Life, distilled by Will Critchlow

That I just had to try out embedding one:

If you’ve followed the stuff I’ve written here and elsewhere, you’ll know I’m a sucker for academic exercises, game theory and business strategy. Combine the three and you know I’ll be hooked.

It’ll come then as no surprise that I’ve been fascinated recently to read about Valve’s amazing corporate structure (TL;DR no management at all and an incredibly empowered workforce). If you haven’t been following along:

• Start with the employee handbook
• Read their economist’s view of the pseudo-marketplace within Valve

I desperately want to learn from their experiment, but there are some things I’m really struggling to get my head around. I hope someone from Valve can stop by and help out. I’ll start with just three questions. I think all of these three actually relate to the same underlying confusion of mine - of what fills some of the vacuum that must be left without any management at all:

1 - How do you balance personal desires with what’s best for the company?

I understand how you mainly avoid people slacking off (explained in the economics post). I don’t quite understand how individuals balance personal desires against company performance. It feels like it could easily descend into a tragedy of the commons where everyone was working (very hard) on long-term fun long shots and no-one was maintaining the cash cows.

Do some people suck this up and take one for the team to work on less fun but highly important projects out of a sense of duty? Do they resent others swanning around having fun on crazy projects?

2 - How do you decide when and whom to hire?

First the when - in most companies this would be a core function of management - estimating capacity and demand and choosing what roles needed filling.

I can just about imagine this self-organising with individual teams hiring people when they need them - but given that they can just wheel their desks off somewhere else and join another team, it’s not clear that they would actually be making a good decision for the company (indeed, if you can’t recruit internally, it should indicate that you have an unpopular project, no?).

Whom - as you’ve said, the whole thing relies on having only very self-motivated and disciplined people working for you. With (presumably) no company-wide hiring process and no way of enforcing specific gatekeepers on hiring, how are you better than your average company at what is one of the key determinants of your success?

3 - How do you get unglamorous work done?

Related to the hiring question - it’s not clear to me what it means to (for example) hire a bookkeeper. You can hire a person and start them off doing bookkeeping - but from their first day, they can wheel off their desk and start “adding more value” somewhere else. How do you hire for unglamorous roles (and retain people in those roles)?

Some questions that are probably more sensitive but that I also don’t understand:

• I just about get the process for allocating a salary budget across the whole company via a democratic process - but not how that budget is decided? I asked about this on Quora but didn’t get a good answer
• How does anyone ever get fired / laid off? (Does anyone ever get fired / laid off?). It can’t possibly be democratic can it? A popularity contest?

I just read about the Brixton pound (Google it) after seeing it tweeted by a local politician and it occurred to me that it looks like it was created by someone with no understanding of economics.

They have reimplemented a currency without all the good bits. With no secondary market and no floating exchange rate, it strikes me as pure pr puff.

If it had those things, there is a chance that local disadvantages could be overcome (particularly if you could borrow in this currency). This is a similar argument to how poorer countries in the eu might be better off with their own currency rather than being forced effectively to tie their exchange rate to the economic powerhouse of Germany.

I think the fact they won’t let you exchange them back for sterling is the most compelling argument that they aren’t really worth a pound sterling (and therefore shouldn’t have a fixed exchange rate).

Without these features I think I’d always prefer pounds sterling over Brixton pounds. If a pound sterling can always buy a Brixton pound but not vice versa, wouldn’t anyone?

Am I wrong? I’m not an expert in economics. Would love to hear where I’m wrong and how this actually does help regeneration.

Wasn’t the web of things.

How do I know?

Because Facebook’s IPO hasn’t happened yet.

Every time recently that another big player has had major news, Google has rolled out a news-cycle-killer.

It could be as simple as announcing that GM have handed their entire social budget to search (or to G+ advertising??).

Or it could be something much bigger and more fundamental.

If I were a betting man, I’d lay my money on a big numbers-based announcement about how G+ is growing faster than Twitter or Facebook in daily average users or monthly average users and engagement.

Who’m I kidding. I love betting. Anyone want to put a tenner on it?

I assume you’ve seen the river of red ink caused by Microsoft’s lengthy excursion into the search engine game:

Here’s what I’d do if I ran Microsoft and was playing the long (5-10 years) game:

1. Realise that I don’t need to win the search engine wars to thrive, but I do need to win at something new
2. Choose my “something new”
3. Do a deal with Yahoo! to ensure that I power the #2 and #3 search engines in the English-speaking world (check)
4. Close down Bing (and Yahoo!) leaving Google with a 95%+ market share in the US
5. Bonus points for selling Bing.com (the domain) to Google
6. Partner with Facebook to lobby aggressively to prevent Google using their (new-found) monopoly in search to grow G+
7. ???
8. Profit

Just a thought experiment. Written very much to provoke debate rather than to espouse an actual point of view. As Scott Adams says:

Warning: This blog is written for a rational audience that likes to have fun wrestling with unique or controversial points of view. It is written in a style that can easily be confused as advocacy or opinion. It is not intended to change anyone’s beliefs or actions. If you quote from this post or link to it, which you are welcome to do, please take responsibility for whatever happens if you mismatch the audience and the content.

I hate the complexity of copyright law. As someone who runs a business operating in the US and the UK, I particularly hate the international differences.

Where there is clarity, however, I dislike it when companies are deliberately confusing or misleading. I believe that the differences between the Pinterest terms of use and their own marketing copy is an example of this kind of confusing behaviour.

The Pinterest terms of use state (emphasis mine):

you represent and warrant that: (i) you either are the sole and exclusive owner of all Member Content that you make available through the Site, Application and Services or you have all rights, licenses, consents and releases that are necessary to grant to Cold Brew Labs the rights in such Member Content, as contemplated under these Terms

These “rights in such Member Content” include (emphasis mine):

to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content

Meanwhile, the about page says (again, emphasis mine):

Pinterest lets you organize and share all the beautiful things you find on the web.

Seriously Pinterest? Your marketing copy encourages me to pin “all the beautiful things [I] find on the web” while your terms of service have me warrant that I either own the images I’m pinning or I have a license to grant you the rights to license or sell those images?

I’m not a lawyer, so I may have missed something here (and I’d love to be corrected by a lawyer who knows the area as I love the beauty of Pinterest). I understand why the DMCA means that Pinterest has to push the onus of non-infringement onto their users, but I don’t see any good reason for it being OK to have such a gap between the ToS and the marketing copy.

Side-note - if you remove the granting of a license to sell all pinned images, I’m strongly in favour of copyright law working in a way whereby this kind of curation and evangelism is indisputably legal but I don’t know what kind of changes that would require to IP law.

Wow. That’s a boring title. Could I have come up with a worse title?

You already know I’m a geek. Well, when I read Wil Reynolds’ recent post on issues with various bonus structures he’s tried, this was the first thing I thought about. You’ll want to read Wil’s post before continuing here in order for anything to make sense.

At university, I studied game theory (my thesis was on combinatorial auction theory - a brilliant, often NP-complete branch of auction theory). I try really hard not to apply it to everyone I meet all the time.

Having said that, I’ve had to learn how to act in social situations, and game theory is actually pretty great for this (see a beautiful mind).

In many situations, the key is to view life as a series of events taking place over time rather than one-off experiments (it is this that “fixes” the prisoners’ dilemma). And it was to this that I turned when reading Wil’s post.

(Before I get into the meat of my thoughts, note that I don’t believe we have compensation completely right at Distilled - but that’s a post for another day). Here are the game theory issues that sprang to mind for me when I read Wil’s post:

• Anything expected is part of compensation - you can’t decouple these things. If people know they are getting a bonus (and know the approximate size of it from the quarterly updates) then they will treat it just like salary. To the extent that money is what motivates them, they will choose where to work based on total compensation (with some risk premium thrown in)
• You get what you reward. If you reward longevity, that’s all you’ll get. There’s no particular reason to think that rewarding longevity will result in more effort / output / productivity except to the extent that you keep good people around
• Company performance-based bonuses (shared according to a pre-defined formula, rather than on personal performance) are (once people treat them as part of compensation, see above) ways of giving people pay cuts in poor years. This is how investment banks work. Bankers wouldn’t work for their base salary(*), and bonuses form part of compensation. It’s one of the few fields where pay cuts from one year to the next don’t (always) cause deep unhappiness / exodus.

(*) ignoring all the 1% debate for now - that’s another post

It seems like some of this can be fixed by tying bonuses to individual performance, but there are issues here too:

• Bonuses based on personal performance reward that particular metric, but tend to encourage selfish behaviour which may result in lower overall performance (damnit)
• It’s hard to couple meaningful bonuses to personal performance in most areas. To get enough upside to cause real behaviour change, you have to push such significant risk of downside that the individual becomes better off running their own thing and taking 100% risk
• If it’s not tied to overall company performance (and either isn’t purely financially-related or doesn’t clawback in underperforming areas) you run the risk of large individual bonuses in times when the company-wide prospects look relatively bleak

Ignoring the theory, the practicalities of determining appropriate reward systems are also complicated by the fact that the people in charge of small businesses skew towards higher risk / faster change / less certainty than average. I find it can be an area where it’s hard to put yourself in others’ shoes.

I’m going to be doing loads more thinking about this. Thank you Wil for being so amazingly open in your post and I hope to have more fruitful discussions about this stuff.

[Sidenote - I wrote this post today on the Distilled blog and the kind of reasoning I refer to above is the stuff I was talking about in the “heads-up” part of the leadership section.]

I have been hugely impressed by Launchrock. I initially thought it sounded like the perfect example of Feature Not A Company but I’ve been convinced that if what they have is a feature, it’s one that should be present in every email provider’s toolkit.

In particular, I’d like Mailchimp to buy them please.

Yesterday, we ran a “ship-a-thon” at Distilled (like a hackday, but designed to be more inclusive of everyone who isn’t a developer / designer - the idea being that we all spent the day shipping stuff to make the company better).

I worked with 4 colleagues to ship an internal alpha launch of a product we are calling “DistilledU” - a learning platform for internet marketing. The first thing we shipped (in good “lean startup” methodology style) was a pre-launch landing page. Obviously we could have built this pretty easily on our own, but I was very impressed by how easy Launchrock made it to create a great-looking page with all kinds of embedded social sharing etc. and a 43% conversion rate.

Yes. You read that right. So far we have had getting on for 1,000 sign-ups at a 43% conversion rate.

I was amazed by the tweets it generated and the great feedback loop that resulted in ever-more signups. When you combine that with the analytics in the back-end, really the only thing missing is integration with Mailchimp. So - to Mailchimp - I don’t care if it’s a feature, I’d like it integrated - even if you have to buy it.

(If you want to see more about our vision for DistilledU, you can read more about our efforts here and of course you can sign up to stay up to date here).

It’s easy to feel the hate for MBAs - especially if you hang out in the startup or online marketing world (e.g. 1, 2).

I have a very different viewpoint.

After my undergraduate degree (pure and applied mathematics at the University of Cambridge) I stuck around in Cambridge for a one-year course entitled “part III” - effectively a one year masters in mathematics.

Part III is described on the website in typical Cambridge style as “not an easy course”. This is a bit like maths professors using the word “trivial” when they mean “very hard, but previously solved”. I found part III hard.

One of the courses I took was financial modelling at the Judge Institute (the business school in Cambridge). This course is part of the MBA syllabus and we sat alongside MBA students. It was not easy for those of us doing it as part of an immersive mathematics course. The MBA guys were doing this across a whole range of disciplines and it’s probably this that is the source of my respect for the institution as a whole.

Although I don’t have the patience to go back into academia now and I love building a business in the real world I am always watching out for ways I can learn more about the theory of business.

I think the biggest three distinct benefits of an MBA are:

1. Learning to think with academic rigour - diving deep into specialist subjects and getting an advanced education in diverse areas - see the example of the financial modelling course above
2. Real case studies. One of the reasons I love articles from the Harvard Business Review and would love to attend in-person lectures on business case studies is the power that history has for teaching us about the future. I hated history as a subject in high school, but I increasingly seek out “history” as a source of learning. The majority of books I read are biographies or other factual accounts and I’m increasingly structuring my business learning around real world stories
3. The people / the network. I got huge value out of being surrounded at university by people who are smarter than I am. I am also increasingly seeing the value of watching those people go on to successful and powerful careers. With the extra experience typical for the average MBA student, I imagine the big MBA programs expose you to another level of interesting people.

I’m not realistically about to embark on an MBA and I think I have the rigour from my degree and just have to push my own flywheel on the network side of things. Which is why I’m focussing heavily on case studies.

The online world is dominated by young companies and young business people. Many of Distilled’s competitors are run by people no older than Duncan and I. We need to learn from history both to grow our own business and to help our clients truly effectively.

Watch this space.

Aside: if you have no idea why I’m talking about flywheels, go read this or this (or, ideally, this)

I have recently been reminded of how hard it is when you’re starting out at something. When we started Distilled, it took us a long time to get any kind of momentum going (see the presentation I gave at my old high school over the summer). Recently, we have been the lucky benefactors of the flywheel effect - that once you have been pushing hard in a consistent direction for a length of time, it seems to get easier and easier to build momentum.

When you don’t yet have that flywheel, it is hard to sell, hard to convince and hard to reach people.

You may know that we are building out conferences in the US. You may not know that we are not going to sell out our upcoming conference in NYC. There. I said it. We have poured blood, sweat and tears into the content and the promotion, but we are simply not yet as well known on the east coast as we are in London or Seattle. The conference will still be amazing, but it’s painful to feel that we could have done more to reach more people, to pack out the room.

But.

And it’s a big but.

Some of us have been here before. It’s only 4 or 5 years ago that Duncan and I were excited to be “selling out” our little shared office hallway to give presentations to 20 or 30 people at £20 / head. We have come a long way. And we’ve done it by turning that damn flywheel. Every damn day.

I’m writing this publicly, even though it should probably be an internal email. I’m doing that because I want our whole team to see that I mean it. Many of our team joined recently. Very few of them (2?) ever worked in our tiny underground office. To you guys: this is real. This is what it’s like. And this is winning. It just doesn’t always feel like it.

There is no shame here. We will continue to work to get the best speakers, to push them to deliver their best content, and to give our delegates the best conference experience we possibly can. We will carry on:

• running competitions
• guest writing
• hustling to get the right people there
• building our email list
• building our social presence
• doing PR
• hosting free events
• running webinars
• trialling advertising
• testing and making improvements to the booking platform
• … and doing all of the other dozens of things that you have all poured time and effort into

And it will pay off. Maybe not this year. Maybe not even next year. But if I’ve learnt one thing, it’s that pushing the flywheel is something close to magical, and by the time it’s going so fast that you couldn’t stop it if you tried, you will feel like the king of the world and we will sell out events that will make this one look puny.

Finally, I want you all to remember the bigger picture. To put things in perspective, up to 2008, maybe 100 people total had attended a Distilled event. In 2009 I think it was about 200. In 2010, 320. In 2011, by my count, we’ll sell about 950 tickets across all events (and that’s not counting the hundreds of people who have bought videos).

The flywheel is spinning, we just need to keep pushing. Welcome aboard. It’s going to be a helluva ride.

Oh, and I should mention, you can still buy tickets, and don’t worry - we have enough people coming that it’s going to rock, we’re just kinda ambitious around here…