create and reinvent.

The same often holds true in the workplace. Perfection is rewarded, while making mistakes is penalized. It’s no wonder that “failure” has taken on a deeply personal meaning, something to be avoided at nearly all cost.

The skills we’re taught work well for familiar situations, yet we’re trained to perfect our ideas and use the past to predict the future with linear plans in a nonlinear world. As such, we need a completely new mind-set. Linear thinking is a death knell for creativity.

When I worked as a venture capital investor, I found that most successful entrepreneurs don’t begin with perfected ideas or plans — they discover them. Entrepreneurs think of learning the way most people think of failure.

A prime example is Howard Schultz, one of the most successful entrepreneurs of our time. When he started what would become Starbucks, he modeled the first stores after coffeehouses in Milan, a new concept for the United States in the 1980s. He was clearly onto something, but the baristas wore bow ties — which they found uncomfortable — and customers complained about the nonstop opera music and menus that were written primarily in Italian. And the early stores had no chairs. Mr. Schultz routinely acknowledges that he and his team made a lot of mistakes. But they learned from them, as they did from countless other experiments.

Consider another example — what it takes to create great comedy. Editors at The Onion, the humor publication, estimate that they try out hundreds of headlines each week before they finally decide to use only a small percentage of them.

Even the most successful stand-up comedians, like Chris Rock, try thousands of new ideas in front of small club audiences in order to develop a one-hour act. Some jokes fail, but Mr. Rock is willing to be imperfect; he persists night after night because every small bet takes him closer to a brilliant act on the big stage.

This is how comedians and entrepreneurs must work — by making countless small bets to discover what works. The real genius is in the approach.

The same holds true for leaders, managers and collaborators. They must to be willing to learn from mistakes. Affordable risks should be encouraged, and small failures celebrated — these are the mark of learning organizations. Otherwise, risk aversion will lead to stagnation and decline.

In a time when valued skills and occupations shift constantly, we must be able to discover interests, opportunities and careers by experimenting. Or by reinventing ourselves altogether.

The architect Frank Gehry, for instance, designed relatively conventional buildings for much of his early career. But inspired by how contemporary painters and sculptors worked, Mr. Gehry performed a series of experiments on his own house in Santa Monica, Calif., during the late 1970s .

Working with plywood, corrugated metal and chain-link fencing, he built a new exterior around his original house.

His experiments were the precursor to what would become his distinctive style, evident in the Guggenheim Museum Bilbao in Spain and the Walt Disney Concert Hall in Los Angeles. The money was good in conventional architecture, yet he decided to start anew, using his own style and voice.

INVENTION and discovery emanate from the ability to try seemingly wild possibilities; to feel comfortable being wrong before being right; to live in the world as a careful observer, open to different experiences; to play with ideas without prematurely judging oneself or others; to persist through difficulties; and to have a willingness to be misunderstood, sometimes for long periods, despite the conventional wisdom.

All these abilities can be learned and developed, but doing so requires us to unlearn many of our tendencies toward linear planning and perfectionism.

As the technology pioneer Alan Kay put it: “The best way to predict the future is to invent it.” It begins with a little bet. What will yours be?

Peter Sims is the author of “Little Bets: How Breakthrough Ideas Emerge from Small Discoveries.”

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Originally published on Harvard Business Review’s blog.

It’s a great disservice to everyone, especially young people, that the stories that we often hear about the most accomplished entrepreneurs sound so effortless. The truth is just the opposite, even for visionary creative success stories like those of Mark Zuckerberg, Jack Dorsey, Howard Schultz, Wendy Kopp, and even the legendary Steve Jobs. Like any creative process, any entrepreneur who wants to invent, innovate, or create must be willing to be imperfect and make mistakes in order to learn what works and what does not.

It took Dorsey years of experimentation before he finally latched onto what ultimately became Twitter. Wendy Kopp started Teach for America, initially as a conference, on a shoestring budget after graduating from college. And Howard Schultz, while he had great foresight to recognize that Americans needed a communal coffee experience like those that existed in Europe, failed on his first try. As I wrote in Little Bets, when his first store opened in Seattle in 1986, there was non-stop opera music, menus in Italian, and no chairs. As Schultz acknowledges, he and his colleagues had to make “a lot of mistakes” to discover what would become the Starbucks we know today.

Despite what we may have read, Steve Jobs was no different. Here are five of Jobs’s greatest mistakes, all of which history shows he ultimately learned from:

1. Recruiting John Sculley as CEO of Apple. Feeling that he needed an experienced operating and marketing partner, the then 29-year-old Jobs lured Sculley to Apple with the now legendary pitch: “Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?” Sculley took the bait and within two years, Sculley had organized a board campaign to fire Jobs. Jobs himself would surely consider hiring Sculley as a great mistake.

2. Believing that Pixar would be a great hardware company. When Jobs was the last and only buyer standing in 1986 when George Lucas had to sell off the Pixar graphics arm of LucasFilms (for $10 million), he never expected the company to ever make money on animated films. Instead, as Pixar historian David Price shows in his excellent book The Pixar Touch, Jobs believed that Pixar was going to be the next great hardware company. Not even a visionary like Steve Jobs could predict what unfolded at Pixar, yet to his great credit, he supported cofounders Ed Catmull and John Lasseter as they pursued their dream of producing a full-length digitally animated film from day one. He protected their ability to make small bets on short films in order to learn how to eventually make a full-length feature film in Toy Story.

3. Not knowing the right market for NeXT computer. Although Jobs tried to spin NeXT computer as an ultimate success when the assets were sold to Apple in 1986 for $429 million, few in Silicon Valley agreed. The company struggled from the start to find the right markets and customers. If you haven’t seen the video about Jobs describing the vision for NeXT’s customers, you should watch it on YouTube. It’s clear that even Jobs was confused. In it he says, “We’ve had, historically, a very hard time figuring out exactly who our customer was, and I’d like to show you why.”

4. Launching numerous product failures. The Apple Lisa.  Macintosh TV. The Apple III. The Powermac g4 cube. Steve Jobs was brilliant about understanding how technology vectors were evolving, yet even he screwed up royally, and often. The lesson that I take from these defunct products is that people will soon forget that you were wrong on a lot of smaller bets, so long as you nail big bets in a major way (in Jobs’s case, the iPod, iPhone, iPad, etc). Jobs was a market research group of one at Apple, which carries with it great risk, yet it should be noted that his batting average improved over time, which comes as no surprise to those who study the benefits of developing strong creative muscles though deliberate practice.

5. Trying to sell Pixar numerous times. By the late 1980s, after owning Pixar for four or five years, Jobs tried on multiple occasions to sell the company, just to break even on his investment, which ultimately equaled roughly $50 million. He shopped Pixar to, among others, Bill Gates, Larry Ellison, and numerous strategic partners and companies. No potential buyer bit. It’s a good thing for Jobs, and his legacy. He eventually engineered the sale of Pixar to Disney for $7.4 billion in 2006.

The lesson, it seems, is fairly simple: Even the great business visionaries and luminaries of our times often fail and have setbacks. Imperfection is a part of any creative process and of life, yet for some reason we live in a culture that has a paralyzing fear of failure, which prevents action and hardens a rigid perfectionism. It’s the single most disempowering state of mind you can have if you’d like to be more creative, inventive, or entrepreneurial. The antidote is to try a small experiment, one where any potential loss is knowable and affordable.

The revolution will be improvised.

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Published originally on MarketWatch.

SAN FRANCISCO (MarketWatch) — Google Inc. has reached another fascinating period of its growth and evolution.

Three years ago, the Internet giant risked becoming the next Microsoft as it became more political and bureaucratic on the back of astronomical growth. But Larry Page’s return as CEO has brought welcomed product focus, leadership, and accountability, and the company attracts and retains some of the best engineers in the world. These factors and great profits have taken Google’s GOOG -0.91%  stock to record highs.

Yet one of the most important questions among Google insiders will be whether Page & Co. can embrace and institutionalize a culture of experimental innovation that made Google, well, Google in the first place.

For answers, they can look north to Seattle, where Amazon.com AMZN +1.91%   routinely pioneers, reinvents, and evolves.

While Amazon founder Jeff Bezos clearly banks on the role of significant inventions, such as the Kindle, he has created a culture of experimental innovation at Amazon better than any other current CEO. (It helps that Bezos still owns more than 19% of the company.)

For example, when Bezos and his “S Team” at Amazon (short for “senior team”) consider a new opportunity, they do not frame the decision-making process around being able to earn hundreds of millions of dollars.  Instead, they ask whether they think the opportunity could generate at least $10 million in revenue, and if they get excited about their hunch, they will assign some of their best intrapreneurs to the project.


Reuters Jeff Bezos.

As Bezos has often underscored: You can’t put into an Excel spreadsheet how customers will respond to a new idea.

Amazon’s strategy and decision-making process starts (and perhaps ends) with improving the customer experience.  Every important meeting, project, or initiative at Amazon begins with a discussion of how the ideas will ultimately benefit customers.

Bezos and team, in fact, constantly experiment in a very strategic and incremental way to mitigate risks. There’s a lot of internal experimentation, which is where the insights about the problems and needs served by Amazon Web Services (AWS) originated.  Google is trying to catch up to Amazon in cloud computing, and it’s likely too late.

Amazon’s incentive and reward systems reflect the importance of learning and discovery throughout the organization. Employee reviews include a section on what was learned from trying experiments, regardless of success or failure. That’s the power of a strong culture.

As my partner Casey Haskins, founding CEO of BLKSHP Innovation often says, “You are what you measure.”

Moving ahead

The primary innovation challenge for Page and Google going forward will be to create a strong culture that utilizes Google’s immense assets, insights, and platform for experimentation and discovery, as well as monetization. You can’t have one without the other.


Reuters

Larry Page.

Google execs are grateful that Page has brought renewed product focus and leadership, while eliminating inefficient bureaucracy and politics — yet Google is also a far less-experimental company and culture than it was even five years ago. Page and Google co-founder Sergey Brin increasingly look to the top-secret Google X Lab, home of a number of brilliant inventors and engineers led by Brin, for the company’s innovations. (Google X is where the driverless car project is housed.)

Nowadays, there isn’t an example of a company that relied on great inventors to produce lasting and sustainable innovation. As Haas School of Business professor Henry Chesbrough has documented well, centralized R&D, such as at Bell Labs and Xerox PARC, has given way to an era of open innovation.

This would hardly be news to Page, but creating a culture that balances entrepreneurial discovery and ruthless execution is extremely difficult.

Amazon has consistently struck that balance.

The advantage that Page and Brin appear to have is the same quality Bezos has in spades. All three executives have extremely curious and pioneering minds, perhaps dating back to their Montessori schooling, and their respective experiences building Google and Amazon exemplify creativity and invention through discovery and learning.

As Bezos has said, “What is dangerous is not to evolve.” If Page and Bezos are able to create cultures and leadership cohorts that can continue to evolve long after they step down, then they truly have built something to last.

Peter Sims (www.petersims.com)is the author of “Little Bets: How Breakthrough Ideas Emerge from Small Discoveries,” and founder of The BLKSHP Enterprises.

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Last week, thanks to Kieron Boyle, Head of Social Finance and Investment at the UK Cabinet Office, who I was introduced to by Jonathan Greenblatt, head of the White House Office of Social Innovation and special assistant to President Obama, I had the privilege of visiting 10 Downing Street with a group of BLK SHP from the U.S. and the U.K. to discuss innovation, entrepreneurship, and social entrepreneurship with senior advisers to the Prime Minister and the UK Cabinet.  It was a fascinating visit.  As England teeters on the verge of a triple-dip recession, I actually came away inspired by the creative approaches and experiments leaders and people are now taking there.  What follows below are some synthesized observations and insights.

Originally published on Forbes.

English: 10 Downing Street doorIf there’s a bell curve of risk aversion by sector, government and philanthropy are at the far right end (by far).  A high-level American diplomat recently described to me the risk aversion in Washington these days as “paranoia,” a fear of failure or making a mistake that leads to a state of near paralysis.  Innovation and entrepreneurship are all but non-existent in Washington at a time when reinvention and renewal is needed most.

Yet, hard as it may be to believe given the current state of affairs, a trip to London and Number 10 Downing Street last week has given me renewed optimism that changes may be starting to bubble from the bottom up, in small yet significant ways.  The insights come just in time for second-term Obama Administration officials to pay heed.

After all, being President is a thankless and nearly impossible job.  While I have been vocal in challenging the Obama Administration to listen and collaborate better, you’re damned if you do, and you’re damned if you don’t these days.

Before turning to the optimistic news, here’s some background about thinking differently about the second-term innovation strategy.

Take government investment in new technology.  The history of technology and Silicon Valley is closely linked to government investment and research monies sparking new industries.  Hewlett Packard originally relied on government contracts to fund radio frequency technology research, while National Science Foundation grants helped fund Google’s early days.

While the Obama Administration should be applauded for its leadership and courage for investing in renewable energy, the problem with a strategy of making a lot of big bets is that one (really) bad big bet on Solyndra, which received a $535 million loan guarantee from the Department of Energy, became the object of pervasive and prolonged criticism.

Interestingly, the strategy of betting big, rather than small, is one of the signs that corporate innovation researchers Clayton Christensen and Jim Collins have found signals a risk of systemic organizational and financial decline.  *(For more detail on these topics and problems, see The Innovators Solution By Christensen and Michael Raynor and How the Mighty Fall by Collins.)

Given the brutal context of national political discourse, it’s of little wonder that I don’t know of more than a handful of very talented people in my generation who have an interest in pursuing roles in government or running for office.  I literally don’t know more than 10 people, and I’m fortunate to know many rising GenX and Millennial stars from my research and various experiences.  The ones who hold a strong interest for politics and public life seem to be mostly driven by external ideas of who they are, rather than an authentic connection to either themselves or average citizens.  That’s certainly different from most (though not all) past American eras, where an ethic of public service ran deep and was honorable.

The institutional problems are deep and systemic.  The state of the media, lack of accountability within social institutions, and a well-documented corruption in the plutocracy, all reflections our cultural priorities, surely deserve significant blame.  *(For more insight and analysis on these topics, I would recommend That Used to Be Us by Thomas Friedman and Michael Mandelbaum, and It’s Even Worse Than It Looks by congressional scholars Thomas Mann and Norm Ornstein.)

Larry, the 10 Downing Street cat, walks on the...Larry, the 10 Downing Street cat, walks on the cabinet table wearing a British Union Jack bow tie ahead of the Downing Street street party, in central London, on April 28, 2011. (Image credit: AFP/Getty Images via @daylife)

In what is likely the beginning of a painful triple-dip recession in England, compounded by an era of often ill conceived and poorly executed austerity measures, the middle and lower classes are hanging on by a thread.

Just ask the team at Shelter, a leading UK charity that provides a bevvy of services to keep people in their homes.  Decimated by the previous recessions, these families have lost all their savings and are losing their homes in droves.  Unlike in Continental Europe, there doesn’t seem to be much of a welfare state remaining in England, the only apparent safety net is a room with four walls.  Who helps these people?  Shelter, but its budgets are being slashed by austerity measures.  Dickens would have a field day.

Just as innovation dries up the farther away decision-makers are from the problems they are trying to solve, and companies struggle when they begin to replace experimental cultures with that made them successful as entrepreneurial ventures with controls, processes, and systems, the problems in England are highly localized.

Senior UK policy makers (who are typically trained as statisticians, policy-makers, lawyers, or economists) often understand the limits of their policy-making ability sitting in Number 10 or nearby.  Their hearts are in the right place and they want to solve citizens’ problems in new and innovative ways, yet they need political air cover from the Prime Minister and senior political leaders, as well as support from many other stakeholders to keep their ideas afloat.

Those closest to power in England will tell you that in this era, there’s an enormous need for innovation to come from outside government.  Simply put: federal government cannot turn these deep-seeded social and economic problems around alone.  What is needed is a new era of openness and collaboration across sectors – social entrepreneurship is truly rising to the fore across both sides of the Atlantic.

Alas, finally it must seem for patient readers, here is where the optimistic part begins.  As Tip O’Neil famously put it: “All politics is local.”  As problems and funding decisions get pushed down in an era of devolution of power, we’re seeing local councils in England start to innovate and experiment with fresh approaches to solving citizen problems, from the bottom up rather than the top down.  We’re seeing that same pattern here in the United States as mayors and governors become the focal points for discovering new ways of administering, funding, and servicing Medicare, Medicaid, and the like.

 

Akin to the entrepreneurial philosophy of making small bets to discover creative approaches to serving needs, solving problems, and finding opportunities, experimentation has arrived to the federal ranks of England in the form of a black sheep idea: a “Behavioural Insights Team.”

 

This arm of the UK Cabinet Office, led by the respected academic, thought-leader, and social entrepreneur David Halpern, was established by David Cameron in 2010: “with a remit to find innovative ways of encouraging, enabling and supporting people to make better choices for themselves.”

Winston Churchill in Downing Street giving his...Winston Churchill in Downing Street giving his famous ‘V’ sign. (Photo credit: Wikipedia)

The unit experiments like mad on everything from how to type tax collection letters in order to maximize participation to how to improve energy efficiency.  Halpern and senior policy-making colleagues often reference Nudge by Richard Thaler and Cass Sunstein.  Thaler has served as an advisor to the unit and the approach seems to be working, with results that include collecting an extra £200m of income tax and increasing payment rates by 15% after telling late payers in letters that their neighbors had paid their taxes.  In addition, they’re finding good results from experiments in getting people into jobs 15-20% sooner in Essex borrowing from insights within US Elections data.

Critics in the press naturally ridicule the team, nicknamed the “nudge unit,” from time to time, yet Halpern’s credibility in influence circles only seems to be growing with the results.

Little things can often lead to large gains.  Behavioral economists are developing their thinking and models on this front – what entrepreneurs and social entrepreneurs do in their sleep.  It’s not only common sense, as I wrote in Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, an experimental approach to innovation is the only empirical way to keep innovating as an individual, organization or society.

Although I am no fan of top down austerity, David Cameron earned an important measure of respect from me this week for empowering an arguably quirky approach to solving problems in a new and different way.  In such bleak times, he doesn’t have much of a choice, and that’s a good thing.  We need a hell of a lot more black sheep like David Halpern working on the side of citizens with experiments if we’re going to begin to restore their faith in federal institutions.   I’ll bet that Sir Winston Churchill would be quite proud.  Perhaps we Americans can learn from our friends across the Pond.  It wouldn’t be the first time.

 

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9:06 AM, January 7, 2013

 

Larger view

President Barack Obama speaks about the economy at the Daimler Detroit Diesel engine plant Dec. 10, 2012 in Redford, Mich. (Bill Pugliano/Getty Images)

Guests

  • Julian Zelizer: Professor, Princeton University
  • Peter Sims: Author of “Little Bets: How Breakthrough Ideas Emerge from Small Discoveries”

LISTEN

 

sponsor:

What kind of president will Barack Obama be in his second term?

Obama has already begun to lay out an agenda for his second term, citing gun control and immigration as two top issues.

Joining The Daily Circuit on Monday, Jan. 7 to discuss Obama 2.0 are Julian Zelizer, a professor of history and public affairs at Princeton University, and Peter Sims, author of “Little Bets: How Breakthrough Ideas Emerge from Small Discoveries.”

READ MORE ABOUT PROSPECTS FOR OBAMA’S SECOND TERM:

Obama’s second chance (Peter Sims on Forbes.com)

Six political lessons of 2012 (Julian Zelizer on CNN.com)

How progress is possible in Obama’s second term (CNN)

President Obama’s 2nd-term history lessons (Politico)

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