Thursday, August 14, 2014

Roadside MBA: Back Road Lessons for Entrepreneurs, Executives and Small Business Owners

Business books about Big Companies and how they operate are next to useless for many of us.   That's what I liked about this book - it's about small companies doing a variety of things and the lessons that can be drawn from them.

The selection of companies, indeed, was great.  Too often business books focus on large corporations that, realistically, none of us will ever come close to running.  Small companies doing their own thing, though?  That is something many of us can aspire to.

"Mazzeo's law" was introduced early in the book, and I immediately liked the thinking behind it: most things don't have easy, clear-cut answers.
Mazzeo’s Law The answer to every strategic question is “It depends.” Corollary 1 The trick is knowing what it depends on. Corollary 2 If the answer to a question isn’t “It depends,” then it’s not a strategic question.
At times the "chatter" about the economist authors and their own lives is a bit more than I would want - it could have been edited down a lot.  Another thing that might have made the book better, although it would have been harder to accomplish, is to include a few case stories about failed businesses, and why they went under.

In any event, there are a lot of interesting lessons to be had throughout the book, and a summary wouldn't do them justice.  Not all the concepts discussed are applicable to every small company, but there's a nice variety.  Here is the table of contents, to give you an idea of the subjects covered:

  • Chapter 1: Scaling a Business
  • Chapter 2: Establishing Barriers to Entry 
  • Chapter 3: Product Differentiation 
  • Chapter 4: Setting Prices 
  • Chapter 5: Managing Your Brand 
  • Chapter 6: Negotiating Effectively 
  • Chapter 7: Hiring 
  • Chapter 8: Incentives for Employees 
  • Chapter 9: Delegation 
  • Chapter 10: Battling the Big Boys
Whatever kind of business you are in, much of the material will, if nothing else, stimulate some thoughts about how these ideas apply to it.

Monday, June 30, 2014

Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain

Freakonomics was the book that kicked off a lot of "pop economics" books by looking at a variety of subjects in a way that was new to many people, taking on various subjects such as the declining crime rate and its relation to abortion, sumo wrestling match fixing and how much drug dealers earn.

Think Like a Freak is the book that goes beyond the numbers and anecdotes from the authors' other books, and talks about how to view problems in a similar way, from another point of view.

Some of their suggestions:

  • Try and put aside your feelings when thinking about things.  If you're already sure that you possess The Right Answer, then you're not likely to think about the problem very clearly.
  • Sometimes it's better to admit you don't know:
The next time you run into a question that you can only pretend to answer, go ahead and say “I don’t know”—and then follow up, certainly, with “but maybe I can find out.” And work as hard as you can to do that. You may be surprised by how receptive people are to your confession, especially when you come through with the real answer a day or a week later
  • Children often think of things with no preconceived notions.  This is often a helpful frame of mind for considering problems.
  • Incentives matter.  This is something pretty much any economist will tell you.
  • Revealed preferences can tell you a lot... if you can find a way to get people to reveal them.  One of the stories here is about Van Halen and brown M&M's:
  • Being persuasive is important to accomplish things - it's not enough to be right.  You also have to convince other people that you're right:

    "Sure, it’s important to acknowledge the flaws in your argument and keep the insults to yourself, but if you really want to persuade someone who doesn’t wish to be persuaded, you should tell him a story"
  • Sometimes, it's best to quit rather than doggedly pursue something that's not going anywhere.  This revolves around the sunk cost fallacy: - although naturally it's not easy to tell when you should be persistent and when giving up is the best idea.
Some of the quotes I appreciated in the book:

When asked to name the attributes of someone who is particularly bad at predicting, Tetlock needed just one word. “Dogmatism,” he says. That is, an unshakable belief they know something to be true even when they don’t. Tetlock and other scholars who have tracked prominent pundits find that they tend to be “massively overconfident,” in Tetlock’s words, even when their predictions prove stone-cold wrong. That is a lethal combination—cocky plus wrong—especially when a more prudent option exists: simply admit that the future is far less knowable than you think.
This makes a lot of sense to me.  I think the less we are in the business of trying to predict things, the better off we are.  The future is complicated, and there are so many ways things can leap off the track you imagined they were on.

On  incentives:

Why do some incentives, even those created by smart and well-intentioned people, backfire so badly? We can think of at least three reasons: 1. No individual or government will ever be as smart as all the people out there scheming to beat an incentive plan. 2. It’s easy to envision how you’d change the behavior of people who think just like you do, but the people whose behavior you’re trying to change often don’t think like you—and, therefore, don’t respond as you might expect. 3. There is a tendency to assume that the way people behave today is how they’ll always behave. But the very nature of an incentive suggests that when a rule changes, behavior does too—although not necessarily, as we’ve seen, in the expected direction.


  1. Figure out what people really care about, not what they say they care about.
  2. Incentivize them on the dimensions that are valuable to them but cheap for you to provide. 
  3. Pay attention to how people respond; if their response surprises or frustrates you, learn from it and try something different.
  4. Whenever possible, create incentives that switch the frame from adversarial to cooperative.
  5. Never, ever think that people will do something just because it is the “right” thing to do.
  6. Know that some people will do everything they can to game the system, finding ways to win that you never could have imagined. If only to keep yourself sane, try to applaud their ingenuity rather than curse their greed.
I'm a fan of economic thinking, so I found the book to be a good read, especially since it doesn't really deal with economics as such, but as part of a way of thinking about many things, some of which might not see the domain of economics.

Sunday, April 27, 2014

The Undercover Economist Strikes Back: How to Run-or Ruin-an Economy

I enjoy Tim Harford's writing, especially his first book, "The Under Cover Economist" but was a bit reticent to get this one. Macroeconomics seems like something that we don't really have a good handle on yet, in many ways, a fact that is indeed acknowledged in the book, and it tends to be a bit more abstract than microeconomics.  However, I needn't have worried: the pleasant writing style makes the book a quick and pleasant read, and touches on a number of topics that are often encountered when reading about the economy and politics.  In this sense, the book is a pretty good tour of important topics in macroeconomics.  Having read this and that over the years, many the topics were not really new to me, but it was nice to see them covered in a fairly direct, neutral way rather than simply absorbing them in context.

While fairly neutral in terms of mainstream economics, the author is certainly opinionated:

The world is full of people who will tell you that there is. Tie your currency to gold! Always balance your budget! Protect manufacturing! Eliminate red tape! That kind of thing. You can safely ignore these people. Anyone who insists that running a modern economy is a matter of plain common sense frankly doesn’t understand much about running a modern economy.
This is probably the sort of opinion lost on the people who most ought to take it to heart, though.

"We don't have all the answers" is something that becomes quite clear in the book, but we do our best to keep improving on what we do know, and to use that effectively with regards to the economy.  You can't run experiments on an economy, except by accident, and there are always many confounding factors in play at one time, making it difficult to understand what is affecting what.  This is a difficulty microeconomics faces, but it's exacerbated by the scale that is the scope of macroeconomists.

Some topics touched upon include inflation, employment, central banks, labor markets, and inequality.  There is also a lengthy section of the book dedicated to defending the use of GDP to measure an economy, in that alternatives are mostly worse, and pushed as part of a political agenda.  Also, broadly, people who have more money are happier:
Justin Wolfers, told me that the relationship between life satisfaction and income is “one of the highest correlations you’ll ever see in a cross-country data set in the social sciences, ever.”
As a resident of Italy, with a first-hand view of the stagnant economy, the brief comment on the employment model here seems pretty obvious.... outside Italy at least:
What’s pretty clear is what doesn’t work: the Mediterranean model of Spain, Italy and Greece provides little help to young people and extravagant protection to people with permanent contracts.
The notion that failure is important for growth is also touched on:
But corporate failure isn’t the cause of economic trouble—it’s the process by which badly managed companies are replaced by more productive competitors.
This is something that often involves very difficult changes for those involved, but ultimately leads to a healthier, more productive economy.  The amount of money that Italy has sunk into Alitalia comes to mind.

The "but GDP growth can't continue forever!" argument is also faced:
I fully agree with the environmentalists who worry that we cannot continue consuming more and more water, spewing out more and more carbon dioxide and burning more and more coal. The problem comes if we then leap to the conclusion that the economy itself cannot keep growing. It doesn’t follow.


A lot of what’s going on with GDP growth is not that more materials are being used, but rather that much the same materials become more valuable as they are used in a better-designed object


The economy has been dematerializing: more and more of what we consume in rich countries requires fewer resources because of more efficient technology (LEDs instead of incandescent bulbs; laptops instead of mainframe computers), or because the value is mostly in the esthetic design (haute couture, haute cuisine), or even because—like the e-book you may be reading or the audiobook you downloaded—the product is digital and has almost no physical form at all
 If you're already familiar with macroeconomics, this book will be too basic, but for anyone else not familiar with the subject, I would happily recommend it.  The conversational style of the book, and the author's able writing make a good introduction to what could be a dry and boring subject in the wrong hands.

Monday, April 14, 2014

For Better or For Work: A Survival Guide for Entrepreneurs and Their Families

Rob Walling's wife, Sherry, gave a talk at MicroConf Europe last year, about various personal and family related aspects of business and entrepreneurship.  In some ways, that was the talk that stuck with me the most from the conference: I can always read technical advice on the internet about various aspects of running a business, but the personal aspect of a bootstrapped business - or any business, really, is extremely important, and the window into the Wallings' lives as he has grown his businesses was very interesting.  From the outside, it's pretty easy to see that he's been successful, but she talked about some problems they've had along the way. I think that resonated with many of us in the audience who have families.

I finally got around to reading this book, which is one she highly recommended.   I too would pass on the recommendation, as the book had many interesting points of view.  The author, the wife of a successful entrepreneur, not only includes some of her own anecdotes, but has included a wide array of stories and people from all kinds of businesses.  This is important, as there are no two stories exactly alike, so what works for some does not work for others, and it's important to be cognizant of the differences.  I also appreciate about the book that there are not always nice, neat answers even in good, happy relationships.

Here are a few quotes that I highlighted:

There may be no faster route to upsetting your spouse than behaving as though your time is more valuable than his—even if from a revenue standpoint that happens to be true
Extremely important to remember!  You can't always think in monetary terms, because money is a good way to value things in a market economy, it doesn't always capture what something is worth.
By refusing to spend the family’s money on the company, the spouse telegraphs her belief that the entrepreneur is pursuing a lost cause—and, by extension, that she has no faith in him.
This is the other side of the above comment.  To me this issue of trust and faith is pretty important: I'm not a born entrepreneur, so I am not entirely confident in my own abilities.  I haven't spent our money on my business project, but I do invest time.  I don't know how it'll turn out, and have some of my own doubts.  When the person you love most voices strong doubts, that can really cut you down.

Home-based businesses are a big tease. They dangle the entrepreneur before his loving family (Dad’s home!) and then immediately snatch him away (Dad’s locked his door!).
I've given up on getting much work done at home while my children are small.  it's just too difficult to push them away.  It's important to have a space where you can just concentrate, without seeing the disappointment on their faces when daddy says "no".

I feel strongly that experiences—the kind that forge memories or expand horizons or provide fleeting epiphanies—should not be postponed, no matter how demanding the company. ... But when families discuss what to sacrifice due to limitations on time and/or money, I think vacations should be off the table.
As I age, I've come to think about things in terms of what I'll remember in 10 years.  It won't be the small things, but the great experiences that we've had together as a family.

There are lots of discussion points, things to talk about and consider together.

In conclusion - for me a successful business would represent economic freedom for myself and my family, but it's a journey we share, and not one I'm willing or able to make alone.  Out of lots of business books with bits of trite advice, this one really stands out in that it discusses what really matters most.

Friday, February 14, 2014

East of the Cascades

The part of Oregon I grew up in, the southern end of the Willamette valley, is kind of a rainy, gray, dreary place, like most of western Oregon.  The people that settled the area were the sort of people who wanted to plant crops, raise their children, build schools and churches, and otherwise lead happy but boring lives.  This is not "the West" that you see in movies or in books.

That west starts east of the Cascades in Oregon, in the high, dry country.  I wouldn't want to live there, but when I'm back in Oregon I always love to visit the high desert.  The sense of vast, lonely openness is something that is all but absent in the bits of Europe that I have seen.

Written in 1964, this book talks about the history of central Oregon - focusing on the area around Bend and Prineville, an area that was more remote and more "Western" than the rainy part of the state on the other side of the mountains.  Indeed, the more fertile farmland in the Willamette Valley was settled first, and only later did settlers head back east, or south from The Dalles.

The book talks about the history of the area, starting with the earliest people of European descent in the area, range wars, Native Americans ("Indians", in the book, being from 1964), and lots of odd bits and pieces of history.

One of the most interesting anecdotes is about a group called The Vigilantes, who dispensed "justice" in Prineville, Oregon in the 1880ies.  Only it turned out that their version of justice was not very "fair and balanced", and as the area was settled, the population wanted real law enforcement, rather than masked riders and mysterious deaths.  A group called the "Moonshiners" formed, and eventually, 75 strong, rode through the town and called out the Vigilantes who were in a local saloon.  The latter wisely stayed put inside. Realizing their days of power were over, and, humiliated, they gave up and never acted again.  No gunplay, but a fascinating story nonetheless.  You can read more about this showdown here:

It's interesting to read about the rise and fall of various places.  At one point, Shaniko, as a railroad terminus, was one of the more important towns in the region.  Antelope was also on the road north to The Dalles, but is now nearly a ghost town, as Highway 97 bypasses it to the east.  Well after this book was written, Antelope was briefly in the news again in the 1980ies when the Rashneeshees made their home on a large ranch nearby, but that story isn't covered in the book (you can find links to it from this page on Antelope:,_Oregon ).  Bend, now the largest town in the region, is actually relatively recent compared to Prineville and some of the other early sites.  Bend was incorporated as a city only in 1904.

In any event, I would recommend the book to anyone interested in Oregon history.  Others might not find that it holds their interest.

For further reading, here's the wikipedia page on the author:

Wednesday, January 29, 2014

Masters of Doom: How Two Guys Created an Empire and Transformed Pop Culture

Did you own a computer in the 1990ies?  Do you remember Doom and Quake?  I didn't play them that much, but they were very, very cool, especially for those days, when computers didn't have nearly the power that today's mobile phones do.

This book is the story of John Romero and John Carmack, the two main guys behind id software's hit games from the early 90ies.  Amongst many interesting aspects of the story, one that stands out is just how big a revolution computers have been.  Here were these two guys, with no money, no connections, not very supportive families, who, mostly through their own skills and knowledge made millions of dollars, and a name for themselves, all in their 20ies.

The author does a good job of telling the story, and keeping things interesting, talking about many of the other people involved along the way.  Towards the end, as things start to fall apart, some of the infighting and rivalries get a bit confusing, but all told, the book held my interest all the way through.

Some various quotes and bits that stood out:

John Carmack had a cat, Mitsi, that he was attached to, but when the cat peed on his new leather couch, he got rid of the cat by dropping it off at the animal shelter, where it was presumably put down.  He was extremely dedicated to coding and pretty much anything that disturbed him or got in his way was not something he looked kindly on.  Initially, his main motivation for doing the company was so that he had the freedom to work 100% on his own games, and have "enough pizza and diet coke to live on".

Senator Joe Lieberman comes across as something of a demagogue, railing against "immoral", violent video games.

Carmack on learning:
"My basic skills built up during school on apple II computers, but lack of resources limited how far and fast I could go. The situation is so much better for programmers today—a cheap used PC, a linux CD, and an internet account, and you have all the tools and resources necessary to work your way to any level of programming skill you want to shoot for."  

That describes my own experience pretty much exactly!  Once I got Linux and was on the internet, I just kept soaking stuff up and haven't stopped since.  I'm incredibly lucky to have had that available.

Carmack again:
Carmack disdained talk of highfalutin things like legacies but when pressed would allow at least one thought on his own. “In the information age, the barriers just aren’t there,” he said. “The barriers are self-imposed. If you want to set off and go develop some grand new thing, you don’t need millions of dollars of capitalization. You need enough pizza and Diet Coke to stick in your refrigerator, a cheap PC to work on, and the dedication to go through with it. We slept on floors. We waded across rivers.”
Indeed, the company was bootstrapped, and the book never mentions them taking any investment.

All in all, a fun read that I wouldn't hesitate to recommend.