Book Review – Obviously Awesome – An Ugly Truth: Inside Facebook’s Battle for Domination – Stray Reflections

In this post, I’ll briefly review the three books I finished recently. Let me know in the comment if you read any of them and what you think about it.

An Ugly Truth: Inside Facebook’s Battle for Domination

Written by two award-winning New York Times journalists Sheera Frenkel and Cecilia Kang, An Ugly Truth covers Facebook’s battle with misinformation and how the company, in my opinion, has failed so far in preventing bad actors from abusing Facebook’s platforms for their agendas. The book draws from hundreds of interviews with sources, including former & current employees who courageously put their career in danger to speak the truth, and takes readers inside the company and throughout the past few years when the conflicting interests came to their heads. Facebook has perfect recipes for a disaster.

The company’s purpose is to connect everybody on Earth. It means that you’ll connect not only the good guys, but also the bad guys. To Facebook, the engagement level is always one of the high priorities. The more engaged users are, the more money the company can make from advertising. As a consequence, any idea or initiative, no matter how constructive or beneficial to the company, would be shelved if it was considered hurting the user engagement. Additionally, the company is Mark Zuckerberg’s, plain and simple. He can fire the Board of Directors if he wants to and there is nothing anybody can do about it. At first, Mark didn’t seem to believe that his creation could be leveraged for harmful purposes. He seemed to actually believe that Facebook was a positive contributor to the world in a sense that since everyone should have the freedom of expression, his platforms were there to facilitate it. It is this belief that led to some of his controversial decisions when it came to content moderation. Last but not least, the bureaucracy and office politics at Facebook also played a role in this mess. Take Stamos and his threat intel team as an example. Alex Stamos was hired by Facebook to be its Chief Security Officer. Along with his team, Stamos unearthed how Russia misused Facebook to interfere in the U.S election. They tried to sound the alarm for months, but their efforts were thwarted and ignored by the upper management team. When they finally got a meeting with Mark and Sheryl, Stamos suddenly became the culprit and scapegoat.

Combine all of those factors together and you can see why Facebook was always poised for a disaster. There are other stories in the book that could highlight how efforts to rein in misinformation always took a back seat at Facebook for various reasons. While the theme of the book may not be anything new, the behind-the-scenes stories are riveting and interesting. If you want an easy read and like to learn about the inner workings at Facebook, this should be a good one to pick up.

Obviously Awesome: How to Nail Product Positioning so Customers Get It, Buy It, Love It

Product positioning is hard. It’s virtually impossible to create a completely new product or service without any direct or indirect alternatives. The challenge then becomes: how can you position your product so that your customers know what it stands for, among all the noises and distractions? In this book, positioning expert April Dunford offers 10 concrete steps to address your positioning problems, along with specific case studies to make her points. As a business student at bachelor and Master’s degree level, I learned about marketing and positioning. So, some of the points April made are not novel to me. Yet, it’s still interesting to look at positioning from her point of view and it’s great to brush upon what I learned in the past. Personally speaking, I think this book is more suitable for B2B products/services than B2C.

Her writing is easy to understand and doesn’t involve a lot of jargon. It’s quite witty in some parts; which makes the experience more enjoyable. I kinda like the book. You can learn quite a lot from a $7 book (the Kindle version), a cost-effective option compared to hundreds of dollars spent on a few credits in college.

Stray Reflections

Jawad Mian hails from Pakistan and is the founder of Stray Reflections, a macro research firm. Two of his obsessions are writing and finding truth in life; which are the inspiration for this book. In it, Jawad shares with readers some of his intimate personal experiences, from growing up in Pakistan to adulthood and fatherhood, as well as important lessons about life that he picked up along the way. In addition to his stories, the author puts to great use some excerpts from classic literature by historical figures. In a busy society full of angst and distractions, this small book helps readers pause, catch their breath and reflect on what matters in life. Reading it was invigorating and refreshing for my soul.

“No distance of place or lapse of time can lessen the friendship of those who are thoroughly persuaded of each other’s worth.”

I’ve grown up to believe there are no coincidences in life. We are always in the right place, and everything happens at exactly the right time. Instead of obsessing about our goals or destination, maybe we should remain in the present moment and just let the universe move about. Like the river, life has its own flow; we cannot impose our own structure on it. We can’t control it—all we can do is listen to its current. Sometimes, when the outside noise dulls down, the quietness within reveals a lot, but only if you listen intently.

I beg you, to have patience with everything unresolved in your heart. Try to love the questions themselves as if they were locked rooms or books written in a foreign language. Don’t search for the answers, which could not be given to you now, because you would not be able to live them. And the point is to live everything. Live the questions now. Perhaps then, someday far in the future, you will gradually, without even noticing it, live your way into the answer.

Life is a journey, and we are all just travelers. It’s okay to fall down or not know where you’re going. Nature has marked out a path for each of us, and it won’t let us stray too far from our course. There is no shame in falling, only in failing to rise and get back up on our feet. As Paulo Coelho said, the secret of life is to fall seven times and to get up eight times. Even success, it has been well said, is nothing more than moving from one failure to the next with undiminished enthusiasm.

Book review: Junk to Gold – From Salvage To The World’s Largest Online Auto Auction

I picked up this book after seeing a few folks on Twitter recommend it. This is more or less an autobiography of Willis Johnson, the founder of Copart, one of the two largest online auto auction in the world. My overall experience from reading this book is positive because I like the content and its reasonable length.

Many books tend to be filled with a lot of junk, no pun intended, and longer than what they should be. This book is straight to the point and can be easily finished on a weekend. Content wise, it can teach readers many meaningful business lessons without shelling out tens of thousands of dollars on college. For example, Willis was a visionary because he and his son-in-law repeatedly invested handsomely in IT ahead of anybody else. They worked with California DMV to leverage computers to register cars instead of manual paperwork. This move sped up the selling process and improved customer experience. Then, they spent $3 million, a big sum at the time, on Copart Auction System (CAS) to allow online bidding for all of their yards; which nobody else did at the time. When the Internet started to gain popularity, Johnson and his right-hand son-in-law hopped on the trend and built out Copart’s online presence. In hindsight, these initiatives seemed rather obvious, but from my own experience working in the U.S, there are many companies that are reluctant in investing in IT, my current employer included.

Willis Johnson is a shrewd businessman. He knew that in order to grow his business, he had to generate more than one revenue stream from the same resources. In his words, he was “putting more through the pipe”. He also learned how to increase his margin and lower the cost. While other yards at the time sold many parts together and had to guarantee buy-backs because the value of the purchase was higher, Willis sold the parts individually and didn’t have to guarantee buy-backs so that his margin was higher than his competitors. Additionally, the founder of Copart bought yards in strategic places. That way, he could cover more areas without incurring more tolling expenses and hurting his margin. A bit later, he managed to buy parts in bulk from Asia to take advantage of cheap labor and wholesale pricing, and sold them at retail prices.

Many books were written on Blue Ocean Strategy, which basically means that companies can gain advantage by finding under-served customer segments and focusing on that particular segment instead of launching lookalike products or services and having to compete with many rivals. You can learn the same lesson from Willis in his book. He wisely specialized on Chrysler parts which weren’t popular at the time. The specialization gave him two advantages. First, he didn’t have to compete with others on Chrysler parts. In fact, Chrysler was happy to partner with him to some extent. He could secure the parts more economically. Second, Chrysler customers were even referred to his yards because others didn’t have the parts.

There are other plenty of good anecdotes and lessons from this book. If you want to learn great business lessons or just want to get to know Copart, I highly recommend this book. Below are some excerpts that I like

Everyone Is Created Equal, but They Aren’t Always Treated Equally While hard work became second nature, I learned it wasn’t always a guarantee of success, and people aren’t always treated equally for equal work. The world was unfair, and this bothered me.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

To us, the business world was black and white, and a deal you aren’t sure about isn’t really a deal at all. It never ceases to surprise me, though, when others cross that line without even a blink of an eye. I was raised to believe that cheating is the same whether you are taking ten cents or $10,000. And if you could do it once, there was a good chance you would do it again.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Dad also had an expression: “Take care of your pennies and the dollars will take care of themselves.” It’s a phrase I have also passed on to others so they would learn the same lesson I learned from him—that small amounts of money can add up to either big profits or big losses. You can’t ignore the small expenses or the small amounts of money unaccounted for if you hope to succeed at the end of the day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

There were pockets of General Motors and Ford specialty yards but not Chrysler, so we were filling a need for a big area. It was also cheaper to stock Chrysler parts. At the time we were still partly in the scrap business, so we could buy all the junk Chrysler cars for thirty-five to forty dollars whereas we were paying seventy-five to one hundred dollars for General Motors junk cars. I could go to an auction and buy a wrecked Dodge Polara for twenty-five cents on a dollar compared to a Chevrolet. So I could buy parts cheaper, but the parts were just as valuable, especially since no one else carried them. Before we specialized, Curtis and I were running between $3,500 and $5,000 worth of parts a month at Mather. After specializing, we were running around $3,500 worth of parts a day.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

I spent $110,000 on a large reel-to-reel computer—about double the amount most people spent on a house at the time. The reels themselves were fourteen inches in diameter and stored all the information about the business and its inventory. Every night, new reels were put on the computer to back up the information. This resulted in boxes and boxes of reels. Today, an iPhone could probably hold the same amount of data. Curtis remembers that other people thought I was crazy (or stupid—or maybe both) to spend so much money on a computer for a wrecking yard. But I was never afraid to spend money on technology if it could help us be more efficient. And it turned out that the whole industry would end up computerizing once they saw the benefits it gave people like me and Marv.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Instead of waiting for the DMV to find a better way, I went to them and proposed a solution. I would develop a way to create electronic forms and print them from a computer, thereby eliminating the need for the DMV to send out the books at all, saving them money and my business valuable time. I spent about $40,000 building the computerized system for the state of California. Now we could go to the computer and fill out all the paperwork needed and didn’t have to wait for books. It sped up the whole process and was an example of how it pays to fix something yourself instead of waiting for someone else to solve the problem for you.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Every time you can add a revenue stream to the same pipeline, the profit margins change drastically. You are putting more through that pipe. That’s what I always tried to do in my businesses, and it is how we were successful.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

“Barry, here’s the thing. I’m not just buying a can of soup for twenty-nine cents and selling it for forty-nine cents,” I explained. “I have ten different services that are growing all the time. Think of us like the local sewer system.”

Well, that got his attention.

“We’re a utility. Nothing can get rid of us—nothing. Two of the biggest businesses in the world are car manufacturers and insurance companies,” I went on. “If insurance companies don’t write insurance policies on cars, then they’re out of business. If manufacturers don’t make cars, then they’re out of business. They’re always gonna make cars, and they’re always gonna insure them. We’re the guy in between.”

I looked him right in the eye and said, “As long as we’ve got the land in the right place to put the cars on, we can’t fail. We are like the septic tanks of the sewer system. You can’t have the system without us.”

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

In the meantime, IAA was gobbling up facilities across the country as fast as they could. I knew from my dealings with Bob Spence that their plan was to acquire as many locations as they could and let the yards still run like they had been before they purchased them, even if that meant they ran on separate computer systems and used different business models. IAA figured they’d worry about converting them into one system later, when they had finished growing.

My philosophy was much different. I felt Copart should grow slowly, acquiring strategic locations and then converting each one over to the Copart system and business model immediately. Jay had already become an expert at converting yards—taking the lead in changing things over in all the facilities I had acquired while getting ready to go public.

I just didn’t want to grow to grow. I wanted to build a brand. I wanted anything with a Copart logo on it to run the same way—same computer system, same pricing, same way of treating our employees—so people started relating our name to a certain way of doing business. We spent time converting things over and converting employees over and teaching them our way of doing things because in many cases, the old way they were doing things hadn’t been working. That’s why they had to sell.

That’s also why I think IAA’s approach to keeping newly acquired yards running the same way was wrong. They weren’t fixing what was broken in the first place.

Johnson, Willis. Junk to Gold: From Salvage to the World’S Largest Online Auto Auction

Book Review – Amazon Unbound

Brad Stone followed his first book on Amazon “The Everything Store” with “Amazon Unbound” ten years apart. Similar to its predecessor, this book is the result of extensive research and journalism on the company that captures the imagination and admiration of the public and millions around the world. How much you like this book depends on how familiar you are with the company and its enigmatic and iconic founder, Jeff Bezos. Personally, having read quite a bit on both, I didn’t find some chapters very useful or interesting because I didn’t think it was necessary for me to know in details what happened internally. With that being said, I did find the book worth the time. If you are fond of business and Amazon, give it a try! Below are a few things that stood out for me

Bezos’ ability to think big and delegate

The chapters on the development of Alexa, Amazon Go, Indian market as well as the acquisition of Whole Foods is interesting. In these chapters, readers can see how Jeff’s ability to think big and push his team to think big resulted in unfathomable success. His vision and boldness led the team to enduring long working hours for years and challenges, both technically and from the market, to introduce services and products that have proven to be strategic assets to Amazon. His genius also lies in his willingness to delegate big & important projects to his team. His previous Technical Advisors led the charge on Alexa, AWS and India. In addition to opportunity and resources, Bezos also provides oversight and counsel, and often the push that his team needs to think big.

“By then, Amazon’s China bet was souring, so Bezos did not want to relinquish his shot at what seemed like the world’s next largest prize. In most OP1 sessions, he usually spoke last, not to sway the group with his formidable opinion. But this time, he interjected while Agarwal was still giving his presentation. “You guys are going to fail,” he bluntly told the Indian crew. “I don’t need computer scientists in India. I need cowboys.

“Don’t come to me with a plan that assumes I will only make a certain level of investment,” Bezos continued, according to the recollection of two executives who were there. “Tell me how to win. Then tell me how much it costs.” Another Indian executive at the meeting, Amit Deshpande, says the message was: “Go big and take risks. Make it happen. We have your backs.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Bezos and his employees riffed on the idea over email for a few days, but no further action was taken, and it could have ended there. Then a few weeks later, Hart met with Bezos in a sixth-floor conference room in Amazon’s headquarters, Day 1 North, to discuss his career options. His tenure as TA was wrapping up, so they discussed several possible opportunities to lead new initiatives at the company, including positions in Amazon’s video streaming and advertising groups. Bezos jotted their ideas down on a whiteboard, adding a few of his own, and then started to apply his usual criteria to assess their merit: If they work, will they grow to become big businesses? If the company didn’t pursue them aggressively now, would it miss an opportunity? Eventually Bezos and Hart crossed off all the items on the list except one—pursuing Bezos’s idea for a voice-activated cloud computer.

“Jeff, I don’t have any experience in hardware, and the largest software team I’ve led is only about forty people,” Hart recalled saying. “You’ll do fine,” Bezos replied.

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Even heroes aren’t perfect

Jeff Bezos is known for making his employees put their ideas into a PR FAQ, which is a single pager that summarizes key points on a new product/service, or a 6-page memo that includes analysis and rationale for an idea or a big initiative. I love this approach. I think it makes a lot of sense to ask folks to put thoughts to paper and strengthen their ideas. However, when it comes to Jeff’s own ideas, he sometimes didn’t meet the high standard. Furthermore, Jeff instills the philosophy of “single-threaded leaders” into Amazon. The thinking here is that when somebody is responsible for an initiative, they shouldn’t be distracted by anything else. Jeff’s focus was initially only on Amazon. Over the years, he became distracted by his new girlfriend and his investments in Blue Origin & Washington Post. The book detailed how he missed meetings and went for days without a visit to the office. He was still involved at Amazon, but that’s not the standard of focus that he demands from his employees.

What I took away from this is the reinforcement of the belief that even your heroes are far from perfect. They don’t always practice what they preach. It doesn’t mean they don’t have good ideas, but it also doesn’t mean that they are perfect either. We should look at people, or at least try to, with some grain of salt, instead of blind loyalty or admiration.

“The first, which Bezos proposed in a free-flowing brainstorm session in 2014, started as a notion he called “the steak truck.” Imagined as “an ice cream truck for adults,” the original suggestion was to stock a van or truck with steaks, drive into neighborhoods with lights flashing and horn blaring, and sell them to residents, as Doug Herrington remembered it. It would be convenient and a great deal for customers, since the meat was being sold in bulk. Eventually, the company might even predict demand and eliminate the inefficiencies and wasted food of supermarkets.”

“But the service was never as ubiquitous or as endearing as Jeff Bezos and Doug Herrington had hoped. Internet critics were baffled by the project and sneered at some of the more inexplicable deals (“bidet sprayers for $19.99, 33% off!”). One empty Treasure Truck burst into flames in a West Philadelphia parking lot at 1:30 a.m. Bezos briefly touted the initiative in his 2017 shareholder letter, but an executive on the finance team told me that it never performed particularly well or was close to profitable. If Amazon wanted to arouse excitement and loyalty for its fledgling grocery services, it needed something else entirely—like a unique product that customers were passionate about.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Well, Bezos had an idea for that as well and it was just as bizarre. In August 2015, the Washington Post published an unappetizing article about how a single hamburger might contain the meat of up to a hundred cows. Sourcing a burger from just a single cow could theoretically produce a superior-tasting patty but that “would be hard and expensive,” a meat distributor told the paper. That caught Bezos’s attention. He seemed to have increasingly adventurous tastes, later sampling an iguana, for example, at a meeting of New York City’s Explorers Club. In another brainstorming meeting with Herrington, he suggested they find a ranch to produce a “single cow burger” and make it a unique item that customers could only buy from Amazon. “I really think you should try this,” Bezos told Herrington, who recalled thinking at first it was a joke. “How hard can it be?”

“The project once again represented a different style of innovation within Amazon. Employees didn’t “work backwards” from their idealized customers, who had never asked for such a creation. They worked backwards from Bezos’s intuition and were catering to his sometimes eclectic tastes (literally). Bezos was right a lot, particularly when it came to cutting-edge technology. But in the end, the single cow burger and other culinary innovations introduced within Amazon Fresh generated little buzz or increased business.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Still, many Amazon execs and alums would have a hard time moving on so easily. Bezos had always demanded that Amazonians comport themselves with discretion and impeccable judgment. He ripped documents in half and walked out of rooms when employees fell short of expectations. By conducting an extramarital relationship so carelessly that it became fodder for a salacious spread in the National Enquirer and then a high-profile media free-for-all, he had failed to meet his own high standards. Dozens of current and former executives would later say that they were surprised and disappointed by Bezos’s affair. Their infallible and righteous leader was, after all, a flawed human.

The revelations also might have explained some of the more curious changes in his recent behavior. Bezos had been increasingly hard to find in the Seattle offices over the past year; OP1 meetings had been delayed or postponed, and longtime deputies were finding it difficult to get time on his calendar. He was spending more time traveling, colleagues had noticed, and that November had popped up with only a few hours’ notice in the Santa Monica offices of Ring, the connected doorbell startup Amazon had acquired in February 2018.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Dark side of Amazon

Amazon is not an angel. There is a dark side that involves using the practice of leveraging data from 3rd parties for their own advantage and sacrificing smaller merchants for their own profit. Are those practices cringe-worthy and distasteful? Yes. Are they illegal? It’s clearly in the grey right now as the government is still conducting its investigation and no charge has been announced on Amazon yet. Nonetheless, given the threat from the likes of Shopify, these practices can cause concern and fear from 3rd parties, which can ultimately lead to sizable losses and damage for Amazon.

“Wendell Morris largely agreed with that sentiment. The founder of the Santa Monica–based YogaRat was one of the first sellers on Amazon to hawk yoga mats and yoga towels; he later expanded into beach towels and microfiber blankets, all sourced from China. In 2014, he became one of the few Amazon sellers that Jeff Bezos touted by name in his widely read annual letters to shareholders. “The beauty of Amazon is that someone can say, ‘I want to start a business,’ and they can go on Amazon and really start a business,” Bezos had quoted Morris as saying that year. “You don’t have to get a lease on a building or even have any employees at first. You can just do it on your own. And that’s what I did.”

But by the time I talked to him, Morris, like Saunders, had changed his opinion. In 2016, when YogaRat employed seven people, he found that his listings were inexplicably disappearing from Amazon’s search results. He spent hours on the phone with an Amazon customer support staffer in India and wrote pleading emails to Bezos’s public email address. His listings were finally restored, though they never returned to their previous positions at the top of search results. A year later, his seller account was suspended altogether because some of the images on his listings violated Amazon’s guidelines against depicting groups of people in product photos. Morris conceded the error while bitterly showing me how countless other sellers violated the same rules without penalty. Someone—probably a competitor—had singled him out to Amazon’s enforcement team.”

“While Morris scrambled to reinstate his account, other sellers of the same merchandise replaced him atop search results. YogaRat never recovered. He now runs what’s left of his firm alone with his wife, and the challenges are daunting. He is constantly fighting overseas knockoffs of his designs and reviews of his products that mysteriously show up on rival listings. When he calls Amazon customer service, he suspects the reps’ primary metric for success is how quickly they can get off the phone. Once a devoted yogi, Morris can barely stand to look at a yoga mat anymore.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Aarstol tried to advertise on Amazon to boost his visibility but that gutted his profits. In the years after he was mentioned in Bezos’s letter, he went from employing ten people to three and from recording $4 million in annual sales to less than $1.5 million. “Amazon doesn’t give a shit about brands,” said Aarstol, who by 2020 was almost completely off Amazon and focusing on sales over his own website. “They don’t care whether you live or die.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Speaking on the condition of anonymity, several private-label managers admitted to exploiting a resource that was even more precious than product reviews—prominence in Amazon’s search results. When they introduced a new brand, like Mama Bear diapers, a practice called “search seeding” allowed the brand managers to pin the initial relevancy score for the new product to the score of an established product, such as Pampers, at least for the first few days. The Amazon product would then appear at the top of search results, rather than starting on the unseen last page with other new brands.

When I asked Doug Herrington whether Amazon changed search results for its private-label products, he flatly denied the practice occurred. “We don’t manipulate search results at all,” he said. He added that Amazon brands were sometimes given prominent advertising slots in search results when they were a “great deal for the customer,” and if customers didn’t respond, the Amazon products quickly vanished. He also compared Amazon’s tactics to those of competing physical retailers, who put generic products like painkillers right next to Tylenol and Advil, taking up limited shelf space. Amazon, on the other hand, had “infinite aisles,”

One who worked on a new lifestyle brand called Solimo said she originally assumed third-party data was off limits when she joined the company in 2016. A year into her job, her boss showed her how to access the sales data and told her to ask Amazon’s data analysts if she needed help. The employee, who asked that her name not be used, subsequently examined third-party sales to determine the fastest-selling vitamin supplements, how many units were sold, and the average selling price and profitability of each.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

Other interesting anecdotes

“Logistics employees who worked on the California service said this hub-and-spoke model ended up being inefficient and unreliable; one said that Amazon was “basically stapling a $10 or $20 bill to every order.” The Fresh team also tracked a metric called “perfect deliveries”—when an order was promptly delivered and included every item. They found they were hitting that target less than 70 percent of the time. Grocery industry veterans belittled the effort from afar. “Amazon Fresh is their Waterloo,” John Mackey told me during our chat in 2014. “What’s the one thing people want? Convenience. You can’t do that with distribution centers and trucks.”

“Success in delivering online groceries relied on getting the logistics exactly right and amassing enough demand to make it profitable to send drivers into residential neighborhoods. Amazon had set up warehouses too far from customers, made it too expensive for them to sign up, and saddled them with bulky tote bags and sacks of dry ice after each delivery. Bezos had finally agreed with Doug Herrington that Amazon needed to reinvent its retail business, but they were going to have to find a different way to do it.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“For the next few quarters, Amazon avoided buying Google ads in Mexico and tried to compensate with billboards, radio, and TV ads, and shipping discounts. As Garcia had feared, it hobbled the site. The offline ads were more expensive and less effective. Google brought in $70 billion in annual advertising revenues because search ads worked and were a relatively inexpensive way for websites to attract visitors. “I wanted to see if we could get traction in a country launch without using Google,” Wilke later said, “and it turned out, the answer was no…. We weren’t reaching enough customers.”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.

“Internally the program was called AMPED. Amazon contracted with an Australian data collection firm, Appen, and went on the road with Alexa, in disguise. Appen rented homes and apartments, initially in Boston, and then Amazon littered several rooms with all kinds of “decoy” devices: pedestal microphones, Xbox gaming consoles, televisions, and tablets. There were also some twenty Alexa devices planted around the rooms at different heights, each shrouded in an acoustic fabric that hid them from view but allowed sound to pass through. Appen then contracted with a temp agency, and a stream of contract workers filtered through the properties, eight hours a day, six days a week, reading scripts from an iPad with canned lines and open-ended requests like “ask to play your favorite tune” and “ask anything you’d like an assistant to do.”

The speakers were turned off, so the Alexas didn’t make a peep, but the seven microphones on each device captured everything and streamed the audio to Amazon’s servers. Then another army of workers manually reviewed the recordings and annotated the transcripts, classifying queries that might stump a machine, like “turn on Hunger Games,” as a request to play the Jennifer Lawrence film, so that the next time, Alexa would know.

The Boston test showed promise, so Amazon expanded the program, renting more homes and apartments in Seattle and ten other cities over the next six months to capture the voices and speech patterns of thousands more paid volunteers. It was a mushroom-cloud explosion of data about device placement, acoustic environments, background noise, regional accents, and all the gloriously random ways a human being might phrase a simple request to hear the weather, for example, or play a Justin Timberlake hit.

The daylong flood of random people into homes and apartments repeatedly provoked suspicious neighbors to call the police. In one instance, a resident of a Boston condo complex suspected a drug-dealing or prostitution ring was next door and called the cops, who asked to enter the apartment. The nervous staff gave them an elusive explanation and a tour and afterward hastily shut down the site. Occasionally, temp workers would show up, consider the bizarre script and vagueness of the entire affair, and simply refuse to participate. One Amazon employee who was annotating transcripts later recalled hearing a temp worker interrupt a session and whisper to whoever he suspected was listening: “This is so dumb. The company behind this should be embarrassed!

But Amazon was anything but embarrassed. By 2014, it had increased its store of speech data by a factor of ten thousand and largely closed the data gap with rivals like Apple and Google. ”

Excerpt From: Brad Stone. “Amazon Unbound.” Apple Books.


Book Review – Think Again: The Power Of Knowing What You Don’t Know

The title gives away much of what the book is all about. Although it doesn’t reveal any groundbreaking fact or insight that no other books has, Think Again is a helpful reminder that we all need to re-evaluate our thinking and our life regularly.

Adam Grant is a professor at Wharton School of The University of Pennsylvania and majors in organizational psychology. In addition to penning several books, including Think Again, he received his tenure at the age of 28, authored many papers and research in his field, and was the highest ranked professor at Wharton from 2012 to 2018. In terms of credibility, there shouldn’t be much to worry about. Back to the book itself. The tenet of Think Again is to encourage readers to think like a scientist with a great deal of humility. To think like a scientist, we need to avoid being too invested in our own opinions. As scientists usually possess a healthy dose of doubt and tend to review formed opinions regularly with concrete data and new facts, that’s what Adam Grant wants us to do. Whatever we learned needs to be revisited and, if necessary, unlearned. The world becomes increasingly complicated. Virtually all the issues that we discuss in our life are multi-faceted and complex; which requires constant investigation and evolution of thinking when new data and theses come up. Yet, many of us, including myself, succumb to mental laziness. We get stuck in the way we think and the opinions we formed in the long past. Changing our minds is often accompanied by admitting that we were wrong and that we made mistakes. Such an admission can be unpleasant and is not what many of us are willing to do. But Adam Grant, using academic research, argues that we must do the hard thing and constantly challenge/review our opinions, for our own benefits.

About a decade ago, when I was fresh out of school, I held beliefs that would make me ashamed now. Back then, success in life was to get a job at a big company, to have a fancy title and to have a lot of money. That success, in turn, would make me happy. Three years into my career, I got depressed. I resigned from a job that paid me well at the time, took almost two months’ sabbatical and accepted a job in a much smaller job market. My life got better. I learned more about the holes and the shortcomings in my thinking which evolved a bit, but there was still a lot of room for improvement. I was still haunted by the idea of pursuing my passion and figuring out the one thing that I should do in my life, like many of us are by all the self-help books and the speeches by the lucky ones such as Steve Jobs. It took me years to finally be at peace with not knowing what I was born to do in this world. Instead, I am happy with being healthy, working towards a future life with my girlfriend and having the freedom that my parents don’t have. Whether that state of mind will persist in the future remains to be seen. But I guess that’s in line with what Adam Grant talks about in the book.

All in all, a nice read for the weekend. It is simple to digest, but the lessons it brings can be profound. Really recommend it.

“If you’re a scientist by trade, rethinking is fundamental to your profession. You’re paid to be constantly aware of the limits of your understanding. You’re expected to doubt what you know, be curious about what you don’t know, and update your views based on new data. In the past century alone, the application of scientific principles has led to dramatic progress. Biological scientists discovered penicillin. Rocket scientists sent us to the moon. Computer scientists built the internet. But being a scientist is not just a profession. It’s a frame of mind—a mode of thinking that differs from preaching, prosecuting, and politicking”

“Mental horsepower doesn’t guarantee mental dexterity. No matter how much brainpower you have, if you lack the motivation to change your mind, you’ll miss many occasions to think again. Research reveals that the higher you score on an IQ test, the more likely you are to fall for stereotypes, because you’re faster at recognizing patterns. And recent experiments suggest that the smarter you are, the more you might struggle to update your beliefs.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“In preacher mode, changing our minds is a mark of moral weakness; in scientist mode, it’s a sign of intellectual integrity. In prosecutor mode, allowing ourselves to be persuaded is admitting defeat; in scientist mode, it’s a step toward the truth. In politician mode, we flip-flop in response to carrots and sticks; in scientist mode, we shift in the face of sharper logic and stronger data.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“When we lack the knowledge and skills to achieve excellence, we sometimes lack the knowledge and skills to judge excellence. This insight should immediately put your favorite confident ignoramuses in their place. Before we poke fun at them, though, it’s worth remembering that we all have moments when we are them.

We’re all novices at many things, but we’re not always blind to that fact. We tend to overestimate ourselves on desirable skills, like the ability to carry on a riveting conversation. We’re also prone to overconfidence in situations where it’s easy to confuse experience for expertise, like driving, typing, trivia, and managing emotions. Yet we underestimate ourselves when we can easily recognize that we lack experience—like painting, driving a race car, and rapidly reciting the alphabet backward. Absolute beginners rarely fall into the Dunning-Kruger trap. If you don’t know a thing about football, you probably don’t walk around believing you know more than the coach.”

“It’s when we progress from novice to amateur that we become overconfident. A bit of knowledge can be a dangerous thing. In too many domains of our lives, we never gain enough expertise to question our opinions or discover what we don’t know. We have just enough information to feel self-assured about making pronouncements and passing judgment, failing to realize that we’ve climbed to the top of Mount Stupid without making it over to the other side.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

“Arrogance is ignorance plus conviction,” blogger Tim Urban explains. “While humility is a permeable filter that absorbs life experience and converts it into knowledge and wisdom, arrogance is a rubber shield that life experience simply bounces off of. Humility is often misunderstood. It’s not a matter of having low self-confidence. One of the Latin roots of humility means “from the earth.” It’s about being grounded—recognizing that we’re flawed and fallible. Confidence is a measure of how much you believe in yourself. Evidence shows that’s distinct from how much you believe in your methods. You can be confident in your ability to achieve a goal in the future while maintaining the humility to question whether you have the right tools in the present. That’s the sweet spot of confidence.”

“Beware of getting stranded at the summit of Mount Stupid. Don’t confuse confidence with competence. The Dunning-Kruger effect is a good reminder that the better you think you are, the greater the risk that you’re overestimating yourself—and the greater the odds that you’ll stop improving. To prevent overconfidence in your knowledge, reflect on how well you can explain a given subject.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.
Excerpt From: Adam Grant. “Think Again.” Apple Books.

“One possibility is that when we’re searching for happiness, we get too busy evaluating life to actually experience it. Instead of savoring our moments of joy, we ruminate about why our lives aren’t more joyful. A second likely culprit is that we spend too much time striving for peak happiness, overlooking the fact that happiness depends more on the frequency of positive emotions than their intensity.”

“At work and in life, the best we can do is plan for what we want to learn and contribute over the next year or two, and stay open to what might come next. To adapt an analogy from E. L. Doctorow, writing out a plan for your life “is like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way.”

Excerpt From: Adam Grant. “Think Again.” Apple Books.

Book review: The Spotify Play: How Daniel Elk Beat Apple, Google & Amazon In The Race For Audio Dominance

As Spotify is one of the stocks in my portfolio, I have extra motivation to read this book. To get to know more about this company that is largely shrouded by secrecy. The book was written by a couple of Swedish interviews through many interviews and investigation of filings. It’s normal to read this kind of unofficial account of a company with a grain of salt or some skepticism, but it’s far from easy to write about a company when current or former employees are shackled by NDAs and when the founders or executives refuse to cooperate.

The book covered Spotify’s history from the very beginning to when it started to increase investments in podcasts. It started with Spotify’s founders, Daniel Elk and Martin Lorentzon, who each sold a startup and became a couple of millionaires, before they even worked together on a secret idea that would later become Spotify. Back when it just got off the ground, there was no playbook for a music streaming service like Spotify, well not legally. Hence, the young startup had to engineer both an app that was user-friendly and a business model that could yield profitability and work well with music labels. As Daniel Elk insisted on, for the right reason, having a free version of Spotify, which let users stream music for free, music labels in the beginning were highly skeptical and reluctant to cooperate. The prospect of Spotify generating enough ads money on the other side of the business to pay loyalties wasn’t appealing at best or practical at least. Through negotiations with the powerful music labels, Spotify came up with their Freemium model that still exists to this day.

“Eventually, Daniel had to compromise by adding a paid service. Three people at Spotify drove him to that shift in strategy: Spotify’s “dynamic duo”—Niklas Ivarsson and Petra Hansson—and the New York-based advisor Ken Parks. After scores of meetings with labels and legal consultants, they are said to have convinced Daniel that a paid version was the only way forward. The alternative would simply cost too much, in both cash and company shares, and never lead to a sustainable business. The freemium model that would define Spotify was thus born out of a tit-for-tat dialogue with the labels, with Niklas and Petra painstakingly hammering out the details of a new template. The industry hated the free service, but was prepared to put up with it as a means to an end, with Spotify vowing to convert free users to an ad-free, premium version.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

In the first few years of its existence, Spotify came close to being belly up financially a couple of times. Back in the latter half of the 2000s, Spotify’s model was a new concept to investors. An investment in Spotify without an agreement with major music labels presented a significant risk. If Spotify had operated without official licenses, it would have embroiled itself and investors’ money in a mountain of legal trouble. Yet, just before the 2008 financial crisis hit, the company labored to put together a funding deal to keep the lights on.

At the Spotify office, around forty employees toasted to the news with glasses of sparkling wine. Daniel was visibly relieved, according to one account.

“That was lucky. If we hadn’t gotten funded, you guys wouldn’t have received your salaries,” he reportedly told his colleagues afterward.

In fact, the timing was immaculate. A few months later, the investment bank Lehman Brothers filed for bankruptcy, setting off the worst financial crisis in more than seventy years.

Excerpt From: Sven Carlsson. “The Spotify Play.”

A few years later, death came close again. This time, it was the ability to see shift in consumer behavior and to react fast that saved Spotify. After the iPhone was invented in 2007, a few years later, consumers started to consume music more on their little computers that could sit comfortable in their hands or pockets. Spotify at the time only had a desktop version. The company’s analytics team found out that their customers didn’t spend enough time on the desktop version on their mobile to be converted into paid users. If they hadn’t reacted and desktop use had kept plummeted, their revenue would have dropped. Without an expansion in paid users, Spotify would have had a hard time convincing potential investors for more cash. The trouble became compounded because having a mobile version required additional licenses from music labels. Somehow, the company pulled through what Daniel Elk called “switching out the engines mid-flight”

“At Jarla House in Stockholm, the analytics team had set up a wide range of dashboards visualizing the music service’s performance in real time. Starting in early 2012, Henrik and his team watched as the inflow of new users switched from desktop—where they could listen for free—to mobile, where Spotify only offered a free trial for forty-eight hours. That clearly wasn’t enough time to convert them into subscribers. Of the new users who tried Spotify on a smartphone, only a small percent would stay on and pay for the service. The conversion rate on desktop—the backbone of Spotify’s business—was much higher. But that was of little comfort if desktop use would keep dropping dramatically.”

“During the summer of 2012, music listening on Spotify plateaued as it usually did during the season. But when fall began, a growing number of users did not return. The analytics team suspected that a large number of them were now using their computers less often, opting for their phones instead. It was an early indication that the massive shift to mobile computing was beginning to pick up speed.”

“At this point, Spotify’s licensing team had spent more than six months negotiating deals for what they called a “mobile free tier.” It was not an easy task. While the record labels were making hundreds of millions of dollars every year in payouts from Spotify, they still disliked the idea of millions of people listening to music without ever being forced to pay. Now, Spotify wanted to expand their free service to include all smartphones, not just the ones belonging to paying subscribers.”

“The data became more and more distressing for Spotify. In the late summer of 2013, more listeners went “mobile only,” by now a common term. Smartphones now appeared to have become a real alternative to computers. Gustav Söderström would later describe this period as “the summer when Europe went mobile. Spotify’s number of active users—the lifeline that kept investors funding the company—was now shrinking. Internal estimates showed that Spotify’s user growth nearly halted between the second and third quarters of 2013.”

“A few years later, Daniel would admit that Spotify would have gone bust within six months if things hadn’t changed. To him, this was one of Spotify’s crowning achievements. Originally conceived as a desktop product, the company managed to adapt to the mobile era—and they did it “mid-flight,” under constant pressure from competitors and from the music industry, which at this time still swallowed around 80 percent of all of Spotify’s revenues.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

The book also touched upon various topics such as challenging negotiations with the music labels, struggle to convince artists that Spotify’s interest was aligned with them, the fight against Apple, the effort to overcome operational chaos before IPO and the negotiations to acquire Soundcloud & Tidal that didn’t come through. Personally, I was interested in the book because I liked to study businesses and as mentioned, because I own Spotify stock. This isn’t an official account approved by the company. Consequently, I am not very sure how much of what was written is true. I don’t believe the authors were out to spread rumors, but on the other hand, I cannot have 100% confidence either. The writing is nothing spectacular. The beginning of Spotify was covered at length, but its more recent history didn’t receive as much attention. Furthermore, I don’t really think the title is correct. Yes, Spotify is a known brand, especially with young audience nowadays, but it’s a long way from being the dominant force in audio. Whoever will emerge victorious in the audio streaming war still remains to be seen. Hence, I would give it a 3/5, but would not put it under the “I highly recommend” category.

“The many problems varied. Spotify had grown quickly, and its organizational structure was, in places, haphazard. Its internal accounting system would have fit a medium-sized business operating in a handful of countries, but not a global market leader with business in nearly sixty countries. If a staffer in the finance department wanted to break down marketing costs for a single country for the year 2014, there would be no way of doing it.

Moreover, it was difficult for Spotify to accurately estimate its own costs. Over the coming years, the company would retroactively write up their royalty payments by more than $60 million due to accounting errors. Spotify had a hard time forecasting how the business would perform. During some quarters, subscriber growth came in well below its own estimates; during others, the number of subscribers surged past the growth team’s targets.”

“A number of sources interviewed for this book would describe how Daniel had a hard time knowing how to handle dustups among his lieutenants. Nearly a decade after Spotify started making big-name hires, many continued to recount how Daniel would let conflicts fester until the warring parties found their own solution. It was, still, a kind of natural selection in a corporate setting. The atmosphere is toxic at times. Daniel tends to give people overlapping responsibilities, then he lets them fight over who gets to do the work,” as one person would recall.

”No one is actually accountable for anything because virtually all decisions must take place though a bewildering process of group consensus, where people who are ignorant of the topic at hand somehow have just as much of a say as the experts,” one former employee at the New York office would post in November of 2019.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

Deal with Sony

“Secret internal documents, which would not emerge until the publication of the Swedish edition of this book, reveal that Sony had negotiated an option—triggered four years down the line—to purchase what would amount to 2.5 percent of Spotify at a heavy discount. The label’s payoff came in the spring of 2015, when Sony paid just under $8 million for shares that, a few months later, would become worth twenty-five times more. Largely as a result of this deal, Sony would become the label with the largest Spotify holdings by the time the company went public in 2018.”

“For the right to stream Sony’s music catalogue in the US, Spotify agrees to pay a $25 million advance for the two-year duration of the contract: $9 million the first year, and $16 million the second. The advance is to be paid in installments every three months, and Spotify can only recoup this money if it meets or beats its revenue targets. The contract, however, does not stipulate how Sony Music can use the advance money. Some industry insiders claim that advance money is generally spent on things other than payouts to artists. Others wonder what happens to the “breakage,” or the part of the advance that is left with the label, when Spotify fails to reach its revenue goals. Is it attributed to streams and distributed to artists, or kept entirely by the label?”

“The contract also stipulates that Spotify give Sony free ad space worth $9 million over three years. Sony can use that space to promote its own artists or resell it at any price they want. Spotify also promises to make a further $15 million of ads available for purchase by Sony at a discounted rate. On top of this, Spotify must also offer Sony a portion of its unsold ad inventory for free, to allow the label to promote its artists.”

“The contract also states that Spotify’s smallest payout per stream will be 0.2 cents. But this measure can’t be used to calculate how much Spotify pays for the artists’ streams. It’s only used when it results in a larger payout than the label’s regular cut of Spotify’s total revenue. In essence, it’s a type of minimum guarantee. If too many users get stuck in the free tier, and Spotify’s average revenue per user falls below a certain level, Sony Music can ask to be paid per stream instead.”

Excerpt From: Sven Carlsson. “The Spotify Play.”

Book Review: Working Backwards: Insights, Stories and Secrets From Inside Amazon

I always cherish a read that reports honestly on the culture of a company, pulling the curtain and providing details on what works, what processes the company used to forge the culture or the “tribe” that they have. Working Backwards is such a book. It was written by two insider Amazon veterans who lived the experience. From a small startup in Seattle that sold books online in the 1990s, Amazon has grown over time to become a household name in the world, a brand trusted by many and a competitor feared by rivals. It’s marching nicely towards generating $400+ billion in annual sales and currently employing over 1 million people. When a company consists of a small team of folks, management and the instillation of culture are straightforward. However, it’s another issue to manage more than 1 million people and still maintain the culture. How did Amazon do so?

“Our culture is four things: customer obsession instead of competitor obsession; willingness to think long term, with a longer investment horizon than most of our peers; eagerness to invent, which of course goes hand in hand with failure; and then, finally, taking professional pride in operational excellence.”

Excerpt From: Colin Bryar. “Working Backwards.”

When it comes to culture and corporate values, you may feel that a lot of companies just put together a list of sensible and sound-good sentences. That’s true. What makes one company different from another is how much the day-to-day operation is guided by its culture and how much the leaders exemplify it. From the very beginning, Jeff Bezos already showed the importance of customer obsession, setting the tone for the #1 value at Amazon for years to come. When employees see the CEO walk the walk, instead of just talking the talk, they believe in what he or she says and follows accordingly.

“From the tone of customer emails to the condition of the books and their packaging, Jeff had one simple rule: “It has to be perfect.” He’d remind his team that one bad customer experience would undo the goodwill of hundreds of perfect ones. When a coffee-table book arrived from the distributor with a scratch across the dust jacket, Jeff had customer service write to the customer to apologize and explain that, since coffee-table books are meant for display, a replacement copy was already on order, but shipment would be delayed—unless time was of the essence and they preferred the scratched copy right away. The customer loved the response, and decided to wait for the perfect copy while expressing their delight at receiving this surprise consideration.”

“Another of Jeff’s frequent exhortations to his small staff was that Amazon should always underpromise and overdeliver, to ensure that customer expectations were exceeded. One example of this principle was that the website clearly described standard shipping as U.S. Postal Service First-Class Mail. In actuality, all these shipments were sent by Priority Mail—a far more expensive option that guaranteed delivery within two to three business days anywhere in the United States. This was called out as a complimentary upgrade in the shipment-confirmation email. Thank-you emails for the upgrade included one that read, “You guys R going to make a billion dollars.” When Jeff saw it he roared with laughter, then printed a copy to take back to his office.”

Excerpt From: Colin Bryar. “Working Backwards.”

One of Amazon’s core values is Hire and Develop The Best. In the very beginning, staff was handpicked by Jeff Bezos, who has a notoriously high standard. As the hiring need grew substantially, Jeff couldn’t get involved in every hire any more. At one point, they ” had new people hiring new people hiring new people.” It became much more challenging to ensure the quality of every hire. Hence, The Bar Raiser program was created. The program’s purpose is to create a formal, scalable and repeatable process that can help with hiring the right people. Essentially, in addition to the normal practices such as having detailed Job Descriptions, phone screening and multi-team interviews, Amazon trains a team of interviewers whose goal is to identify in every new hire something that he or she can do better than a member of the existing team. The Bar Raiser cannot be the hiring manager or recruiter, but has the veto power to ultimately reject an applicant; though such a power is reportedly rarely exercised. It’s similar to having a new set of eyes that can review your work, whether it’s an essay or a code, and help remove the gut feelings out of the process as much as possible.

As Amazon’s business became increasingly multi-faceted and complex, how did the firm organize teams internally to be nimble, effective and innovative? The answers are: single-threaded leadership and two-pizza teams. The concept of single-threaded leadership is fairly simple: appoint someone to own a major initiative and remove all other responsibilities. Unburdened by other responsibilities, these single threaded leaders can devote all the time and energy to make their initiatives work and grow. More importantly, when a company wants to come up with new ideas, there is no way to gauge the results of the ideas without bringing them to real life and there is no point of doing so when there is nobody focused completely on that task alone. Andy Sassy, who will become the next CEO of Amazon in Q3 2021, used to be Jeff Bezos’ shadow and the single threaded leader for AWS. Other major successes at Amazon such as Prime, Kindle and Amazon Digital all resulted from having dedicated teams and leaders build them up from the ground.

“Amazon’s SVP of Devices, Dave Limp, summed up nicely what might happen next: “The best way to fail at inventing something is by making it somebody’s part-time job.”

And there is the two-pizza team. It’s normal in a working environment to depend on somebody else for your job. However, if there are too many dependencies, they will slow down the innovation process and reduce the efficiency of the whole company. To address that issue, Amazon came up with the two-pizza team concept. The idea is to have a small enough team that they can be fed with two pizzas. Each team is tasked with removing its dependencies and building out infrastructure and innovating. The sooner a team becomes unshackled by dependency on others, the sooner it can dedicate its resources to actual work and innovation. Each team functions like a small startup or a self-sustaining API that can work together if necessary, but doesn’t rely on others to be effective.

The next element of the Amazon Magic is my favorite: the importance of writing. At Amazon, Power Point is replaced by 6-page memos. The point is that writing a memo helps crystalize and sharpen ideas, as well as removes the limitations of a Power Point. Of course, Amazon still delivers presentations to partners, but internally, they rely on memos to ensure that the presenters think through the ideas/problems and don’t waste anybody’s time with half-baked thoughts. Another practice is to write a PR/FAQ for every new product/service idea. The idea is to envision the end result or customer experience that could come from a new idea, put it down to a one-page press release and work backwards to the details in an FAQ section.

I cannot tell you how many times I came up with an idea and after putting it to words on this blog, I realized how little I thought about it. Every time I write about something on this blog, it still may not be accurate, but the end product is much better than my original thought. At work, I also see it first hand. People have a lot of ideas in their head and shoot out ideas to everyone else. I am pretty confident that they didn’t take the time to work through the nuts and bolts, the logic, the challenges and ramifications of their ideas.

“The reason writing a good 4 page memo is harder than “writing” a 20 page powerpoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what, and how things are related. Powerpoint-style presentations somehow give permission to gloss over ideas, flatten out any sense of relative importance, and ignore the interconnectedness of ideas”

“Pressed against this functional ceiling, yet needing to convey the depth and breadth of their team’s underlying work, a presenter—having spent considerable time pruning away content until it fits the PP format—fills it back in, verbally. As a result, the public speaking skills of the presenter, and the graphics arts expertise behind their slide deck, have an undue—and highly variable—effect on how well their ideas are understood. No matter how much work a team invests in developing a proposal or business analysis, its ultimate success can therefore hinge upon factors irrelevant to the issue at hand.

We’ve all seen presenters interrupted and questioned mid-presentation, then struggle to regain their balance by saying things like, “We’ll address that in a few slides.” The flow becomes turbulent, the audience frustrated, the presenter flustered. We all want to deep dive on important points but have to wait through the whole presentation before being satisfied that our questions won’t be answered somewhere later on. In virtually every PP presentation, we have to take handwritten notes throughout in order to record the verbal give-and-take that actually supplies the bulk of the information we need.

“Pressed against this functional ceiling, yet needing to convey the depth and breadth of their team’s underlying work, a presenter—having spent considerable time pruning away content until it fits the PP format—fills it back in, verbally. As a result, the public speaking skills of the presenter, and the graphics arts expertise behind their slide deck, have an undue—and highly variable—effect on how well their ideas are understood. No matter how much work a team invests in developing a proposal or business analysis, its ultimate success can therefore hinge upon factors irrelevant to the issue at hand.

We’ve all seen presenters interrupted and questioned mid-presentation, then struggle to regain their balance by saying things like, “We’ll address that in a few slides.” The flow becomes turbulent, the audience frustrated, the presenter flustered. We all want to deep dive on important points but have to wait through the whole presentation before being satisfied that our questions won’t be answered somewhere later on. In virtually every PP presentation, we have to take handwritten notes throughout in order to record the verbal give-and-take that actually supplies the bulk of the information we need. “The slide deck alone is usually insufficient to convey or serve as a record of the complete argument at hand.”

There are more great points, examples and details about Amazon’s culture from the book, apart from some of my favorite above. The book also touches on the value of thinking long term, being patient, removing defections at every level or controlling the input variables. With what I think are sensible decisions and policies, there is little wonder why Amazon is a success that it is today. In my opinion, there is no greater competitive advantage than having a robust culture that can foster a company’s mission and vision. You can replicate parts of operations or strategy, but it’s much harder to replicate a culture. Amazon managed to put together a strong culture, evidenced by their financial success and brand name, and it’s something that rivals will find highly challenging, if not impossible, to mirror.

This is a great read for business students or any curious mind that wants to know more about one of the greatest companies on Earth. If you are looking for such a read, I highly recommend it.

Disclosure: I own a position on Amazon.

Book Review: Exercised – Why Something We Never Evolved To Do Is Healthy and Rewarding

I learned of this book from a Twitter account that I follow. The book looks at exercise from the anthropology and biology perspective to answer a few key questions such as:

  • Did we evolve over thousands of years to exercise? Or did we evolve not to spend more energy than we should? Why is exercise such a struggle for many?
  • Why is sitting harmful to our body?
  • How much exercise is enough? What exercise should we do?

The book is jam-packed with research and studies that serve as corroborating evidence of the points that the author tries to make. It must have taken him a long time to dig into hundreds of research like that, including trips to remote places so that he could live with ethnic tribes whose lifestyle is so different from ours dominated by modern technologies. Clearly, the author knows what he is talking about. Even though it’s very research-oriented, the book is well-written and engaging. I do admit that I got tired at times due to its overwhelming length and the number of topics packed in one volume, but for the most part, it was time well spent and an enjoyable read.

The core message of the book is nothing new: Exercise is great for our health and rewarding. But this book offers a little bit more insights into how we can integrate exercise into our daily routine more easily, why certain things happen and how we should design exercise that can benefit us more, especially when we age. I am fairly certain that readers will get away from reading this book with some new knowledge. Below are some of my notes:

“Imagine you have been asked to conduct a scientific study on how much, when, and why “normal” people exercise. Because we tend to think of ourselves and our societies as normal, you’d probably collect data on the exercise habits of people like you and me. This approach is the norm in many fields of inquiry. For example, because most psychologists live and work in the United States and Europe, about 96 percent of the subjects in psychological studies are also from the United States and Europe.

Such a narrow perspective is appropriate if we are interested only in contemporary Westerners, but people in Western industrialized countries aren’t necessarily representative of the other 88 percent of the world’s population. Moreover, today’s world is profoundly different from that of the past, calling into question who among us is “normal” by historical or evolutionary standards. Imagine trying to explain cell phones and Facebook to your great-great-great-grandparents. If we really want to know what ordinary humans do and think about exercise, we need to sample everyday people from a variety of cultures instead of focusing solely on contemporary Americans and Europeans who are, comparatively speaking, WEIRD (Western, Education, Industrialized, Rich, Democratic)

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“Which brings us back to physical inactivity. From the perspective of natural selection, when calories are limited, it always makes sense to divert energy from nonessential physical activity toward reproduction or other functions that maximize reproductive success even if these trade-offs lead to ill health and shorter life spans. Stated simply, we evolved to be as inactive as possible. Or to be more precise, our bodies were selected to spend enough but not too much energy on nonreproductive functions including physical activity”

“So let’s banish the myth that resting, relaxing, taking it easy, or whatever you want to call inactivity is an unnatural, indolent absence of physical activity. Let’s also refrain from stigmatizing anyone for being normal by avoiding nonessential exertion. Unfortunately, we have a long way to go. According to a 2016 survey, three out of four Americans think obesity is caused by a lack of willpower to exercise and control appetite.27 Despite stereotypes of non-exercisers as lazy couch potatoes, it is deeply and profoundly normal to avoid unnecessarily wasting energy. Rather than blame and shame each other for taking the escalator, we’d do better to recognize that our tendencies to avoid exertion are ancient instincts that make total sense from an evolutionary perspective.”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“Although most fat is healthy, obesity can turn fat from friend into inflammatory foe. The biggest danger is when fat cells malfunction from overswelling. The body has a finite number of fat cells that expand like balloons. If we store normal amounts of fat, both subcutaneous and organ fat cells stay reasonably sized and harmless. However, when fat cells grow too large, they distend and become dysfunctional like an overinflated garbage bag, attracting white blood cells that trigger inflammation”

“A second way lengthy periods of sitting may incite widespread, low-grade inflammation is by slowing the rate we take up fats and sugars from the bloodstream. When was the last time you had a meal? If it was within the last four or so hours, you are in a postprandial state, which means your body is still digesting that food and transporting its constituent fats and sugars into your blood. Whatever fat and sugar you don’t use now will eventually get stored as fat, but if you are moving, even moderately, your body’s cells burn these fuels more rapidly. Light, intermittent activities such as taking short breaks from sitting and perhaps even the muscular effort it takes to squat or kneel reduce levels of fat and sugar in your blood more than if you sit inertly and passively for long.38 Such modest extra demands appear to be beneficial because although fat and sugar are essential fuels, they trigger inflammation when their concentrations in blood are too high.39 Put simply, regular movement, including getting up every once in a while, helps prevent chronic inflammation by keeping down postprandial levels of fat and sugar.

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“These ubiquitous miniature batteries, which power all life on earth, are called ATPs (adenosine triphosphates). As the name implies, each ATP consists of a tiny molecule (an adenosine) attached to three molecules of phosphate (a phosphorus atom surrounded by oxygen atoms). These three phosphates are bound to each other in a chain, one on top of the other, storing energy in the chemical bonds between each phosphate. When the last of these phosphates is broken off using water, the tiny quantity of energy that binds it to the second phosphate is liberated along with one hydrogen ion (H+), leaving behind an ADP (adenosine diphosphate). This liberated energy powers almost everything done by every cell in the body like firing nerves, making proteins, and contracting muscles. And, critically, ATPs are rechargeable. By breaking down chemical bonds in sugar and fat molecules, cells acquire the energy to restore ADPs to ATPs by adding back the lost phosphate. The problem is, however, that regardless of whether we are hyenas or humans, the faster we run, the more our bodies struggle to recharge these ATPs, thus curtailing our speed after a short while.”

“Sugar is synonymous with sweetness, but it’s first and foremost a fuel used to recharge ATPs through a process termed glycolysis (from glyco for “sugar” and lysis for “break down”). During glycolysis, enzymes swiftly snip sugar molecules in half, liberating the energy from those bonds to charge two ATPs. Restoring ATPs from sugar doesn’t require oxygen and is rapid enough to provide almost half the energy used during a thirty-second sprint. In fact, a fit human can store enough sugar to run nearly fifteen miles. But there is a consequential catch: during glycolysis the leftover halves of each sugar, molecules known as pyruvates, accumulate faster than cells can handle. As pyruvates pile up to intolerable levels, enzymes convert each pyruvate into a molecule called lactate along with a hydrogen ion (H+). Although lactate is harmless and eventually used to recharge ATPs, those hydrogen ions make muscle cells increasingly acidic, causing fatigue, pain, and decreased function. Within about thirty seconds, a sprinter’s legs feel as if they are burning. It then takes a lengthy period of time to slowly neutralize the acid and shuttle the surplus lactate into the third, final, but long-term aerobic energy process”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“If you keep up a regimen of two sessions a week of HIIT, your muscles will gradually improve their ability to produce high, rapid forces in part by augmenting how many fibers contract simultaneously when stimulated by nerves. In addition, your muscles will change composition. Although HIIT cannot stimulate your body to produce more fast-twitch muscle fibers, the ones you have will thicken, making you stronger and hence faster. On average, sprinters’ muscles are more than 20 percent thicker than distance runners. HIIT can also modify slower, more fatigue-resistant pink fibers into faster, more fatigable white fibers; lengthen fibers slightly, thus boosting their shortening speed; and increase the percentage of fibers in a muscle that contracts, thereby increasing force. But these and other changes don’t happen on their own, and require constant effort to maintain. If you want to run faster, you have to try to run faster.”

“The benefits of regular HIIT go well beyond its effect on muscles. Among other payoffs, HIIT increases the heart’s ability to pump blood efficiently by making its chambers larger and more elastic. HIIT also augments the number, size, and elasticity of arteries and increases the number of tiny capillaries that infuse muscles. HIIT further improves muscles’ ability to transport glucose from the bloodstream and increases the number of mitochondria within each muscle, thus supplying more energy. These and other adaptations lower blood pressure and help prevent heart disease, diabetes, and more. The more we study the effects of HIIT, the more it appears that HIIT should be part of any fitness regimen, regardless of whether you are an Olympian or an average person struggling to get fit.”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“And therein lies an important lesson about why we exercise. Because exercise by definition isn’t necessary, we mostly do it for emotional or physical rewards, and on that horrid April day in 2018, the only rewards were emotional—all stemming from the event’s social nature. For the last few million years humans rarely engaged in hours of moderate to vigorous exertion alone. When hunter-gatherer women forage, they usually go in groups, gossiping and otherwise enjoying each other’s company as they walk to find food, dig tubers, pick berries, and more. Men often travel in parties of two or more when they hunt or collect honey. Farmers work in teams when they plow, plant, weed, and harvest. So when friends or CrossFitters work out together in the gym, teams play a friendly game of soccer, or several people chat for mile after mile as they walk or run, they are continuing a long tradition of social physical activity.”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“In the end, the 2018 HHS panel concluded that some physical activity is better than none, that more physical activity provides additional health benefits, and that for “substantial health benefits” adults should do at least 150 minutes per week of moderate-intensity or 75 minutes per week of vigorous-intensity aerobic physical activity, or an equivalent combination of the two. (Moderate-intensity aerobic activity is defined as between 50 and 70 percent of your maximum heart rate; vigorous-intensity aerobic activity is 70 to 85 percent of your maximum heart rate.) They also reaffirmed the long-standing recommendation that children need an hour of exercise a day. Finally, they recommended everyone also do some weights twice a week.”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding

“Aerobic exercise additionally stimulates the growth and upkeep of just about every other system in the body. Within muscles, it increases the number of mitochondria, promotes the growth of muscle fibers, and increases their ability to store carbohydrates and burn fat. In terms of metabolism, it burns harmful organ fat, improves the body’s ability to use sugar, lowers levels of inflammation, and beneficially adjusts the levels of many hormones including estrogen, testosterone, cortisol, and growth hormone. Weight-bearing aerobic activities (alas, not swimming) stimulate bones to grow larger and denser when we are young and to repair themselves as we age, and they strengthen other connective tissues. In moderation, aerobic exercise stimulates the immune system, providing enhanced ability to ward off some infectious diseases. And last but not least, aerobic exercise increases blood flow to the brain and elevates the production of molecules that stimulate brain cell growth, maintenance, and function. A good cardio workout really does improve cognition and mood.”

Excerpt From: Lieberman, Daniel. “Exercised : Why Something We Never Evolved to Do Is Healthy and Rewarding
Physical Activity Guidelines for Americans. Source: HHS

Book Review – The Psychology of Money. Likely the best book I read this year

I waited for this book to come out for a while, and it surely doesn’t disappoint. The Psychology of Money by Morgan Housel is an excellent book on personal finance, our thinking towards money and how that drives a lot of our decisions in life. Not only does the book contain a lot of wisdoms and high quality content, but it is also well and crisply written that you can finish it in a weekend, unlike a lot of other books that are unnecessarily lengthy.

If you care about growing your net worth, investing and making important decisions in your life (who doesn’t?), I really recommend this book. It will transform what you think about money and life. Below are a few nuggets from the book. Have a nice weekend!

The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.

Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

“At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.”

The idea of having “enough” might look like conservatism, leaving opportunity and potential on the table. I don’t think that’s right. “Enough” is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.

Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.

Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong. Because it’s never as good or as bad as it looks. The world is big and complex. Luck and risk are both real and hard to identify. Do so when judging both yourself and others

Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Jim Simons, head of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much. Simons’ net worth, as I write, is $21 billion. He is—and I know how ridiculous this sounds given the numbers we’re dealing with—75% less rich than Buffett.

Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.

If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace. You can find a new routine, a slower pace, and think about life with a different set of assumptions. The ability to do those things when most others can’t is one of the few things that will set you apart in a world where intelligence is no longer a sustainable advantage

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

The idea is that you have to take risk to get ahead, but no risk that can wipe you out is ever worth taking. The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside. There is no margin of safety that can compensate for the risk.

Room for error does more than just widen the target around what you think might happen. It also helps protect you from things you’d never imagine, which can be the most troublesome events we face.

Excerpt From: Morgan Housel. “The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.”

Look for books to read? Check out those I have read lately

The Anatomy of The Swipe: Making Money Move

We are so accustomed to having quick card-based transactions that if a transaction takes more than a couple of seconds, it will be a terrible customer experience. What many folks don’t know is that there are a lot of things that happen behind every transaction. It involves several parties, including but not limited to a cardholder, an issuing bank, an issuer processor, a network, a merchant processor, a merchant bank and a merchant. During the brief couple of seconds when a cardholder waits at a cashier, information goes from a card reader all the way back to at least an issuer processor through a card network (Visa, Mastercard) and a merchant processor, and back to the card reader. But it’s not finished yet. The process continues at least a couple of days after the transaction when the involved parties go through the clearing and settlement steps.

The payment world is so complex that there are startups that decouple individual steps of the whole process and carve out a niche market for themselves by specializing in such steps and improved efficiency. Take neobanks for example. They offer checking accounts with virtually no fees because they aren’t regulated and can operate without fixed costs such as branches.

I tried in the past to learn about payment systems, but not until this book did I find a reliable source that can break down abstract concepts in a digestible manner. If you are interested in payments or fintech, do yourself a favor and read this book

The reason why you can take money out of just about any ATM is because of the Durbin Amendment and its requirement that every debit card must have a secondary unaffiliated network. This law was put in to give consumers more choice in finding an ATM network. For example, if you have a debit card from Visa and the ATM doesn’t support Visa’s ATM networks, then it can run on Mastercard’s ATM network, Cirrus.

The term “Clearing” is used primarily by Issuers, but can also be referred to as “Capture” by Merchant Acquirers. Clearing happens toward the end of the day for most Merchants and will factor in tips, transaction reversals, and returns. This is basically the Merchant confirming these transactions are valid and that these funds are ready to be moved or “settled.”

Settlement is the actual movement of money from the cardholder’s bank account, the Issuing Bank, to the Merchant’s bank account, the Acquiring Bank. This movement of money typically happens via Fedwire as instructed by the payment networks.

Key term: 3D Secure

This is a standard for offering cardholders one more layer of security for online transactions. When card numbers are entered into a website to pay for something, 3D Secure will require the cardholder to enter one more form of authentication, such as a one-time-use PIN or passcode, similar to how two-factor authentication works for websites. More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.

More recently, the card networks are requiring Merchants and card Issuers to roll out a service called 3D Secure. The technology is standard in Europe but not yet in the US.

The main reason is that these new “neo-banks” aren’t actually banks but rather tech companies that partner with regional banks such as Sutton Bank, Bancorp, or Meta Bank. These regional banks have less than $10 billion in assets and are able to charge a higher Interchange rate because they are considered exempt from the Interchange rules set forth in the Durbin Amendment and are considered “unregulated.”

TAPE SUCKS: Inside Data Domain, A Silicon Valley Growth Story

This book was written by Frank Slootman, former CEO of Data Domain. Frank took the company public and was the CEO when it was sold to EMC. He then went on to take the rein at ServiceNow and is currently assuming the top job at Snowflake. This book is his account of his time as CEO at Data Domain. It is a pretty short book, but it includes an honest and crisp account of how he scaled the company and dealt with startup issues. I like this book because it isn’t lengthy. I think it’s because of his direct nature as a Dutchman. Frank wrote about the lessons he learned along the way with little “fat” or lengthy unrelated anecdotes. He was straight to the point. His lessons outlined in the book should be helpful to aspirational entrepreneurs and CEOs.

Snowflake is expected to go public next week. If you are interested in that company and its CEO, you should give it a read.

My morning routine

The author interviewed a plethora of celebrities and successful folks to learn about their productivity hacks in the morning. Humans are creatures of habits. We all have our habits and routines and these successful men and women aren’t any exception. I don’t think what this book offers is unique in a sense that you can find these hacks on Google at any time. What it does is perhaps to catalogue all these hacks in one place so that you can choose to look at the routines of the folks you like. Plus, if you already studied about productivity tips before, it’s very likely you’d know what to do in general. What is missing is just our determination and discipline.

With that being said, if you are new to the productivity improvement game, this book may be of value. However, it’s pretty pricey compared to the two books I listed above, given the value and satisfaction in return. I’d try to Google the topic before I book this book

7 Powers: The Foundations of Business Strategy

This is a classic book about business strategy. It covers 7 aspects of a successful strategy framework developed by Hamilton Helmer. The aspects include Economies of Scale, Network Effect, Counter Positioning, Switching Costs, Branding, Cornered Resource and Process Power. I think it’s a valuable read to anyone who is interested in analyzing businesses and companies. Of course, the book would be more valuable to newcomers than those who already studied strategy before. For instance, if you are familiar with the concept of Network Effect, Porter’s Five Forces and Switching Costs, this book will serve more as a reminder than a revelation. Nonetheless, it costs only $9 for a Kindle version from which you can take great notes on business strategy.

The Motley Fool Investment Guide

Even though this book costs $15 for a Kindle version, I actually think if you are new to investing and you want to grow your net worth, you should start reading this book. This book covers very important topics of investing. It talks about why you should invest in or avoid mutual funds. It also discusses the appeal of blue chips and small-cap stocks. If you haven’t learned much about the main financial statements (income statement, cash flow or balance sheet), the book provides an overview of these statements and what they mean in general. In my personal experience, although news outlets have coverage of companies’ financials, as an investor, you should do your own homework and practice reading reports as well as financial statements. Additionally, this book touches upon options such as shorting and longing a stock. They aren’t my preferences, but it doesn’t hurt to know what they are and what they do. Of course, the book has to talk about the power of compound interest, which is why we need to invest early and be patient.

I really recommend this book if you want to venture into investment.

Book review: The Innovation Stack

Similar to the most recent books, this one came to me by chance when somebody I follow retweeted someone else who read it. I gave it a chance and I am glad I did. The book is penned by Jim McKelvey, the cofounder of Square. The book should be recommended by business schools and read by anyone who wishes to improve their competitiveness as a business or a company. It is a straightforward, easy-to-read, genuine and informative book. What I like the most about the book is the author’s genuineness. He doesn’t seem to try to immortalize entrepreneurs or make wild exaggerations. For instance, one of his main points is to copy what worked in the past. In my personal experience at business schools, I often listened to professors talk about “blue ocean” or “doing something unique”. I always find it hard to come across something that has never been done before. Perhaps, I am not smart enough. That’s why it’s refreshing to listen to a billionaire who admitted that he copied everything he could at Square.

Jim’s Innovation Stack simply refers to the process of companies trying to solve a problem which leads to two more problems and so on. By tackling each problem, successful entities come up with a unique mix of elements that only they can possess, elements that make them competitive. Any competitor that wants to copy an Innovation Stack has to somehow copy every single element of the Stack, not just one or a few. That makes a solid Innovation Stack defensible and difficult to emulate.

The same concept can also apply to individuals. For instance, speaking English may not give anyone a competitive advantage. However, combining English with other skills such as fluency in Latin and professional training in archaeology makes a person “more unique” and harder to compete.

There are other gems in the book that I believe will be useful to readers. If you are looking for a short quality read over this weekend, give it a try. It’s worth it.

“BEFORE stalking got such a bad reputation, I was pretty good at it. My target was always the same: some famous businessperson. Entrepreneurship was not taught in school at the time,* so I had to invent a way to get instruction. My technique was simple: I would wait until some famous entrepreneur came to St. Louis to give a speech. After the speech I would catch the speaker as he or she left the stage and offer a ride to the airport.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

“A couple of ratios help illuminate the crime scene. Credit card vendors were making 0.04¢ on every dollar ($0.3 billion / $788 billion) they processed from their large merchants. Now compare this to 1.8¢ on the dollar, the profit they were making on small merchants ($2.4 billion / $130 billion). Their profit margin from small businesses was forty-five times higher than from billion-dollar corporations. I rechecked my math three times before that number sunk in. Small businesses pay forty-five times more than the giants do. We had identified a big problem and a good reason to start a company.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

The problem with solving one problem is that it usually creates a new problem that requires a new solution with its own new problems. This problem-solution-problem chain continues until eventually one of two things happens: either you fail to solve a problem and die, or you succeed in solving all the problems with a collection of both interlocking and independent innovation. This successful collection is what I call an Innovation Stack

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

“But this book’s subject is the exploration of the unknown; so, as a consolation prize for readers expecting between five and seven bulleted steps to success, I will now tell you the universal formula for success in any existing industry. This formula works from building bridges to selling soap. This formula has worked for millennia and it will give you the ability to succeed in any known field of endeavor. Even better, you have been practicing the fundamental skill it requires since before you were born, and are almost certainly a master.

Ready?

Copy what everyone else does.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

“In 1973, Braniff cut its fare between Dallas and Houston to $13, half of what Southwest charged. The Dallas–Houston run was Southwest’s primary source of profit—competing at that rate, even with its Innovation Stack and greater cost efficiency, would be disastrous. Braniff’s pricing attack violated US antitrust law, but the executives hoped to drive Southwest out of business before Herb could take them to court. Winning in court wouldn’t matter if Southwest was dead, so Herb needed a fast solution. He and his team devised a plan by looking at their customers.

Southwest knew that most of the passengers on the Dallas–Houston route were businesspeople. These businesspeople flew Southwest primarily for the convenience of multiple flights, easy changes, open seating, and on-time performance. Braniff could set any price it wanted, but it could not replicate the other effects of Southwest’s Innovation Stack. These business fliers were not choosing Southwest simply because of the low price, a price their employers reimbursed them for anyway. So Southwest offered fliers the option of paying only $13, or they could pay the full fare of $26 and get a complimentary bottle of Chivas Regal scotch, Crown Royal whiskey, or Smirnoff vodka. Most of the passengers stayed with Southwest and chose to pay the full fare and get the booze. Southwest managed to outsell Braniff at twice the price, and for the length of that promotion became the largest liquor distributor in Texas.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

“Disruption has become nearly as threadbare a concept as entrepreneurship. The two words could be roommates at rehab. When Clayton Christensen first popularized the disruption concept back in 1997, the idea was novel and interesting. But what Christensen originally called disruptive innovation has now been shortened to just disruption and the oversimplification is profound. Two decades later, disruption has become the high-fructose corn syrup of business, an overused ingredient sprayed on pitches and injected into keynotes in the hope of disguising the familiar taste of conformity.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

“IS DISRUPTION BAD? Not by itself. But disruption has also never been the focus of good entrepreneurs. The entrepreneurs profiled in this book set out to build and not to destroy. To focus on disruption is to look over one’s shoulder into the past. But if you are trying to solve a perfect problem or expand a market, shouldn’t you study that industry? No, you look at your customers, or I should say your potential customers, for they do not even know your product or service is possible.”

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.

But now that you have read this book you have lost something as well. You can no longer look at a problem and say, “Nothing can be done.” You can’t even say, “I can’t do it because I am lacking (fill in your excuse du jour).” You can only say either, “I’m not going to do anything” or “I am going to solve this problem.” Because we have seen how world-changing entrepreneurs had few if any qualifications when they began their journeys. 

Excerpt From: Jim McKelvey. “The Innovation Stack.” Apple Books.