US 2016

US Flag in a barn
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Below is an email I shared with my teams post Nov 8th, 2016 US Election Results.

Hey team,

I know today is a strange day, where many of us feel that we’ve woken up in a topsy turvy world, that doesn’t make any sense.

Whomever you supported in the American election we can all agree that it was a very important round this 2016. To some this is the greatest victory they could hope for, a revolution and a big disruption to the establishment and status quo. To others it’s an attack on liberalism itself, a huge step back towards sexism, racism, and bigotry. It may feel like our western, educated, and industrial society has lost all the progress that we’ve made towards equality between the sexes, respect for women, and breaking glass ceilings.

But both of these views are a little extreme aren’t they? History shows us that even massive revolutions rarely cause true change and what may seem as a big “F U” to the establishment, will most likely result in some rocking of the boat, a changing of the guard in some places, and a carry on for the rest. Inertia is a really powerful force.

The huge step back? Let’s take stock of the world outside US. Long term change happens through many incremental decisions that add up to true change. Social science has taught us that culture changes and develops at the outliers and periphery, and rarely does true cultural change come from the biggest, most incumbent players. Sound familiar?

Progress towards recognizing women and breaking glass ceilings in the western world? Plenty of those! Theresa May, Angela Merkel, Dalia Grybauskaitethese (Lithuania), these women are examples in the western world, not to mention Latin American & Asia. They are not even that outlier and periphery anymore, Germany is one of the strongest western economies in the world. True change is happening and will happen, it’s just that it’s always a little slower then we’d like, and the largest incumbent hasn’t yet been disrupted 🙂

Rather than swinging back and forth between divisive extremes, we can chose to take stock of this election result and unpack the social implications it has.

– Obama’s rein was largely handicapped by the divisive gridlock in senate and congress. Republicans agreed on many of the things that Obama was trying to implement but they could not appear to support him. Yesterday all the levels of government were won by the GOP.

– Even if Hillary would have won, she would get the same gridlock as Obama did. The disenfranchisement of the population that voted for Trump, would have continued, and we could have a much worse uprising in the next 4 years.

It’s important to take stock for the current educated liberals. The current feelings of shock, disbelief, anger and frustration – these feelings reveal a prejudice towards those who chose Trump. And it’s precisely because of this prejudice that they chose Trump in the first place.

Alienating and ignoring a whole section of the population is divisive, and by not working to include this section of population in the new economy, it leads to folks voting based on fear and protectionism. It’s easy for us city folk who work in technology to pass judgement on those living in rural areas, and not taking charge of their own lives.

Here’s the good news:

– We do work in the new economy, and we’ve learned to ramp up people’s tech, entrepreneurship, and ecommerce skills.
– We literally work for empowering people to be self sufficient and give them the ability to take agency of their own financial security.
– Last financial crisis Shopify did very well in customer acquisition as folks looked to take charge of their lives.
– Shopify is ready to include people of all walks of life and help them sell and make money 🙂

Wherever you sit on the American Elections results, it is our collective responsibility to build a 21st century that is inclusive of not just those who are like minded, but also those with opposite views, because their voices have just as much weight as do ours.

Keep Calm and Shopify On 🙂

Natural Selection and Product Design

Product Design Evolution
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I love this on so many levels. This is so basic that the underlying assumption to that statement can be derived to simple common sense.

What’s next though?

How could we envision the next evolutionary step arising from this (symptom) of a single product for many users dichotomy?

Is it possible to build many unique products for many people? Would the pareto principle still apply?

Or would it simply scale to a higher grouping (20% of unique products cater to the 80% but now global majority)?

Let’s look at the natural world for some hints. It is in essence the authority of product design. Specifically, the building blocks of life. All life is composed mainly of the four macromolecule building blocks: carbohydrates, lipids, proteins, and nucleic acids. The interactions of different polymers of these basic molecule types make up the majority of life’s structure and function. Boom, 4 macromolecules.

Let’s see what those 4 macromolecules need. Wikipedia to the rescue again:

There are 6 main elements that are the fundamental building blocks of life. They are: sulfur, phosphorous, oxygen, nitrogen, carbon, and hydrogen. Of those 6, what’s the most important one? What is the element that is absolutely necessary for all life on earth?

The basis of life is carbon. Carbon’s importance comes mainly from the enormous variety of structures that it can form, with the most important of these structures being the carbon chain, forming the “backbone” of fatty acids and carbohydrates, among other organic molecules. Other elements do share properties similar to carbon, in this regard. However, they are not as prevalent on earth as carbon.

So we need 4 macromolecules – of which the backbone is carbon. On Earth all carbon and macromolecules are repeated throughout life. Evolution and natural selection shapes and molds the necessity and existence of these components into any organism, whether plant or animal. Yet they, the products of carbon and 4 macromolecules are all different, unique and adapted to maximizing their near environment.

The science that all life shares commonality is in fact the physics and perhaps the synthesis to the 1% rule. 1% of the creativity – building blocks – allowing for 99% of all life.

1% of the necessary building components to proliferate any and all organisms. This is powerful. If product design is approached from the minimum base required to form and adapt life, we can colonize any environment. All it has to be, is favourable to the survival of the basic blocks. Nature then will take its course. It is the ultimate antifragility. Many unique products to many environments – all having the same fundamental blocks of life.

That brings us to two constants.

  1. Environment will keep changing. Forcing the organism/product to enter into an adapt or die evolution cycle.
  2. Perhaps the more important, the building blocks remain the same.

The formulation of the building blocks is what determines success or failure of a unique product in a changing environment. From the point of view of life, success or failure of a single product is irrelevant – what matters is the survival of life overall. I arrive to conclude – that if we want to ensure survival of a product, its value proposition must be deduced to its basic components (the principles upon which it exists), which is the 1% that matters, the 1% that owns the monopoly of all possible variations in the future.

Elon Musk described this eloquently when he was researching ICBM’s for flight’s to Mars. If a rocket is divided to it’s building blocks, the tonnes of copper, kilograms of hydrogen and oxygen, metal alloys, etc – the dollar value of those ingredients is relatively cheap compared to the cost of a functioning rocket. Thus the value must be in the formulation, the recipe of those basic ingredients. With enough brain power this type of value can be replicated and thus the muse for Space X’s existence.

We are back full circle as to why I love that tweet from Tobias. Additional bolt ons to a single product, makes it instantly worse for those who have no need for the extra wing on their rockets! We must have many products for many users – all using the same basic tenets of the initial value proposition.

life and entropy

Universe displayed in the stage of order, starting from disorder and ending in disorder
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Holding opposing views simultaneously is an unnatural proposition. Consciously how can we reconcile the wide gap that exists between the two oppositions? How can you agree and disagree with a single idea, at the same time?

Surprisingly as a species we do this all the time and it is in fact in our nature. Life vs death, Mind over matter, Night vs Day, Heaven vs Hell, Order vs Entropy… This incongruence, the wide gap, exists from the day we are born to the day we die. Our whole universe is built with opposing forces. Matter vs Antimatter, positrons vs electrons, anti protons, anti neutrons, our environment is filled with opposites.

Our western culture posits that life is the beginning and death is the end. Stoics help us understand this dichotomy a little deeper. There is also a state before life, when we are dead but not yet alive. We enter life from a state of death. It is just as good probability, as any, that this is the state man returns to when she dies.

Stoics propose death as the beginning. Wrap your head around that and the natural conclusion is that one purpose of life amongst many, is to simply reconcile the wide gap between conflicting reality.

If we start from the Big Bang, our stages were disorder, which moved into order, swirling gas clouds, solar systems, planets, life, humans, aliens; with the universe expanding, entropy will give us again disorder, and we start over again. In the meantime here man lies to enrich her understanding of conflict and revel in its beauty.

Startup = Growth; IPO = Revenue

Landscape image of Colorado Rockies representing an allegorical Revenue Mountain
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Ever had that spark of doing your own thing, wanting to make an impact, change the world through technology? Great, hold on to that feeling, shelve it, admire it, and cultivate the passion. Next, read Paul Graham’s essays, especially the Startup = Growth piece.

Now that you have an idea of what a startup is, I want to tell you about what a post IPO company is. Granted, I am yet to experience an exit, so do take this with a grain of salt. But, I do have an honours degree in Finance, and did manage a sector in a student investment fund, so I’ve had at least some hands on experience in equity valuation.

So what do investment analysts do with publicly traded companies? Everything is predicated on forecasting Growth of Future Revenues and assigning a price to those revenues. This basic premise is all there is to finance. Literally, it’s a projection on growth of future revenues. Any formula you take, the P/E ratio, the Discount Cash Flow Valuation, Earnings per share, all of these are just different methods to skin the same cat. Each method, stabs at trying to put a price on future ability of a company to generate revenue and grow it. That is it. Here, if you don’t believe me: http://en.wikipedia.org/wiki/Stock_valuation

Public Companies have shareholders, who’s demands are very simple. They want their shares to grow in price. Shares grow in price if a company can show consistency in growing their revenues, thereby commanding a higher Price to Earnings (P/E) ratio. Price of stock goes up, the street is happy, the board is happy, the shareholders are happy, CEO gets to keep their job. 

If Startups = Growth, Post IPO (Public Companies) = Revenue.

Ok, so Revenue growth determines stock prices, what does that have to do with post IPO companies?

Product growth becomes secondary, everything else becomes secondary. What is most important is impacting that top line Revenue number. Side note, no wonder the shady accounting practices, the incentives are there to do anything but report bad news on Revenue.

Miss your estimated revenue target by $1? Stock price dips 20%, CEO’s job is at risk.

What does that mean? More importantly what does that mean for a startup who’s growth driven by user acquisition?

It means the focus shifts from land grab, to making that user acquisition cost break even and start making profit. It means product development no longer focuses on being on the bleeding edge of technology and feature set, its first priority is towards maintaining the existing Revenue stream and growing it. For the most part, better attention to the already existing customers, as they become the de facto arbiters of a company’s health.  It also means the organization changes within, to avoid breaking the lifetime chain. This change isn’t inherently good or bad, it’s just it, change. A transformation from a caterpillar into a butterfly. Both are beautiful at each stage. Although the process is a bit ugly 🙂

The important thing is to be ready for it. Ready for Revenue.

Are you ready?

Data Facts

Tip of the Iceberg, looking for Data only solutions
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FACT: 100% OF ICEBERGS THAT SINK SHIPS ARE FROM WATER

a riff on Looking for patterns

Seth Godin wrote this amazing piece about Looking for patterns on which @larslofgren from Kissmetrics and I, both agreed was a beautiful reminder of the problem with looking for Data only solutions. I’ve always maintained that Data without proper context is just a binary record. For any set of facts, an unlimited amount of stories can be told. It is the story that provides the context for the data, and narrative is even more important than actual data itself. Here’s a great example. Let’s go with Water:

FACT: Water is the main ingredient in Pesticides and Herbicides.
FACT: Water is the main cause of drowning.
FACT: 100% of People who Drink Water die.
FACT: 100% of all Serial Killers drink water.
FACT: Excessive consumption may cause excessive sweating, urination, and even death.

Of course I’m being over the top and facetious, but I’m sure you get the point. All these above are true. Next time you’re looking at data, keep in mind the bias that you are trying to dig and context of your inner narrative. No one is immune to this, not even the cleanest data set and best A/B test in the world. At some point we all have to draw a line in the sand, to determine what is the story we want to believe in.