Opinion on Luke Kanies

Building on ATProto

luke@lukekanies.com (Luke Kanies) — Mon, 20 Jul 2026 00:00:00 +0000

Bluesky’s Atmosphere Protocol has the chance to become the base for a whole generation of applications. But it’s developing in surprising and disappointing ways.

I spent part of last week at the Local First Conference in Berlin. I was not surprised to find that AI coding was on everyone’s minds. Less expected was how pervasive ATProto was.

I’ve been considering trying to build on ATProto for a few months, so this was a great chance to ask a bunch of questions from both people building on it, and the people actually building it (multiple key Bluesky people were there).

I want ATProto to be the answer for me. I want to again live in a world where application developers use public, community driven standards to create interoperable applications with common data standards. I think it can be. But unfortunately I think it’s not on track to be that right now.

In this post I’m going to describe what I have been wanting to build, and how ATProto’s current and proposed designs do and don’t work with that. And I’ll also throw in some comments about what’s been surprising to me.

I’m probably trying to do too much here. But my main goal is to provide feedback on the proposed design, and it’s hard to do so without being clear about what I want to build and why.

Start With Reviews

The smallest version of what I want to build is a suite of applications for recording reviews. In an ideal world, these applications would supplant Yelp, GoodReads, Letterboxd, and a bunch of similar applications for just about anything you might consider reviewing. (Yes, I know there are already people building versions of these on ATProto; I’d want to collaborate with them.)

I want to replace these applications not because of their function, but because of their business models. Neither my wife nor I will use them the way they’re intended, and I think most people are like one or the other of us.

Local First Data

For me, I don’t want these companies to own my data. We have more than a thousand bookmarks in Yelp, but… they’re stuck in Yelp. I can’t do anything else useful with them: I can’t publish them, I can’t share them, I can’t write scripts across them, I can’t version control them. They belong to Yelp, not me. And, frankly, the experience they provide for managing lists of bookmarks kinda sucks.

This is a classic local first use case. I could adopt one tool that was great for writing reviews, another that used the same data but was better at publishing best-of lists for my friends, and another that made it easy to share “best business books” lists on my web site. No single app is going to do all of these, but a shared, public data model allows everyone to have what they want.

I’ve lost the willingness to give big corporations a permanent right to control how I use my own data. (That’s why I’m writing this in plain text and publishing via Hugo.) The apps only get worse over time. And if I’m going to invest that much time in recording my opinions, I want to control its use, not let Yelp do it.

Public and Private

As to my wife, she will just never publish anything online. Never. If I want her to review books or restaurants or recipes, it has to be in a place where I – and maybe the rest of our family – will see it, but no one else.

Personally, I am willing to publish public reviews. And sometimes I specifically want to, like sharing books I found useful as a founder. But doing so is complicated. The information I would record about a restaurant for myself is quite different from what I would want the wider world to know. Yet… most apps don’t allow you to draw this distinction. Reviews are public. Your opinion affects the subject’s reputation, even if you didn’t want it to. (I’m vegetarian and autistic, so a place working for me is not necessarily relevant for other people.)

Fundamentally, most of these applications are built to enable influencers: People who want to build a following online for their reviews. “Oh man, she has the best book recommendations!” “If he likes the restaurant, I know I will too!”

But most of us don’t want to become influencers. If anything, we’ve generally learned the lesson that it sucks to be followed by a bunch of people online. I want to keep my stuff private. I don’t want my opinions to matter to anyone else.

I mean sure, when someone comes to town I want to be able to give them a list of restaurants they should visit and activities they should do. But I want to send it to them, not the rest of the world.

We can split the world into three kinds of people:

Those who would only record a review if other people will read it. These are the influencer-wannabes
People like me, who would provide a mix of public and private reviews, depending on the circumstance
People like my wife who will only ever record reviews if they can be confident it will be private to just their friend group, or even just to themselves

The current crop of applications works fine for the first group. But it leaves the latter two out in the cold.

And I bet anything that those other two groups are much larger.

So, what we need is a system that allows application developers to easily let their users choose how public or private they want to be – entirely public, entirely private, or sharing piecemeal with individual groups.

What does this have to do with ATProto?

Let’s start with what’s great about ATProto: It seems to be the first protocol designed to solve identity at scale, enabling any application to build ATProto identities into their application for authentication, tracking followers and following, and the other related features that basically every application needs.

Its identity system not perfect (I wish it were more human readable, especially). But it seems to be close enough today that nearly every speaker at Local First this year mentioned it. No more does every app developer have to create their own social graph, their own identity and authentication systems, their own means of finding friends.

Unfortunately, at least for now, the rest of the protocol is of limited use for my goals.

Today, ATProto is public-only: It assumes that everything you do will be published online for the whole world to see. That design decision is baked into everything from the storage systems to the structure of the publishing services.

The community is currently designing what they call “permissioned data”. (I think this is a silly name, and it should just be called “private data”, which is better both because “private” is actually a word, and also because it describes user behavior instead of technical implementation, which is a far better naming practice).

Unfortunately, while most of the assumptions driving the design seem reasonable, the resulting design looks very hard to build on. A lot of where I think it goes wrong is captured perfectly in the above linked post:

Before we get into it, the through-line on all of this is that public broadcast data is substantially different from permissioned data.

I fundamentally disagree with this. (I am not the only one.)

Private and public data are basically identical. A restaurant review is a restaurant review whether I am the only one who ever sees it or it gets shouted to the rooftops. A book review I share with my book club is identical to a book review I share with my wife or publish on my web site.

Data I publish to the world is just a special case: The permission is world-read. Just like data I never publish is a special case: It has no readers other than me.

Unfortunately ATProto is already used out in the wild for Bluesky, and it is designed and built as a public-only protocol. It would be hard to change it to support access control, limited distribution, and the other features you need with private data.

So, instead, the community has, from what I can tell, just… designed a completely independent system for private data.

Permissioned Data relies on the existing identity system and lexicons (for defining data types). But adds entirely new data structures, plus new methods for managing and validating that data. (Note that the link above is to one in a series of posts on the design; you can get to all of them from there.)

So, as an app developer, you have to essentially write two applications: One for public data, and one for private. But, your users don’t think of it as two apps. “These are restaurant reviews. All the restaurant reviews should go together.” So your job, as the developer, is to support these two data systems, and two protocols, but never let the user see that they’re totally different.

That gets messy real fast. You’ve got a private post you want to make public? You’re not modifying it – you’re deleting the old one and making a new one in the public subsystem. Does it keep its likes? Its reposts? Links to it? 🤷‍♂️ No idea, but… probably not.

It’s actually worse than that. ATProto’s storage subsystem, the “Personal Data Server”, provides direct access to your data. In other words, you should expect more than one application to want to read and write your data. So now, anyone who is interested in this data has to write two versions, but lie to their users and hide any differences.

Because, again, there aren’t actual differences. The actual data being stored is the same. The way the user thinks about it is the same.

To me this is a sign that the current proposal is flawed.

I don’t know how to fix it. I’m nowhere near close enough to conversation to think I can propose solutions yet. But hopefully I can help people see problems, at least.

One last local-first note

I only had a high-level understanding of ATProto went I went to Local First, so I learned a lot while I was there. One thing I was definitely wrong about was how the PDS worked.

I naively assumed it worked a lot like a git repository. The ATProto community regularly says that I own my own data. I tend to assume that means that I have a copy of it, and that when I make changes, I am operating against my copy then distributing it. This is exactly how git works: I clone a repository, make my changes, then push them back up to the server for distribution. I have a hard time imagining “owning” my data without always having a copy of it.

But no, that’s not at all how ATProto works. The PDS is “your” server, but… it’s actually a server. You do not push data up and pull it down; you speak a protocol to it. You only “own” your data because it and the protocols for accessing it are public, and you can change where it is stored.

It does use cryptography-based data integrity guarantees like git does, which is one more reason I assumed I could easily manage the data like git does. But those guarantees are only used on the server, not in the protocols you use to provide new data.

ATProto meets about half of the design principles in the Local First essay linked above. But it clearly misses on the data being at your fingertips or the network being optional, and also misses out on a lot of implied abilities because you’re always talking to a remote server.

If you want to record a review while you’re offline… best practice is to essentially store those reviews in a temporary area, then push them to the server when you’re back online. In other words, you have to build your own custom storage and sync system if you want offline support. Obviously not impossible, but also obviously not local-first.

If you then cross this with the current design for Permissioned Data, I’ve got a bit of a mess:

Custom local storage for offline data
Custom sync system for emptying offline data
Sync system must use different protocols for public and private data
Online app usage must also use separate read and write systems for private and public data, and is likely different from the system used for offline support

As an application developer committed to both local first principles and letting the user choose between public and private, ATProto is working at least as much against me as with me. Am I really better off building on this, versus designing my own system? That question is doubly scary when you recognize that the protocol designer and I are so far apart philosophically.

If I believe public and private data are fundamentally the same, just with different access rights, but the community believes they are and should be different… I am fighting the protocol, storage system, and community every step of the way. I’ve done this before, and it sucks.

Conclusion

I’m still excited about ATProto. And thankfully, the Permissioned Data design is early enough that it can still be improved. And I’m not the only person out there pushing back on the existing design and its goals.

Even if the proposed design goes through, I can build at least somewhat on ATProto, maybe using its identity and lexicon systems.

But I came up in the 90s, when the entire internet was built on standardized protocols that were internet-scale, resilient, maintained by the community and a standards group, and built to empower its users rather than enrich whoever could build the biggest moat. I want that world again.

I think ATProto has the opportunity to be the first new protocol of this type in decades. I hope they go for it, and build something every application developer (but especially me!) wants to build on.

AI Is Like a Crappy Consultant

luke@lukekanies.com (Luke Kanies) — Mon, 12 May 2025 00:00:00 +0000

I decided to finally give vibe coding a try. I’ve barely written any code since I hired developers at Puppet in like 2009. And I’ve been a staunch AI/LLM skeptic. But I figured I should at least be an educated skeptic.

After a false start, and a couple of months of periodic usage, I’ve come to some conclusions about it. The first one is the most important:

You should treat AI like an untrustworthy consultant.

Think of this scenario: You need help with your company’s core product. You have to bring in an outside expert, either just as another body, or more likely, because they have knowledge your team doesn’t. What do you do?

Give them commit access and let them work unsupervised? Of course not.

At the least, you have someone sit by their side, checking every line.

More likely, you don’t even let them touch the keyboard. After all, you want more than the help – you want your team trained up so they don’t need that help next time. The only way you’ll get that is if your team does the work, even if someone else is telling them what to do.

That’s how I consulted at Puppet: I show up, I walk you through all the work, and when I leave you have more than a functioning system; you actually know how to use it. Sure, it was faster and easier to do all the work myself. But no one ever learned anything then.

All the coding I’ve done with AI help is in Swift, using SwiftUI, to build iOS apps. I’ve never worked with anything like any of that – I’ve not used any of the specific tech (other than an iPhone as a user). I’ve never used a UI framework. I’ve never worked in statically typed languages. And I’ve barely ever worked in compiled languages. So, it seemed like a solid use case for getting some fast help.

My first try used Cursor, and let it edit everything.

After a few iterations, I had a bare-bones application. But… I felt like I was pushing around a bag full of bolts. There was definitely stuff in there. But I didn’t even know how to think about the changes I needed, because I didn’t understand enough.

So on the second iteration, I decided I would do all the typing: The AI does not get to touch the keyboard. When I started it was all gibberish, because I didn’t understand anything. But after only a session or two, I have a pretty good sense of how both the language and framework work. That’s about when I realized the second big thing:

AIs are crappy architects.

It kept giving me stupid advice. For instance, every time it encountered an error, it would just catch it and print some logs. Uhhh… that’s bad. It would encounter a small problem, and design a big stupid solution instead of doing a small rearchitecture. Because it can’t think, it couldn’t realize when it hit a design wall that needed rethinking.

After a while, I concluded that it wasn’t very good at the back end code – I have a lot of experience with modeling and data flow, and I kept finding dumb things it did. But I never found those dumb things in the area I have no experience: the UI.

But… then I thought for a bit. And I realized, duh, that’s probably just because I’m not good enough yet to recognize the dumb stuff it’s doing.

Coincidentally, I am now hitting a repetitive wall with Swift’s type checking. I keep having to break a view into smaller and smaller files so that it can compile fast enough. Turns out that’s the AI’s only trick for fixing this problem. But a small amount of research shows there are other options. In particular, I can instrument the compile and see what’s actually taking all the time, and focus on just rewriting that code to be more compiler-friendly. This is the kind of stuff an experienced programmer does without thinking, but a crappy consultant whose entire experience is based on trawling Stack Overflow probably never figures it out.

I did find one area where LLMs absolutely excel, and I’d never want to be without them:

AIs can find your syntax error 100x faster than you can.

They’ve been a useful tool in multiple areas, to my surprise. But this is the one space where they’ve been an honestly huge help: I know I’ve made a mistake somewhere and I just can’t track it down. I can spend ten minutes staring at my files and pulling my hair out, or get an answer back in thirty seconds.

There are whole categories of coding problems that look like this, and LLMs are damn good at nearly all of them. Where did I fail to log correctly? Where am I not handling an error appropriately? If I am updating this method name, which files do I have to change?

I’ve had about five to ten sessions of using Claude – just on the command line, no fancy tools, and no editing allowed. I have about enough experience with Swift and SwiftUI that the terms of the relationship have changed. I feel more like the senior engineer, and it is the junior developer I have working on a short term contract. I can pass it the stupid grunt work (rename this method through the whole system, fill out this boilerplate for a new view, figure out how this new library works).

But I absolutely can’t trust it to make any big decisions. And I have to check all of its work. (Even better, it won’t be offended when I do.)

After a few more sessions, I’ll probably start letting it edit files directly. But only for that kind of large scale, small change work. Once I build the error management framework, it can probably push it through the system (especially since I’ve sprinkled my code with comments when the error management was missing). But I’ll still walk through all the changes to ensure it actually makes sense.

Do I Hate Investors?

luke@lukekanies.com (Luke Kanies) — Tue, 22 Aug 2023 00:00:00 +0000

Of course not. But the fact that people think I do says a lot.

Photo courtesy of Andre Hunter.

Seeking a round of funding is about the most miserable thing I’ve ever done. Truly. Fundraising was less pleasant and more demeaning than anything else I did at Puppet. But Clickety’s final (abandoned) round was uncomfortable in a new way.

Two different investors asked me the same question:

Why are you fundraising if you hate investors?

The question caught me flat-footed. Mostly because it’s such a stupid one.

I don’t love working with real estate agents. I feel like I’m being scammed. Even if I like my own agent, I usually don’t like the other one. I’m uncomfortable the whole time.

But in the US, it’s way harder to buy or sell a house if you don’t use an agent. And even if I went without, the other side of the party probably would hire one. So, I use a real estate agent. And I work with the agent on the other side at the same time. You want the house, you use the system.

And when I buy that house? I ask my banker for a loan. It’s not because I love bankers. It’s because I need help buying the house, and he’s in the business of helping people buy houses. Seems pretty straightforward. It has nothing to do with whether I like bankers, banks, or the mortgage financing system.

The legal system is similar. I actually do like a lot of lawyers. But… god, not all. And the way lawyers often work is stupid. I don’t actually think lawyers designed modern legal documents as a form of job security, but it sure looks like it sometimes.

But when I need to work with complex contracts, I hire a lawyer. It doesn’t matter whether I like lawyers or the US contract system; I have a job that demands legal help, so I go get it.

There’s a huge difference between all of them and venture capitalists, though: Bankers, real estate agents, and lawyers don’t demand that I act like I like and respect their industry. But VCs don’t just want me to start a great company. They want me to like and respect them for trying to make money off the work of me and my team.

Why was I fundraising from VCs?

To paraphrase Willie Sutton (maybe?), because they’re the ones with the money. If I want funding for my company, I need venture capitalists. What does it matter how I feel about the venture industry?

If you’re an entrepreneur today, there is no other source of capital. You can either bootstrap, or raise money from VCs. There are a few firms experimenting at the edges, like Calm, but they have a minuscule amount of money compared to the venture capital industry.

Yes, I could bootstrap. I’ve done it before. But it took four and a half years. I’m not as patient today as I was when I was 29. I also thought it made sense to start this company as a CEO and product manager first, rather than as a programmer. (In retrospect that was a mistake.) That made it impossible to bootstrap. I needed a team.

This question is just offensive, though. Its implication is “you should not raise money from investors unless you are willing to show respect and appreciation for the money they give you”.

Why? The world famously hates bankers and lawyers, yet continues to work with them. Why does this field get to demand our respect, when others don’t? Finance, especially, is just here for the money, and everyone – them included! – knows it. We just have to convince them we’ll help.

VCs are gatekeepers

Investors display their power by demanding your respect. They don’t invest in people who don’t show fealty to their image of themselves.

It’s how banking used to work: Some people got money, and some people didn’t. Fundamentals had nothing to do with it. You had to be in the right network, have the right skin color, the right class. Eventually bankers realized they made less money when they only loaned it to their friends. (And the US government forced them to back off their discrimination a bit.)

Most investors today will tell you to just “play the game”. This is what they mean: Participate in our discriminatory process, and show us proper respect. This is why you usually need a warm introduction to even be allowed to pitch them.

It’s a broken system that leaves broken people in its wake.

But I raised money within it, many times, because that’s where the money is.

Hate the Game, not the Player

No, I don’t hate investors.

But I do hate the world of venture capital. It is fundamentally flawed. It incentivizes behavior I can’t stand, and quashes behavior I find respectable and moral.

For what it’s worth, I also hate the larger finance industry. It’s not like venture is some rare target for my ire. There’s a reason I’ve never considered working in finance. (Well. There are several.)

Venture is an amazing engine for creation and invention. But it mostly invents stuff I wish didn’t exist. And it does not seem to be able to solve the problems that matter most to me or the larger world.

People appear to hear my dislike for their industry and think I hate them, personally. I can’t do much about that. I respect and like some investors. I dislike some others. But I generally have no particular feelings about a given individual.

That being said…

I don’t tend to respect investors.

Being a venture capitalist doesn’t automatically disqualify you from garnering respect. But it also does not automatically deserve it.

In the 1980s, finance was at its peak. People made ungodly amounts of money ruining the lives of thousands and thousands of people. And they were held up as heroes of business. We’ve largely learned that stripping financial assets is maybe not something we should be proud of. These people still get rich, but we have learned not to lionize them.

Is the modern venture investor as heartless and shameless as a PE investor from 40 years ago? Generally, no. (Although there are definitely exceptions.) But like those 80s wolves of Wall Street, VCs have found a money-making edge, and they’re ruthlessly exploiting it.

I’m just not that impressed.

I can see why someone would read that disregard and disrespect as hate. Especially given the power dynamic: I’m asking them for money, yet I’m not showing “proper respect”.

My banker didn’t demand I “play the game” when I applied for a mortgage. He just needed evidence that I could afford the house I was buying, and that it was worth what I was paying.

Being autistic means I’ll never be able to “play the game”. It’s literally constructed so only the in-crowd can join. I can mask for a while. But it takes hundreds of meetings to raise a round. Most people in the meetings look the same, dress the same, went to the same schools, and ask the same questions, yet think they’re special geniuses. And most of them give the same answer (“no”). It becomes hard to hold a facade.

It’s not a choice, or a lack of skill. It’s a hardwired neurological limitation. You might as well ask me to be taller, or have a lower voice.

For better or worse, I’m not sure it matters now. My personal limitations are likely to prevent me from trying to raise money again. But I hit those walls in large part because of how harrowing fundraising is.

Will I do it again?

My experience at Clickety tells me I’m unlikely to run another venture backed startup.

It looks like I’m already a bit of a pariah, which might explain part of why it was so hard to raise. (Not that I don’t deserve some of that reputation.) It’s not about to become easier for me. The older I get, the less I can handle gatekeepers. And I was already crap at tolerating them when I was younger.

My health — both physical and mental — would need to significantly improve. Running a company is stressful enough. Raising money was too much.

I won’t rule it out. I know my future is going to look different from my past. I have a lot of healing to do.

But I still believe in the power of software to make people’s lives better. And venture capital is a fantastic source of acceleration. I hope to continue to work with founders, and intrinsically that means working with investors, too, sometimes.

I also love solving problems. I hope to help others do it. But I won’t rule out trying to solve some problems on my own.

And maybe one of those solutions will be so good they can’t ignore me.

Don’t Make Board Decks

luke@lukekanies.com (Luke Kanies) — Wed, 22 Jul 2020 00:00:00 +0000

Why and how my team built board reports instead of PowerPoint decks. Fifty pages, less work than slides, and more valuable. Image courtesy of Drew Beamer.

Board meetings are a critical time of communication and reflection for a company. You have to share enough information that the people in the room can make existential decisions about the business. Yet most CEOs I know share only slides (the “board deck”) with their board.

This is a huge mistake.

People who worked for me at Puppet claimed I hate PowerPoint or Keynote. Nope. I use them myself when presenting on stage in front of a large crowd. But they are a horrible choice for communicating without a talk track, and are incapable of conveying large amounts of information, or anything of detail.

Don’t trust me? Ok, how about Edward Tufte , The Godfather of information design, who partially blamed them for the Columbia space shuttle explosion:

These [NASA] review boards examined what is probably the best evidence available on PP for technical work: hundreds of PP decks from a high-IQ government agency thoroughly practiced in PP. Both review boards concluded that (1) PowerPoint is an inappropriate tool for engineering reports, presentations, documentation and (2) the technical report is superior to PP. Matched up against alternative tools, PowerPoint loses.

What’s that you say? Running your business is easier than shooting rockets into space, so you are fine dumbing down your communication? You’re not in great company.

Amazon forbade PowerPoint in staff meetings, switching to a six page written memo:

Bezos revealed that “narrative structure” is more effective than PowerPoint. According to Bezos, new executives are in for a culture shock in their first Amazon meetings. Instead of reading bullet points on a PowerPoint slide, everyone sits silently for about 30 minutes to read a “six-page memo that’s narratively structured with real sentences, topic sentences, verbs, and nouns.”

Scott McNealy banned it at Sun Microsystems years earlier.

It’s not just that slides are bad.

There’s a much better option right in front of you.

For most of my time running Puppet, we prepared a board memo: A text document written in normal English, with supporting images and charts. It averaged between 35 and 55 pages in length.

It worked great.

It took less time to prepare, and conveyed the state of our company more effectively. I recently shared my last board report, from 2016, with a friend, and he protested, “This is an SEC filing, not a board report!”

I’m not sure if our process is a fit for you, but hopefully it will at least inspire you to find a better solution than slides.

I used to be like you. Well. I never walked through slides in the meeting. I always drove a short (3ish items) agenda. My goal was discussion, not presentation. But I did start out using a deck.

I still cringe a little at the thought. But one of my startup principles is “Innovate only when necessary.” Your business requires a certain amount of breaking new ground. But don’t add risk by doing something unnecessarily new. If I avoided everything I thought was dumb I’d never get anything done.

Everyone else did board decks. My team was used to them. 🤷‍♂️ Sure, we’ll give them a try.

I hated it.

We spent too much time, on the wrong work, and did a poor job in the end.

Wow. The team spent so much time on fonts. And arranging images. What, exactly, is this adding to the board meeting? I understand: An ugly deck makes us look bad. But it seemed like we were spending a third of our time prettifying something instead of actually communicating.

There’s a good reason it was so hard to make them attractive: We had a ton of information to convey. We had to include detailed information about sales, marketing, engineering, and operations. The reader needed to quickly gain a sense of what was working, what was not, and what the vectors were around the company. No amount of picking fonts and rearranging images could deliver that understanding with PowerPoint.

So one quarter we ran an experiment. It was early on, only a year or two after our first round.

I gave each member of my team a choice: You can produce slides, or prose (i.e., plain text, using full sentences and paragraphs). Unsurprisingly, sales and marketing picked slides, and engineering and services picked prose.

What a stark difference.

The prose was done faster, communicated more, and just felt so much better.

Experiment over, prose won, we switched.

But how?

I don’t remember exactly how the process evolved. I do remember where we ended up, six years into using producing what we called board reports.

We did all the writing in Google Docs. We could all work at once and not step on each other’s toes.

I would build a skeleton of the report: Write out each section heading (“Summary”, “OKRs”, “Product”, “Marketing”, “Sales”). Then I’d use a comment to assign each section to the relevant executive. They’d either produce the text themselves, or do so in partnership with their team. Sales, marketing, and finance would include a lot of charts and graphs; product tended to stick to prose with a couple of diagrams or screen shots.

As people filled out the document, I played a few roles.

I spent most of my time assessing when someone was done. I’d read through people’s work and mark something that was insufficient, unclear, or missing with a comment in Google Docs. These are easy to spot even when scrolling through a fifty page document. As people worked, they marked their progress as done or ready to review. A completed section was easy to recognize: All comments and suggestions were resolved.

In this way, I could scan a large document and instantly see where work remained to be done.

My second job was overcoming a shortcoming in Google Docs. Or maybe a lack of training of office workers. Docs has built-in headings, and if you use them, your document is visually consistent, and auto-generates a table of contents. However, most people who worked for me never used the headings. They’d make a headline bold and increase the font size. So I had to go through the entire document and correct the markup. This was probably a quarter of my time.

By the end, I delegated this to a senior copy-editor who we trusted to see the entire document in process.

My last major role, and the only one that resembled the work of a CEO instead of an editor, was to ensure we were telling a single, coherent story. I’d write the summary to set the key messages. Then as I assessed everyone’s work, I pointed out inconsistencies or gaps. Most of this simple editing: Ensure all of the text used the same voice (first person plural, usually). It involved plenty of strategic work, though: tying company goals to team performance, ensuring the whole story was told, and asking everyone to cover the ‘why’, not just what happened.

You can guess this process triggered a few tense side conversations as I dragged information to light.

That, in the end, is the real point of the board report: Make sure we all understand the true state of the business. The writing was more important than the reading. It was on me to ensure we did the real work, rather than just packing it with information without saying anything.

I usually spent about four hours on it. Again, on a fifty five page report. My team each spent 1-3 hours. I did have the odd executive here or there or spend more like four or five hours on their part. We also never invested enough in automated reporting, so I’m confident some parts of the org had to work harder than I’d like to admit to generate their charts.

We targeted completion at least a couple of days before the board meeting. I’d share it with the board as a PDF. A couple of times I tried sharing it as a Google Doc (copied, so they can’t see the edit history), in hopes they would ask questions that could drive the agenda. It never got much engagement so I stopped.

Without a board deck, what did we actually talk about? I mean, without slides driving every minute, don’t you lose track?

No way. I ran a tight ship. But we measured time in half hours and big topics, not individual clicks.

My board meetings were usually three hours long. I’d spend an hour with just the board discussing high level status of the business and team. Then we’d take an hour and a half to cover our agenda, usually with portions of my team in the room. Then we’d spend half an hour at the end again just with the board, discussing what we learned and what we expected to do about it. This is when we also assessed individual executive performance. By the end of my tenure we also had a few minutes set aside for just the board, with me absent.

This process created space for deep conversation in the meetings. Everyone who read the report (which was, well, nearly everyone) was caught up on the business. They were fully prepared to discuss the three topics. And we had no structured flipping of slides to get in the way of discussion.

After the meeting, I edited the report as needed then sent it to the whole company.

Usually this involved removing just a line or two. Sometimes it was larger surgery, and others no changes at all. Mostly I cut out discussion of personnel changes, or removed sentences that required more sensitive, political phrasing than I practiced in these reports.

The end of this cycle ensured everyone involved in the company was up to date on, well, everything. Goals, status, progress, weaknesses, strengths.

I don’t know if everyone should use this process. I know many people were raised by American business to think slides are the best form of communicating. That’s a hard habit to break. I won’t even judge you if you use slides during the meeting to display the agenda and schedule, and maybe key images.

Slides are perfect if you want to tightly control the message, and not leave much room for hard questions.

But if your goal is to do real work in board meetings, skip the deck and write a report.

The Automator's Dilemma

luke@lukekanies.com (Luke Kanies) — Fri, 24 May 2019 00:00:00 +0000

Automation is not to blame for all the job destruction and wage stagnation. But you can still do great harm if you build it for the wrong reasons.

We’re told that automation is destroying jobs, that technology is replacing people, making them dumber, less capable. These are lies, with just enough truth to confuse us. You can have my robot washing machines when you pry them from my cold, wet hands.

I’m not some Pollyanna, thinking tech is only ever positive. Its potential for abuse and hurt is visible across the centuries, and especially so today. But I’m more optimistic about the upside than I am pessimistic about the down, and I’m uninterested in scaremongering screeds against it.

And yet. Technology and automation are not forces of nature. They’re made by people. By you. And the choices you make help to determine just how much good or bad they do. Even with the best of intentions, you might be doing great harm. And if you don’t have good intentions at all, or you don’t think ethics are part of your job, then you are probably downright dangerous.

I’m here to convince you that you have a role in deciding the future impact of the technology you build, and to provide you - especially you founders, tool builders, automators - some tactical advice on how to have the best impact, and avoid the dark timeline.

As I was building Puppet, explaining that I was developing automation for operations teams, execs and sales people would think they got it: “Oh, right, so you can fire SysAdmins!”

Ah. No.

When prospective customers asked for this, I offered them a choice: You can keep the same service quality and cut costs, or you can keep the same cost, and increase service quality. For sysadmins, that meant shipping better software, more often.

Their response? “Wait, that’s an option?!” They only knew how to think about their jobs in terms of cost. I had to teach them to think about quality. This is what the whole DevOps movement is about, and the years of DevOps reports Puppet has published: Helping people understand what quality means, so they can stop focusing on cost.

And those few people who said they still wanted to reduce cost, not increase quality? I didn’t sell to them.

Not because they were wrong. There were real pressures on them to reduce costs, but I was only interested in helping people who wanted to make things better, not cheaper. My mission was completely at odds with their needs, so I was unwilling to build a product to help them fire their people.

This might have been stupid. There are good reasons why a CEO might naturally build what these people want. The hardest thing in the world to find for a new product is a motivated prospective customer who has spending authority, and here they are, asking for help. The signal is really clear:

You do a bunch of user interviews, they all tell the same story of needing to reduce cost, and in every case, budgets are shrinking and the major cost is labor. Great, I’ll build some automation, and it will increase productivity by X%, thus enabling a downsizing. The customer is happy, I get rich, and, ah, well, if you get fired you probably deserved it for not investing enough in your career. (I heard this last bit from a founder recently. Yay.)

This reasoning is common, but that does not make it right. (Or ethical.) And you’ll probably fail because of your bad decisions.

Let’s start with the fact that you have not done any user interviews. None.

The only users in this story are the ones you’re trying to fire. Executives aren’t users. Managers aren’t users. It seems like you should listen to them, because they have a lot of opinions, and they’re the ones writing checks, but nope.

This has a couple of consequences. First, you don’t understand the problem if you only talk to buyers, because they only see it at a distance. You have to talk to people on the ground who are doing the work. Be careful when talking to them, though, because you might start to empathize with them, which makes it harder to help fire them.

Even if you do manage to understand the problem, your product will still likely fail. As much as buyers center themselves in the story of adopting new technology, they’re largely irrelevant. Only the people at the front line really matter. I mean, it’s in the word: Users use the software. Someone, somewhere, has to say: Yes, I will use this thing you’ve built, every day, to do my job.

If you’ve only talked to buyers, you have built a buyer-centric product, rather than a user-centric one. Sure, maybe you got lucky and were able to build something pretty good while only talking to managers and disrespecting the workers so much that you think they’re worthless. But I doubt it. You’ll experience the classic enterprise problem of closing a deal but getting no adoption, and thus not getting that crucial renewal. Given that you usually don’t actually make money from a customer until the second or third year of the relationship… not so great.

Users aren’t stupid. Yes, I know we like to act like they are. But they aren’t. If your value promise is, “Adopt my software and 10% of your team is going to get fired,” people know. And they won’t use it, unless they really don’t have a choice. Some of that is selfish - no one wants to help team members get fired, and even if they’re safe today, they know they’re on the block for the next round of cuts. But it’s just as likely to be pragmatic. You’re so focused on downsizing the team that you never stopped to ask what they need. Why would someone adopt something that didn’t solve their problems?

What’s that you say? You ignored their problems because you were focused on the boss’s needs? This is why no one uses your software. Your disrespect resulted in a crappy product.

Call me a communist, but I think most people are skilled at their jobs. I am confident that I can find a learned skill in even the “low skill” labor. I absolutely know I can in most areas people are building software.

I was talking to a friend in a data science group in a software company recently, and he was noting how hard it was to sell their software. He said every prospective buyer had two experts in the basement who they could never seem to get past. So I asked him, are you trying to help those experts, or replace them?

He said, well, our software is so great, they aren’t really necessary any more.

There’s your problem. You’re promising to fire the only two people in the whole company who understand what you do. So I challenged him: What would your product, your company look like if you saw your job as making them do better work faster, rather than eliminating the need for them?

It’s a big shift. But it’s an important one. In his case, I think it’s necessary to reduce the friction in his sales process, and even more importantly, to keep those experts in house and making their employers smarter, rather than moving them on and losing years of experience and knowledge.

The stakes can get much bigger than downsizing. In his new book, Ruined By Design, Mike Monteiro has made it clear that designers and developers make ethical choices every day. Just because Uber’s and Instacart’s business model requires that they mistreat and underpay workers doesn’t mean you need to help them. While I don’t think technology is at fault for most job losses, there absolutely are people out there who see the opportunity to make money by destroying industries.

This is not fundamentally different than the strip mining that happened to corporations in the 1980s, except back then they were making money by removing profit margin in companies and now they’re making money by removing “profit” margin in people’s lives. Jeff Bezos of Amazon has famously said your margin is his opportunity, and his warehouse workers’ experiences makes clear that he thinks that’s as true of his employees as it is of his suppliers and competitors.

Just because they’re going to get rich ruining people’s lives doesn’t mean you have to help.

I think your job matters. I think software can and should have a hugely positive impact on the world; not that one project can by itself make the world better, but that every person could have their life improved by the right product or service.

But that will only happen if we truthfully, honestly try to help our users.

When, instead, we focus too much on margin, on disruption, on buyers, on business problems…. we become the problem.

The Rights You Lost When the Document Died

luke@lukekanies.com (Luke Kanies) — Tue, 08 Jan 2019 00:00:00 +0000

There are many upsides to the era of the smartphone and the cloud. But I’ll never forgive them for killing documents.

Photo by Daniel Zurnau

The limitations of mobile devices perfectly complement the strength of the cloud, as foretold by Sun Microsystems two decades ago: Your computers will be weak and hold no data, and the servers will be powerful and store everything. They were just wrong about what form those weak computers took (and, of course, who would be selling the servers).

I obviously love the benefits of mobility, of having an amazing computer in my pocket and having access to the world’s information pretty much wherever I am. And there are many capabilities we take for granted that you just could not provide without large central collections of data that the cloud enables.

But many of the changes in our tech landscape are accidental outcomes of cloud + smartphone. I regret them. And I want to fix them.

One of those big changes is the demise of the document.

You might think, no, I still have documents. I mean, yeah, I used to have Microsoft Word documents, but now I have Google Documents. Right?

No. The content you have in Google Docs is stored in a big database. Sometimes, when they choose to, you can treat it like a collection of documents. But it’s not.

This is pretty obvious when you try to use Google Drive. Compare using documents there to a Dropbox folder full of Word (or Pages¹) documents. One comfortably exists in a world of folders, hard drives, and file systems, and the other just feels…. not quite right. That’s because Google Drive is wearing the camouflage of a filesystem, but it’s a database in the back end, and the truth leaks through. We’re not fooled that easily.

It starts with a miserable user experience, but doesn’t end there. Because Google is storing all of your data centrally, you need their permission to use it. This is new.

Until the smartphone and cloud took off, Microsoft had a comprehensive monopoly in digital documents, in text, spreadsheets, and presentations.² To participate in business, you pretty much had to own Office. Their position was so strong they built a Mac version just to prop that platform up enough for it to look like a viable competitor. The market just didn’t see an OS as competitive without office.

But lo and behold, times change, and now you want all of your files online. Google wants to help you do it, and just happens to have a couple of fancy features you couldn’t (at the time) get without uploading everything. Real-time collaborative editing is actually pretty sweet.

Microsoft worked for years to prevent other apps from reading their documents, but they seem to have stopped that at some point. I don’t know if they just gave up the arms race, realized they had already won so it didn’t matter, or actually felt the need to reduce their market power. But by the time Google acquired Writely and rebranded it as Google Docs, it wasn’t that hard to read these docs separately. This was a massive boost for Google (and theoretically smaller companies, but it didn’t turn out that way).

After all, all the docs you care about were right there, on your computer. You didn’t need to ask Microsoft for a copy; you did not have to export them, wondering what data was included and what was kept back. And the form you’d send to Google is the exact form you’d send to anyone else, via email or on a USB drive. Their ingesting of all of your critical data was pretty easy as a result.

But in 2019, things are very different. Want all of your data from Google Docs in the next new company’s fancy web app? Step 1: Export. That’s right. You have to ask Google to give your data. Because, and I hate to belabor this, you don’t have it.

Then your fancy app needs the ability to import the special arbitrary 100% proprietary format Google exports in. It’s true that some apps might allow you to skip this step: They’ll authenticate directly to Google and slurp your data down. But just like when Facebook shut down data access for Twitter and other competitors after building its own network by copying data from Friendster and others, Google will only tolerate this kind of integration when they don’t feel threatened.

You need their permission, their tolerance. Given their use of monopoly power to weaken Yelp, among many others, you can be sure they’ll have no qualms about quashing a budding competitor by making this hard if someone gets close.

So here we have two analogous situations, with almost identical data, but in one case you have your data, and in the other, you’ve got to ask permission for it. There are downsides to each, but there’s no argument they’re different.

Note that this isn’t really a question of data “ownership”. Google would probably argue that you do actually own your data, as might Facebook. You just can’t access it in a useful way.

I’m thrilled that the cryptocurrency/blockchain communities are driving a conversation around data ownership, but it’s still disappointingly naive. This concept runs up hard against the reality that digital copies are free, and it’s basically impossible to prevent people from copying data you’ve given them read access to. Conversely, “ownership” means nothing if I can’t get all - and I mean all - of my data in a useful form.

What they need to talk about instead is rights. Realistically, I can’t own my birthday. Would that be a copyright? Trademark? Patent? Of course not. It’s just a fact, and facts can’t be property. But we all know that my birthdate matters.³ I need the ability to prevent you from, say, publishing it widely, or using it in combination with other facts to impersonate me. These are legal rights, not aspects of ownership.

I miss the rights that documents gave us, now that we no longer have them. Because these rights were implicit, a consequence of the technology reality at the time, we did not even know we were giving them up. But we’ve got to fight now to get them back.

The first thing you can do is be conscious of this when you choose your tools. All life is a compromise, and sometimes it’s the right answer to give up rights for functionality. But many apps are functionally equivalent, yet make vastly different choices about your rights.

As one example, I recently migrated away from Evernote, because their business model is shifting to a focus on businesses, which, well, I am not. It was a nightmare. Even though everything in my Evernote notebooks was either a text file or a PDF, I couldn’t export literally a single thing as text or PDF. Well, that’s not true. I could export each individual item that way. But not the whole collection. My choices were HTML or a proprietary format. It took hours of manual work, and a lot of it I just dumped in a folder, never to look at again unless disaster strikes, because it wasn’t worth it.

Compare that to what I’m replacing it with: Keep It (as of today, anyway). I’m sure I’ll give up some features to pick it, but, ah, I haven’t found any yet. And all the files I put in it? They’re just - hold on to your seat, folks - files. I can open that directory on my Mac. I can add things to it. I can remove them. Then I can see them in Keep It. If I stopped using it tomorrow, I would have to, um, add the files to something else. Or use the Finder, or Dropbox, or something similar.

It’s obvious that Keep It respects the document, and they see their value as adding functionality on top of it, rather than subsuming it in some way.

This should be the gold standard. You should be able to adopt an app that gives you functionality, but does not take away rights.

In the age of documents, apps like Microsoft Word could try to curtail your rights, but other developers would be on your side trying to give them back. In the age of the cloud, and the smartphone, you don’t get that option. You no longer have rights, you have “permission”, with a side of binding arbitration.

I don’t think we can go back to the era of documents on a disk. But it’s worth looking back and asking: As we’ve gained so much, what have lost?

And then demanding that our software providers begin to give some of that back.

Although even Pages, and all of Apple’s productivity apps, weaken the definition of a document, because they use bundles instead of a single file. ↩
I was on team break-up. ↩
I can’t believe you forgot mine last year. ↩

Follow your weird

luke@lukekanies.com (Luke Kanies) — Thu, 13 Dec 2018 00:00:00 +0000

To really win, you have to seem strange to your true peers, not just the world at large.

Photo by Elias Castillo

Look, I have to say it: You’re weird. Even if I don’t know you, I’m confident: Somewhere, maybe lurking deep inside, something about you is just not right. I don’t know what, specifically. For all I know, you might be one of those weirdos whose particular strangeness is just how authentically normal you are. shudder.

This might be insulting to you, calling you weird. It happens a lot: I think I’m complimenting someone and they get all huffy. Conversely, people are often afraid I’ll be hurt when they shyly let me know that I, ah, don’t really fit. Don’t worry; you’d need to know me a lot better to successfully offend me.

Society is not a huge fan of weirdness - I mean, the definition is pretty much, “does not fit into society” - and it trains you away from it. We’re social animals, so you probably do what you can to conceal, or at least downplay, anything different. It makes sense. It’s a basic survival mechanism.

I know I do it. I can’t hide everything - some stuff just can’t be covered up - but I can usually skate through a conversation or two before people back up a step and give me that funny, sometimes frightened, look. Being on the west coast helps; I’m a little less weird here than I was in the south. It probably also helps that I cut my mohawk, and the spiked leather jacket and knee high boots stay in the closet now.

I’ve written a bit about my struggles to balance authenticity and fitting in. I think it’s important to call out it out, because those who experience this struggle rarely have the luxury of admitting it. I’m lucky enough in multiple ways that I can be up front about it now. But resolving this conflict matters for more than psychological reasons. Our own goals usually require that we learn to embrace our weird. Not just grab on to it, actually, but really live in it. Inhabit it.

That weirdness is how we win.

This is easiest to show in investing. We have a natural tendency to do what is proven to work, but that is only assured of getting “market” - in other words, mediocre - returns. If you study the best investors, they’re all doing something that seems weird. Or at least, it did when they started. The first people who paid to string fiber from NYC to Chicago to make trades a couple milliseconds faster were considered pretty weird, but they knew the truth: Normal behavior gets normal returns, anything more requires true weirdness. (Well, or fraud. There’s always that if you’re afraid to stand out.)

It’s the same way in life. You can’t say you want something different, you want to be special, but then follow the same path as everyone else. “I’ll embrace what makes me special just as soon as I get financial security via a well-trodden path to success.” Oh yeah. We definitely believe that.

There’s a nice sleight of hand you can do, where you can say you’re doing something different, but really you’re a rare form of normal. The first few doctors and nurses were really weird. Those who recommended you wash hands before surgery were literally laughed at, considered dangerous crackpots¹. But now? Most people become a doctor in pretty much the same way. Being a doctor is normal now, even if it’s not common. That’s probably good.

But what if your job is innovation? What if you’re whole story revolves around being different? Can you still follow a common path?

Because that’s what too many entrepreneurs today are doing: Trying to succeed at something different, by doing what everyone else is doing.

I mean. Not literally everyone else. But close enough.

It starts out innocently enough. There aren’t many people starting tech companies at first, and boy howdy are they weird. Someone makes a ton of money, all their weirdness gets written up - “hah hah, see how he has no sense of humanity but is somehow still a billionaire?” - and now we’ve got something to compare to. Hmm. Well. We can’t consistently duplicate Jobs, Gates, Packard. But if we tell enough stories enough times, we find some kind of average path through them. Ah! Enlightenment!

Now that we know what “most” people do, we can try it too. I mean, we have no idea if the stories about those people have anything to do with why they succeeded, but why let that get in our way? Conveniently, every time it works we’ll loudly claim success, but silently skip publishing any failures. Just ask Jim Collins: He got rich by cherry-picking data in Good to Great to “prove” there was a common path to business success. It turned out to have as much predictive value as an astrological reading, and is just business garbage dressed up in intellectual rigor, but that doesn’t seem to have hurt him.

The business world keeps buying his books. They need to believe there’s a common path that anyone can travel to victory. Otherwise, what would they sell? What would they buy?

Obviously this doesn’t work. There is no standard playbook to winning an arms race. Once there’s even a sniff of one, people copy it until it doesn’t work any more. This is pretty much the definition of the efficient market hypothesis: There’s no standard way to get above-average results. Once Warren Buffet got sufficiently rich as a value investor, so many people adopted the strategy that, well, it’s hard to make money that way. Not impossible, but nowhere near as easy as it was fifty years ago.

Of course, you can go too far in being weird. There has to be something in your business, in your strategy, that makes you different enough that you just might win. But adding a lot of other strangeness for no good reason worsens already long odds. The fact that Steve Jobs did so well even though he was a raging asshole, even to his best friends, made his success just that much less likely. Most people are a bit more like Gates and Bezos: Utterly ruthless in business, and caring not a whit for the downsides of their success, but perfectly capable of coming off as a decent person whenever required.

I’m rarely accused of being a world-class jerk, but I don’t pass the smell test as normal for very long. Jim Collins might say maybe if I were more pathological I would have succeeded more. With Jobs and Musk as examples, it seems reasonable, right? In truth, it’s just as reasonable that I would have done better by dropping out of Reed College, like Jobs did, rather than foolishly graduating from it. Think it’s too late to retroactively quit early?

Yes, you have to learn to love your weird, but it shouldn’t be arbitrary. You can’t realistically say that you’re going to rock it in business because you’re addicted to collecting gum wrappers from the 50s. I agree that that’s weird, but is it usefully so? Being a jerk is weird, and bad, but it’s not helpfully so. And really, dropping out of college isn’t that weird for someone in Jobs’s financial position at the time. It’s only if you have a bunch of money that it seems so.

I recommend you take the time, think deeply on what opinions you hold that no one else seems to, what beliefs you have that constantly surprise you by their lack in others. What do you find easy that others find impossible? What’s natural to you, but somewhere between confounding and an abomination to those who notice you doing it?

Those things aren’t all good. And in many cases, you’ll need to spend your entire professional life managing their downsides, like I have. But somewhere in that list is what sets you apart, what gives you the opportunity to truly stand out. They’re the ground you need to build your future on.

Unless you just want to be normal. In that case, I don’t think I can help you.

This is an amazing example of sexism. The doctor’s wards had three times the fatality rates of the midwife wards, but of course, they were doing nothing wrong at all. ↩

Great advisors reveal your truth, not theirs

luke@lukekanies.com (Luke Kanies) — Tue, 16 Oct 2018 00:00:00 +0000

Giving answers is easy, and usually worthless

Photo by Blake Cheek

Being an advisor to other founders is a contradictory affair: Be helpful, but do not give advice. That is, I want to help you do your best work, but I don’t think I can or should do it by telling you what to do or think.

I obviously think I have value to add or I would not sign up to help. Well, maybe it’s not obvious; our industry is rife with advisors who attach their names and little else to projects. It’s true I’m motivated to join partly by the possible long-term reward, but mostly I’m helping because I enjoy it and am learning a lot.

While running Puppet, I was constantly confronted with a classic leadership struggle: How do I simultaneously help people improve their own answers, yet get them to do what I want? There are many who will say this is a false struggle, that I could have avoided it by focusing on empowering people instead of trying to get them to do what I wanted. Pfft. The literal definition of leadership is providing direction and getting people there, and that’s doubly so for a fast-growing startup where alignment is critical to execution. I spent a decade slowly, incrementally, getting better at this, but felt my incompetence as keenly at the end as I did at the beginning.¹

Advising companies allows me to practice the empowerment-half of this skill without the other complications. Unlike when I was a CEO, I know I should not be setting direction or making decisions. My job is not to provide answers, but to help people do their own best work.

My only explicit training for this was when I was an organic chemistry lab tech in in college. My primary task was repeating questions back to the students: “I don’t know, which layer do you keep?"² When I started dating my now-wife in college, she told me her friends were bitter that I would not give them answers. I knew my job. I was there to help them get an education, which required they did the work on their own. This has also been helpful experience for being a parent: “I don’t know, what is 12 times 9?”

Advising CEOs has similar constraints, but it’s a lot more open-ended, and has no answer sheet. In the lab, there was one right answer, it was always the same, and you could reason it out with the information at hand. Labs were also usually a day of work, maybe three days, and mistakes were pretty cheap, in the grand scheme of things. I don’t expect one of those students to track me down later in life and lay at my feet all of their struggles or successes. Most importantly, we were studying an objective space that I did actually know more about. When push came to shove, I knew the answers, and I could reason out anything that wasn’t obvious.

Helping CEOs is considerably harder. I’m rarely asked about questions that have a single right answer. No competent CEO would bother getting advice on an easy question, or one whose answer wasn’t important. Wrap into this the fact that I can’t possibly know the company as well as the person asking me the question.³ It’s inconceivable that I would often have answers available that the expert in the seat doesn’t.

That simplifies the challenge: Prod the questioner into getting to their own answer, no matter how much they complain. And they do sometimes get upset: I had a CEO exasperatedly demand what I would do, after a long session of forcing him to work through what he cared about, what he saw as the right answer. When I relented - only after he had already done all the hard work - he could see how thin and useless my answer was. By the time he’d decided what to do, he saw that what he learned from the process was at least as important as the answer, and my just providing a solution could never give that.

There is still some risk. I’m by no means a master of this technique. I know I have at times presented people’s options in stark ways, which sometimes felt like no choice at all. My own predilections, such as toward a consumer-style sales model, are hard to separate from any guidance I might provide. It’s honestly just hard to know sometimes whether you’re successfully getting someone to express their own implicit belief or leading them to agree with one of yours.

It’s a skill I expect to spend the rest of my life trying to master. But it’s worth doing, and I’m enjoying the learning process.

Helping CEOs instead of running my own company provides a kind of repeatable laboratory environment. I get to learn at the same time, though, because it’s much harder than being a lab tech.

It’s not enough to just parrot questions back. I spend my time listening closely and drawing out more information, then replaying back what I heard. Listening is a woefully underrated skill. I’ve been loving the opportunity to practice really hearing what people are saying, and trying to differentiate between the words they use, the meaning behind them, and their intent in saying it at all.

As you look for advisors, be sure you demand the same discipline from them. Don’t accept answers. They should hear you, understand your dilemma, and be able able to point out where you haven’t thought completely, or clearly.

A great advisor should provide light, not direction.

If this whole definition of leadership annoys or offends you, I’d ask how you differentiate between leadership and management, and also how you expect a company to align around a direction without someone picking the direction. ↩
Nearly every experiment in organic chemistry involves using liquids to separate chemicals, where part of the solution ends up in an aqueous (watery) layer, and the other ends up in another layer, like separated oil and vinegar in salad dressing. One of those layers is now waste, and the other one has the chemical you’re working on. Don’t throw away the wrong one! ↩
This is another big difference from when I was the leader; I knew Puppet itself better than anyone, even if I could not know your specific area as well. ↩

How to Neg a Founder

luke@lukekanies.com (Luke Kanies) — Fri, 07 Sep 2018 00:00:00 +0000

Is that a compliment, or an insult?

Photo by John Salvino

My experience growing and fundraising for Puppet was full of inspirational-sounding phrases that cut like a knife. Aggressive goals got praise for wanting to “build a real product” and “really scale this thing.” These are some of my favorites. And when I say “favorites,” what I mean is, I hate them. Deeply.

The one that I heard most often made me want to walk out of the room. I’d pitch an investor while fundraising, and he (always he) would say: “So you’re going to try to turn this into a real company, eh?” As if being my full time job for years was somehow not real. As if you are the arbiter of truth, not my customers. Or me.

If you want to make an entrepreneur feel small, you really want to piss them off, try to inspire them this way. I assume most people who used it thought they were complimenting me, impressed that I was taking this big step or something. But it was a sure fire way to trigger my defenses. When you diminish the work I’ve done so far, it’s hard to see you as a potential partner. I quit my full time job five years ago, and have missed out on hundreds of thousands of dollars of earnings, but asking you for money is what shows I’m serious?

I’m convinced at least some investors did it on purpose, as a form of negging - trying to position themselves as an authority and me as someone who needed their help and wisdom. “That’s pretty cute. Why don’t you get some help from the professionals?” I’m good, thanks.

I know most people didn’t mean it that way, though. Their worldview is just so skewed that if you haven’t raised a ton of money, you’re not really trying. They can only conceive of success if it looks a specific way. You literally cannot succeed unless you do what they do, what all their friends do.

If you’re an investor, advisor, or executive, take a deep look at how you talk to founders. Are you truly complimenting them, or actually diminishing their work? Are you presenting yourself as the arbiter of success, even while you think you’re saying the other person has done so well?

If you’re a founder, know that you don’t have to take it. No one else gets to define success for you. There’s always an in-crowd, but by definition the best results come from being outside of it. Even if you decide you need their money, you don’t have to accept their framing.

The virtue of a tool

luke@lukekanies.com (Luke Kanies) — Tue, 19 Jun 2018 00:00:00 +0000

Vendor success should be about customer needs, not its own.

Photo by Philip Swinburn

I am a tool junkie. I love the effortless balance of a well-known chef’s knife, like my hands know what to do all on their own. Heavy usage builds callouses and tunes muscles, its usefulness evidenced by scuff marks and changed infrastructure. Failure leaves blisters or even hospital visits in its wake.

A good tool proves its utility. Knives slowly shrink with sharpening, work pants thin, machines need oil. If they don’t, you’re either not maintaining your tools, or barely using them.

This wear is proof of your usage. They should be scratched. Dented. Aged. Patinas should be acquired from the shop, not factory treatments. Their callouses should pair yours. Tools can not be precious. They’ll just live on a shelf, then retire to your attic. You should seek that perfect middle ground, where you spend enough money that your kids can inherit them, but not so much that you are squeamish about giving them a job.

Tools only deserve the label if they help you work.

You might say I have strong feelings about them. I’m assuming this love led to my focus as a software entrepreneur on helping people people work. Or maybe my experience with tools in the physical world led me to seek them in the digital world, learning to make what I could not buy.

Given my tool fetish, you’d think I’d have a solid grasp of what I mean when I use the word. Apparently, not so much. I was recently pulled up short by a simple question, asked by Jordan Hayles of the Radical Brand Lab: What do you mean by tools?

What do you mean, what do I mean? It’s a simple question, right? The above text gives one example, but I would have thought I could answer it in a bunch of reasonable ways, none of which seem terribly controversial.

But the more I explored, the less simple the question became.

I’ve been describing my goal as building power tools for people. This phrase comes from my time building houses with my dad, and ‘power tools’ just meant the things you plugged in. You know? Because they needed power? It’s a common usage, maybe the word choice here did not mean much.

Except… I’ve spent more than a decade learning product management, describing myself as a product-oriented founder, managing that function in a growing company, and attempting to teach it to others. Yet here I am ignoring both the term and the field entirely. Why am I so quickly dumping my work of the last ten years? Is it just creative branding? Cynicism about my industry?

Why not power products? That’s a motor boat of alliteration: ‘power products for people.’ Awesome, right?

Ok, maybe not.

Product management as we know it began in the consumer goods industry. You’re handed a train car full of dish soap and told to sell it. You’ve got to package it, set pricing, convince a local store to carry it, argue with them about location, move it away from competitors, all that. Every product you see in your local grocery store is loved by a product manager who fights for its shelf space, believes it is beautiful, and wants you to give it a good home.

Tide soap is one of the most commonly stolen consumer goods, but not because it’s soap. The strong brand makes it easy to resell, even allowing it to be used as a stand-in for money in drug deals. I wish I was that good at product management. For all that, it says nothing about the soap.

Product management can also be used for evil. Laser printers had toner cartridges you could just refill. Not very clean, but cheap and reliable to run once you plonked down the cash for the expensive printer. Modern inkjet printers instead use disposable cartridges. To sustain profit margins in a rapidly commoditizing industry, manufacturers started putting rules in place on the cartridges: You had to buy them from the manufacturer, they had to be replaced every year, you could not refill them, you could not print in black and white if any color cartridges are empty.

The user was getting hurt so the vendor could make more money. People got pissed of enough that the US Supreme Court weighed in.

That’s good product management. Well, it’s evil, but you know what I mean. It’s effective. We’re talking big-B revenue effective. Hmm. A moral distinction begins to reveal itself.

These are examples of companies forcing their business model onto their customers. There’s no difference between the dish soap sold at retail and the one sold in bulk, yet they’re separate products, differentiated through packaging, shipping needs, and labeling. You pay much more for the retail package than the wholesale one, primarily because the business model behind them is so different.

But when I think of a tool, these complications are missing. When I use a hammer, it just has to fit my hand and smash stuff. When I pick up my drill, it works with every bit I own, regardless of the logo. The battery and charger are proprietary, but the vendor’s most visible role in my life is color choice. My yellow drill works just fine with bits from the blue or green companies. (You probably visualized brands by my just mentioning colors. That’s still effective here.) It does not matter whether I bought the drill from Home Depot or inherited it from my dad; once in my hands, it just works.

I think this begins to answer the question of what a tool is.

It helps you do your job, without your worrying about the vendor’s needs.

I know that DeWalt and Mikita need to make money to sell me a drill, but I don’t think about it when I’m using their tools. Even after more than two decades without one, I can comfortably recite that “my” hammer is the Estwing 22oz waffle head with a straight claw¹, but none of those details mean I need the vendor’s permission to hit a nail with it. I make a decision about the right tool, I buy it, I use it. End of story.

It is small. If you call something a tool, not a product, you’re saying it’s less, it’s not as complete a solution. This can be belittling, insulting, but it does not have to be. It’s also a statement of independence. Of freedom. Of, and this is going to sound crazy, compatibility.

Products have an implicit, ongoing dependence on their vendor. If that’s me, I love it: I want you to pay me all the time, not just once. That ongoing relationship is how I afford to keep improving what I’ve built for you. This can be a great way to ensure we have a long-term, sustainable partnership. But it’s not always a healthy relationship. The more you have to deal with how I make money, the worse the experience is for you.

I think this is what I like about tools. They’re self-contained. Independent. Using them is fundamentally pragmatic, not a lifetime commitment.

That independence has downsides for me as a vendor. You don’t get any of those delicious growth-hacker buzzwords. Your product isn’t “sticky”, there’s no “moat.” Those are examples of my customers being constrained by my business model, and their absence means revenue is harder to build, to protect.

One might argue I’m better off because treating my customers with more respect makes a better business in the long term, and I’d probably agree. This kind of respectful partnership should deliver higher returns than one that traps and mistreats its customers. I think this is often the right answer, but it’s not a popular one. It’s harder to get funding, to get off the ground. I might be accused of not “wanting to build a real company,” or I might have Silicon Valley’s most dire insult hurled at me: “That’s just a lifestyle business”.

Tell that to Adobe. Or AutoDesk. These are great tools companies. They are the behemoths we know today because they knuckled down and solved their customers’ problems. They worried about that, rather than how they could extract maximum revenue over time. It was a different time, but people have not changed.

I don’t think that every product is compromised when the vendor’s needs show up in the customer’s life, but I think most are. Some of it is laziness, shoring up product limitations with business model innovations, but a lot of it is strategy, recognizing the value of painting your customer into a corner.

Honestly, some of it is just survival. A lot of those inkjet printers are unaffordably cheap, but buyers care only about cost, not value. Some markets are intrinsically dysfunctional, with users and vendors slowly killing each through bad deals and cynical behavior. But as a vendor, I get to make a choice about what markets to play in, and how to work with my customers.

I am a simple person with a simple dream: I want to build something that helps someone work. I have to make money while doing it, because that’s the nature of the job, but I’m more interested in my customers’ work than my own. I know I need a business model, a go-to-market strategy, a plan for growing and supporting my business. But my customers should not need to care about that, should they? If they like what I’m building, they should be able to buy it, and use it. And tell all their friends how great it is. They should not wake up one day to find they’ve accidentally gotten married to me.

I just want to build tools. And I’m proud of it.

We told with great pleasure the (most likely apocryphal) story that this hammer was illegal in Florida because the metal haft could cut your thumb off. ↩

The power of better tools

luke@lukekanies.com (Luke Kanies) — Tue, 24 Apr 2018 00:00:00 +0000

There is a solution to wage and productivity stagnation. Just don’t call it automation

Image courtesy of Washington Department of Transportation

I don’t know what the rest of the world thinks when they use the phrase ‘power tool’, but for me it’s visceral, literal. My experiences using them and watching them transform my family’s work permeated my time building Puppet. These power tools aren’t little plugins to expensive frameworks, they’re large capital investments that dramatically change your job.

I grew up building houses with my dad. The worst task he gave me was trying to paint a set of louvre doors for a closet while in high school; I had to flip the doors over every 90 seconds to catch drips getting through the slats. After three days of misery, my father relented and rented a paint sprayer, with which we finished the job the same day, at a much higher quality.

Around the same time, my dad would rent a pneumatic nailer for big framing jobs. By the time I finished college a few years later, that critical tool went from borrowed to owned and traveled everywhere with him. Initially used only for large jobs, most contractors now have multiple nail guns to cover framing, trim, and every other use case, and the air compressor needed to power it is as important as electricity.

It might not be obvious, but both of these are examples of automation. You replaced a very manual process - applying paint, or nailing things together - with a machine. If this were a factory, these days you’d call those machines robots, but because it’s a construction site, we just call them tools.

And these tools were expensive. Even with how much faster we finished that painting job, I expect it cost more to rent the sprayer than to finish the work manually, because of how little he was paying me. (This does ignore the soft costs of listening to me complain, which were likely high.) Even today paint sprayers and nail guns are often rented rather than purchased, because good ones cost a lot of money and aren’t needed all the time.

It’s no surprise that discussions of tools and productivity are easier to understand from my experience as a carpenter than as a sysadmin. There’s plenty of room for arguments about what is or is not a software power tool, but when it costs more than a week’s wages, it trails a bright orange cord everywhere it goes, and it can nail your hand to the wall while you’re standing at the top of a ladder¹? It’s a power tool.

There’s a common story about what robots and automation do to people like my dad (and both of my brothers, who followed in his footsteps): It steals their jobs and ruins their lives.

What utter poppycock.

If you think of your job as driving metal spikes into wood, then a nail gun is a mortal threat. But if this is your value add, your biggest danger was never automation. My dad never sold his ability to join raw materials together quickly; he sold homes, he sold the opportunity to enjoy your house and family more. How did these new power tools affect that?

They were awesome. Painting and nailing are classic examples of menial, low-value work, and yet we spent most of our time on them. All of the differentiation we offered to our customers was packed into a narrow slice of work, because implementation took so much time and money. As we were able to bring more powerful tools to bear, the menial work shrank and larger portions of our time could be spent on design work, customer interaction, and tuning our customers’ homes.

Interestingly, my father’s next career step was even more pointedly about experiences enabled by tooling. He took a job with a state hospital in Tennessee, fabricating custom furniture for severely disabled patients. Suddenly he was using industrial sewing machines for upholstery, and partnering with medical professionals to design multiple beds for each patient, enabling them to be happier and more comfortable (and also avoid bed sores, thus saving hundreds of thousands of dollars per patient). Given the tragically minimal budget allocation for this kind of work, every dollar saved through automation and tooling directly delivered health and happiness to his patients.

It’s no wonder I see the value in power tools, that I am more conscious of the benefit they can deliver than the loss of low-value menial work.

I had a similar experience as I was building Puppet. I would meet executives and salespeople (I don’t know why it was always them) who would say, “Oh, automation? Great, you can fire sysadmins!” No. Beyond the obvious reality that I was selling directly to my users, who would never buy on the promise to fire their coworkers, that was just not why we were valuable.

Puppet gave people a choice between lowering cost but keeping the current service quality, or keeping your costs flat while providing a much better service. “Wait, making things better is an option? I didn’t know that!” Most companies were aware that their IT sucked, but they only knew how to measure and manage cost, so that’s what they did. Once you believed in the power to make things better, power tools turned out to be great investments for both the user and the buyer.

By letting people spend more time on the parts of their work they enjoyed, the work that makes them special, we also delivered higher quality experiences for their customers and constituents. “Spend less time firefighting and doing menial work, and more time shipping great software.” If the heart of your skillset is clicking buttons or responding to outages, Puppet might have been a threat to you, but our users knew where their real value was. We helped them spend more time there and less time on the boring, low value stuff. The sysadmins hated the work, the customers hated to need it, and the executives hated paying for it. Great, done, don’t worry about it.

When you look around the software market, though, power tools are out of style. There are big data companies building for the non-existent average user, minimalist companies building solutions that do little for almost everyone, and there are power tool companies of yesteryear still hanging around. There just aren’t that many modern software companies building large, clunky, expensive tools that just might cut your hand off if you’re not careful.

That’s partially why productivity has stagnated². The world has not changed that much - some of the greatest improvements to productivity come from making large capital investments in tooling for your workers - but how we spend our money has. People balk at a $5k computer, when the Mac IIci would cost more than $13k in today’s dollars just for the hardware, yet was a powerhouse in desktop publishing. This is to say nothing of how the mobile app stores have driven down what people are willing to spend on software.

Yes, Adobe’s software is expensive, but it’s that price because it delivers so much value. If it didn’t, no one would buy it. Every large market should be so lucky as to have the collection of power tools that graphic designers get. It sounds crazy, but we’re suffering from not enough expensive software. Instead of building the most powerful software possible and finding customers who see its value, companies are building the simplest thing they can and trying to get everyone to use it.

There are bright spots in the industry, like Airtable and Superhuman. I’m hoping they help to shift momentum back to automating away the tedious work and enabling focus on what humans excel at.

More powerful tools improve your life, but they also make you happier even if you can’t buy them. They tantalize you, promising you great returns, if only you can come up with the cash. And they’re maybe just a little bit scary, warning you that buying them is not enough. You must master them.

A friend of ours managed to do this when working alone in the time before cell phones. ↩
Yes, I might be being simplistic to make a point. ↩

Why We Hate Working for Big Companies

luke@lukekanies.com (Luke Kanies) — Tue, 10 Apr 2018 00:00:00 +0000

Modern capitalism raises the flag of the free market while pitting centrally planned organizations against each other

It’s quite a journey from being born on a commune to raising more than $87m in funding at a software company. This journey forced me to wrestle with existential questions about my true beliefs, and how they intersected my life as an entrepreneur. One’s work is rarely a pure reflection of ideology, but companies need a clear and authentic strategy, which requires a tight alignment between company operations and the founder’s philosophy. I have discovered more about those differences between what I believe and the best ways to grow a corporation while studying economics - that is, how money is made and exchanged - than any other area.

A worldwide conflict between communism and capitalism defined the latter half of the twentieth century. The United States’ ideological battle was the central drama of my childhood, and it was with a combination of glee, pride, and “told you so!” that my fellow Americans watched the wall fall in Berlin, and the USSR dissolve shortly thereafter. I expect few would deny that the US is the standard bearer for capitalism.

Yet, there’s a flaw at the heart of this claim. While the United States operates as a free market economy, the key agent within modern capitalism - the corporation - works more like an authoritarian state. Given how much of our world is built around corporations, this truth and its impacts are critical.

I grew up apart from America’s passion for capitalism. In the era of Reagan, I was living on a commune. My parents did not earn money for their labor, and we didn’t have personal property. My family left the Farm when I was 8, and as I matured, my ideological roots were in conflict with the US’s nonstop pro-capitalism message. As I joined the workforce and eventually started my own company, I found myself attached to neither the communal roots of my childhood nor the Wolf of Wall Street world I moved into. I grew slowly in convictions, as I encountered problems in the course of scaling a company.

The first real conflict came when it was time to hire managers. I founded a company primarily because I did not thrive as someone else’s employee, so what led me to think others would? More importantly, anyone who has ever operated at the front line is aware of the severe costs imposed by the separation between the people who do the work and the people who make the decisions in hierarchies. Hiring managers was just going to make the company do worse, not better, right? Right?

I expect three of you are gleefully shouting, “Yay, holacracy!” right now, while the rest are confused and either offended or think I’m an idiot. I did consider a manager-less world, but a little research provided only examples of disaster, because the only available options just replace an explicit power structure with an implicit one. In other words, it’s still hierarchical with the founder on top, but now decision making is opaque and the system is easy to exploit because of the lack of controls (which looks surprisingly like the cult/commune I grew up in).

Those who are confused or offended by the idea that managers make performance worse would be informed by a deep dip in economics. One of the core principles of the free market is that central planning committees can never be as efficient or as effective as the people doing the work. By definition a free market economy lacks a decision-making hierarchy; the ‘free’ means every agent (individual or corporation) can decide for themselves, without needing permission from a manager above.

While there are many aspects of modern American capitalism I reject, this one I wholeheartedly support¹. The downsides of a strong central executive were taught to me early.

Like many other communes, the one I grew up on routinely failed to feed its people - my parents speak with horror of the ‘wheat berry winter’, when we lived on little else. While his people were short on food, the founder of the Farm was off touring Europe as the 3rd drummer in a band, “bringing our message to the world”.

Thankfully none of us starved to death, but the failing was similar to what most communist countries experienced: The central organization could not feed everyone. For years, I assumed this was just incompetence, whether at the scale of the Farm or China. The truth was far more structural. Millions starved during the Great Leap Forward because the central organization was trying something impossible: Managing the productive output of an entire country. The Planet Money podcast tells a great story of how this central planning was walked back in China, but the general point here is that these communist countries did not just nationalize the means of production, they tried to centrally control all of it from within a small group.²

When people talk about communist countries not being a free market, this is what they mean: They tell the farms what crops to produce and in what quantity, rather than letting them decide for themselves. China even went so far as to dictate what hours a farmer should start and stop working, and then directed managers to ring a bell for transition times to control every little group of farmers. Anyone who’s ever had to punch a clock into a rigid, dysfunctional hierarchy is likely getting painful flashbacks about now.

It should be immediately obvious why this fails miserably: The distance between the central planning committee and the farmer is so great that good decisions are nearly impossible. It’s nearly impossible for critical feedback to make it from the edge, where the farmers are working, to the central planning committee in time to affect decisions, and then for those decisions to make it back to the edge in time to be useful. The podcast linked above also points out how unmotivated the farmers were under this regime, cutting productivity even further. Those who have studied lean manufacturing, agile development, and DevOps are likely seeing parallels here.

The result was catastrophe. When a corporation is painfully inefficient it loses money and might have to do layoffs, but when a country fails at growing food, its people starve to death. I don’t mean to imply that central planning was the only cause of famine under communist rule - there were political operations that led to mass starvation, just like in the West - but learning more about these helped crystallize what I do truly prefer about capitalist models. It also converted the phrase ’the free market’ from a catchy slogan into something meaningful to me.³

The most important feature of free market economies is that each person within them is able to make independent decisions in their own best interests⁴. If you’re a farmer, you can decide what to grow, how much to grow, and when to work to develop your crop. Heck, you can even choose not to be a farmer any more. Success is merely dependent on your finding a buyer for your work at a price you can tolerate. Any given year might not be perfect, but your decision making gets better over time as you learn to respond to customer demand.

This pattern is easy to understand in any system where the people doing the work make the decisions. If you’re a jeweler, you can decide what to make, how much to sell it for, and what to spend your time on. Same if you run a small restaurant, lead local tours, or are a one-person shop doing house remodeling. It’s a free market, where you can charge what the market will bear, and you can quickly and efficiently respond to its whims, ensuring that you are getting the best use of your time.

This was a powerful organizing principle for a long time. The history of human commerce developed largely this way: One person, or as many people as could fit in one shop, would turn labor into a product, then find a buyer for it. Most large-scale efforts were organized by the state of the time: Monarchs and the landed gentry, who were the only ones capable of marshaling enough resources to build palaces, roads, and other large construction projects.

This began to change in the 17th century when corporations like the Dutch East India Company were able to deliver massive windfalls to investors by pooling money and using it to extract resources from colonies. There was a step change in the 19th century, as corporations went from generating wealth to building and owning infrastructure. It’s one thing to outfit a single ship for a year-long voyage, yet another to maintain railroad schedules across the United Kingdom, or run a telegraph network around the whole US. These aren’t just short-term money-making exercises, they’re long-term commitments with big capital outlays and large returns over years and years.

We still live in a free market economy, but it’s not one Adam Smith would recognize. Instead of individual or small operators, ours is composed almost entirely of corporations. Really big corporations. And these companies, they use the same kind of central planning that we so despise in communist systems. I know. I’ve done it.

By the time my company got near 500 people, we had a multi-week planning process, where the leadership (i.e., me and my lieutenants) set out top-level goals, built a top-down plan to accomplish them, then drew information from the front line to see where it needed change. We called this a bottom-up plan, but it was only bottom-up from the perspective of numbers - how much money we’d have, what our costs were, etc. - rather than from the bottom of the organization. We could see no way to have a system where the people doing the work built a plan for the organization. Even thinking about it now, my reaction is, “How would they know what my goals are?”

That’s the kind of question you can only ask in an authoritarian state, not in a free market economy. My goals became my company’s goals, and the only real way to ensure people worked toward them was providing a plan. You might argue that a corporation should focus on shareholder value, but that doesn’t help make decisions about what the company should actually do.

Great leaders find a way to listen to everyone in the company, but in the end, leadership is about making decisions. That’s essentially the definition of the word. And we all know leaders who did not bother to listen, or just did not need to in order to be great; today’s most vaunted tech leader, Steve Jobs, was famously disrespectful of the opinions of others, yet made a lot of world-changing decisions (not all for the better).

This is exactly why working in a big corporation is so stifling. If you’re in a small company, the executives are close enough to the front line that it’s more like working in a tribe, but in a big company, the leadership is so removed from whose who do the work that executive teams operate like the politburo we so decry in communist countries. Certainly the bureaucracies are no more enjoyable or forgiving.

I find it both ironic and painful that my inability to work for someone else resulted in my creating a company that involved a lot of smart, capable people working for someone else.

I wish I had a solution. If this were an easy problem, its solution would already be pervasive, because the benefits are massive. Just in terms of efficiency, we’ve seen how much better the free market is than planned economies, but it also has a hugely positive impact on quality of life. People are happier when they’re in control.

I know the solution is not more freelancing and contract work, which America’s corporations are addicted to. That’s the worst of both worlds: The exploitative nature of capitalism with the inefficient bureaucracies of communism. Transactions on the free market work because they’re good for both sides, but most people only accept part-time contract relationships today when they have no other real choices.

Holacracy certainly isn’t the answer. It’s fundamentally flawed because of its implicit power structure - Tony Hsieh still runs Zappos, even if he does not use a central planning committee to do it - but the biggest problem is it makes no mention of economics. Without a clear system for scoring the transactions (i.e., money) it’s impossible to build a free market.

This problem of how to handle economics within a non-hierarchical company might lead some to think of using blockchain tokens as an internal currency. This is impossible today, beyond the fact that the world of blockchain is mostly about fraud and black market sales. The biggest problem is that we have no idea how to value most of the work people do. I mean, we might know that what a developer should get paid for a year’s work, but how much is that work worth? The majority of the work done in modern corporations is incredibly hard to value, which is partially why companies are so inefficient and make so many bad decisions.

That brings up an even bigger problem - companies today hire workers to make money from their labor. In other words, they generate profit because they pay their employees less than they’re worth. If everyone could trade their labor for exactly the amount of money it was worth, the corporations that employ them would have a much harder time making money. Instead, in modern corporations the shareholders and the executive team - again, the central planning committee we so despise - make the majority of the money, while the front line does all the work and makes very little. This is true even at the big tech firms; software developers might be well paid relative to hotel workers, but they’re paid a pittance compared to the founders and executives. This might speak to why we have no solution yet - free market corporations would tend to reduce concentrations of wealth, which would be terribly disruptive to the current system.

Like I said, I don’t have a solution. But at least now I know what makes the current system so painful, and it gives me some hope that we actually can come up with a better answer. I know I’ll be working harder in the future to manage the downsides of what we have today.

Although I might stress the “well regulated” part more than most modern economists. ↩
Of course, capitalism is just as capable of killing its citizens, whether through starvation or lack of health care. ↩
Note that I’m not taking the capitalist side of the cold war here; while Americans were decrying the oppression of the Soviets, we were actively clawing back progress on civil rights and knocking over democratically elected governments. This article is about principles, which political regimes rarely show a great track record in following. ↩
But not so independent that you should be as pathological as Ayn Rand. ↩

Great design is ruining software

luke@lukekanies.com (Luke Kanies) — Tue, 03 Apr 2018 00:00:00 +0000

The arrival of the smartphone has convinced the world of the value of great software design, but it’s not all good news

The smartphone has reached more people and delivered more value faster than any technology ever seen. Much of the world has had to adapt to this arrival, but software design suffered the greatest reckoning. As the smartphone ascended, developers finally adopted reasonable design principles, realizing that they could not pack every feature ever seen into the smartphone experience. This recognition of the value of design - and especially, minimal design - is a good thing. Mostly.

I could not be happier that the industry finally accepts that there are principles of design, and there is a practice and discipline behind building great software. It’s great that we’re seeing more focused software that does little, but does it very well, rather than the previous age of the GUI when software attempted to own large parts of our lives by doing anything and everything. For a long time, Microsoft Word was used by nearly everyone who had a computer, and their strategy was to ensure no one ever had a reason to choose something else by building every feature anyone might ever need; their toolbar was the canonical example of never saying no.

The smartphone changed all that. Those rows of icons would fill the screen on a phone and leave no room for typing, and of course, no one would use them anyway because of how different the usage patterns are. As people realized they could no longer just throw in the kitchen sink, they began hiring (and listening to!) actual designers, and those designers have been steeped in the culture of Dieter Rams and the minimalism of the Bauhaus movement, which is awesome. Mostly.

Unfortunately, the phone caused everyone to focus on the final design principle of Dieter Rams (“Good design is as little design as possible”), without apparently remembering the nine that came before it, or why they were earlier in his list. I get it; the design constraints in a phone are intense, and it might not be a good idea to minimize everything, but it sure is easy.

The consequence of this mobile brutalism is a new movement building simpleton tools: Software that anyone can use, but no one can become an expert in.

Trello is a great example. I adore Trello. I think it’s great software, and it’s clearly a success by any measure. However, for all that I’ve relied on Trello daily for years, I feel no more an expert than I did just after starting to use it. It’s not because I haven’t tried; it’s because there’s no depth. You can pretty much plumb the product in a couple of days.

That’s fantastic for getting new users up to speed quickly, but deeply frustrating after a couple of weeks. Or months. Or years. Compare that with Vim, which I still use for all of my code editing, yet it’s so complicated that most people don’t even know how to quit it, much less use it. I’m not going to claim its lack of user friendliness is a feature, but I will defend to the death that its complexity is.

Apple’s Notes is the ultimate expression of this trend in text editor form. It’s a fine text editor. I know some people have written huge, impressive programs in similarly simplistic editors like Notepad on Windows. But I personally could not imagine giving up keyboard navigation, selection, text munging, and everything else I do. The fact that complicated work can be done on simplistic tools speaks to the value of having them, but in no way invalidates the need for alternatives. Yet, on the current trends, no one will even be trying to build this software I love because they couldn’t imagine two billion people using it on a smartphone.

I think it’s fair to say that that’s an unfair standard, and even a damaging one.

I miss the rogue-esque exploration that tool mastery entails. It’s not that I want tools to be hard; I want them to be deep. I want to never run out of ways to invest in my tools. I don’t want to have to swap software to get upgrades, I want to upgrade my understanding instead.

But I look around my computer, and everything on it was designed for the “average” user. I was not average as a CEO with 40+ hours of meetings a week while receiving more than 200 emails a day, nor am I average now as someone who spends more time writing than in meetings. There’s no such thing as an average user, so attempting to build for one just makes software that works equally poorly for everyone.

It is a rookie mistake to conflate the basic user who will never plumb the depths of their tools with the expert user who will learn every nook and cranny of your software. It is a mistake to treat the person who sometimes has to solve a problem the same as a person who spends 80% of their time working on that problem.

I don’t want to be an expert in all of my tools - for all that I take thousands of photos a year, I don’t think I’m up for switching to Adobe Lightroom - but for those tools that I spend the most time in, that most differentiate me, I want the opportunity for true expertise. And I’d happily pay for it.

Back in the days when computer screens were tiny, there were plenty of stats that showed that paying for an extra screen would often give people a 10% or more boost in productivity. I know it did that for me. As a business owner, it was trivial to justify that expense. Monitors cost a lot less than 10% of a person’s salary, and don’t need to be replaced every year. Heck, the whole point of the automation company I built was to allow people to focus their efforts on the most valuable work they could do.

Yet, when it comes to software being built and purchased today, to the tools we use on a daily basis, somehow our software ecosystem is failing us. There is no calendar I can buy that makes me 10% better, no email client available that I can spend five years getting better at.

It’s great that people are finally making software that everyone can use, but that’s no excuse to stop making software for specialists, for experts, for people who could get the most advantage from that extra 10%.

Please. Go build it. I know I’ll buy it.

Where does your work live?

luke@lukekanies.com (Luke Kanies) — Tue, 13 Mar 2018 00:00:00 +0000

Most of our software is confused about what job we’ve hired it for

I’ve really enjoyed playing Zelda: Breath of the Wild, but my life has been changed more by one of its reviews than by the game itself. The review had a unique view on what made the game so great. It contrasted Zelda to other games - Destiny, for example - saying that while others tended to distribute gameplay across multiple areas (e.g., in Destiny, the radar is a critical part of the game), Zelda really focuses the game into the main screen where you walk, glide, ride, and fight.

The review (which I unfortunately cannot find, because of the quantity of posts online that all use similar words) called this “where the game lives”. I love what this phrase evokes. I absolutely loved the game Borderlands, but I was deeply frightened of ever finding out how much time I spent at its store screen, because item collection and management was such an important part of the game. A lot of its fun was specifically from the collection, rather than the playing, but that meant a large chunk of the game lived in the store, as opposed to out in the world.

Most of our software could use a similar dissection.

Like Destiny and Borderlands (which are both great, and quite similar), the tools we use show a surprising distance between what they help us do and what we’ve hired them for. If I may be permitted to steal from this review, this distance is a sign that our software is confused about where our work lives.

To pick a counter-example, I’m writing this post in Ulysses. People who choose this software laud its simplicity, which makes it easy to focus. What they really mean is, all you can do with it is write. There’s almost no formatting, very little organization, very little anything but writing. The work lives in the writing. (My first draft was written on an ipad, which further simplifies that focus.)

Contrast that with any task or project management tool. My wife and I are in the middle of planning a bunch of camping, and we’re using Trello to organize many of the options. What is Trello’s opinion about where the work lives?

Last time I looked, my wife had three browser windows open, each with about fifteen tabs. She’s also working in RoadTrippers (Pro, natch). To get this work into Trello is a process of copying, pasting, writing copy about why you pasted it, and then using Trello to file it so you can find and manage it later.

In this operation, where does the work live? It’s scattered across maps, calendars, browsers, and applications like RoadTrippers. Does Trello know that? Does it agree? How does its opinion of where the work lives affect its utility? Brief introspection leads us to conclude Trello has no idea where the work lives, and the humans using it are entirely responsible for connecting the two.

Here’s a simple exercise for anyone using a task tracking app: Envision yourself going into that app and just marking everything done, even though you obviously haven’t done the work. It hurts to even consider, doesn’t it? Your brain has absorbed that these tasks are representations of work, and it’s your job to match the representation to the work, because you know the tool won’t do it for you. When you mark something done, of course nothing goes out and does the work; you’re just lying to your software about the state of the world. And it has no idea! This disconnect is what leads to an allergic response to the idea of marking work done in software that is not yet done in the real world.

I’d like to say that Trello was just a bad example, but I think all task tools share this confusion. Bug trackers and project management tools are specialized examples of this, and they obviously have no idea where the work lives. If I’m writing code, all of the work is done in my text editor, in files on disk, and maybe in my testing tools to ensure the work is done and done right. I then go somewhere entirely different to mark the work done. Why? Shouldn’t GitHub know it already? Why do I have to explain it? The answer is because these trackers think tracking is the work, when of course, the work is the work.

It’s no better in personal tools. I just started using Things 3 for my own tasks, nearly all of which end up being expressed in email or calendars, yet Things 3 has no conception of either. It has no idea where my work lives, and expects me to put out all of the effort necessary to connect them.

Speaking of email and calendars, they have their own role in this conversation.

Email is interesting. Everyone hates it, because it’s so important to everyone that we use it constantly, yet this animosity is a result of its utility and criticality. In other words, people hate it because it works so well. But when you’re doing email, what work are you actually doing?

I’m not sure I know. You’re communicating. But usually, you’re communicating about some other kind of work, like a document, a meeting, or some kind of activity that takes place outside of the inbox. A well designed application will remove the need for communication via email - Google Docs is a great example of this. Its sharing and commenting features have allowed many discussions to move from email to where the work is, in the document itself; their addition of suggestions has doubled down on focusing on the work, rather than talking about the work. (Note that this is completely different from Slack, which advertises that it gets rid of email, by which it means it moves the conversation, not that it does a better job of bringing the work into the software.)

Of course, how do you have Google Docs tell you someone commented on your document? Email. :)

What about calendars? Why do calendars exist? As a tool, where does their work live?

I am thankful to have had to try to explain to a friend my position on this, otherwise I’d think it was easy to understand. It’s so counter to how people work today that a relatively obvious truth is impossibly counter-intuitive: calendars are about how I spend my time.

When using a calendar, the work is what you actually do. You, a person, out the in the world. That’s what the calendar is about. Its job is to ensure you do the right things at the right time, with the right people, in the right place. It’s about doing, not documenting, managing, or notifying. You can put something in a calendar and not do it, or do work that’s not in the calendar; any of us would say, obviously, that it’s what you do that matters, not what the calendar says. Merely creating an event has no effect, and thus no value; it only matters if it then affects your behavior. The work lives in what you do. But does your calendar make even the slightest attempt to directly manage how you spend your time? What would that even look like?

To pick a small example, my calendar apps seem to not care what city I’m currently in, or where I’m physically located. Isn’t this weird? The tool whose primary job is to manage where I am physically located makes no attempt to represent or take into account the core fact it is meant to control. It still dumbfounds me.

Yes, they can tell me in real time when I should leave for a meeting based on travel time (as long as travel involves driving, rather than walking down the hall to a conference room), but they can’t say, “Given that on Tuesday you’ll be in Portland, working from home, you should block out travel time to get downtown to lunch and back”. That is, they can alert me in the moment, but they can’t do their core job - reserving time to ensure I’ll be doing the right thing in the future. Because they can’t do this, I have to create those blocks myself, else I’ll find myself choosing between skipping one appointment or being late to another. The whole point of a calendar is to manage time, but in this simple example they fail to ensure I will have space to transition my corporeal existence between physical locations. Shouldn’t that be step one, rather than an exercise left to the human?

I also reserve time for tasks I do alone every day, like working out and writing. I do this primarily to ensure it gets done, rather than because those times are special (although I do get a bit jittery now if I don’t write first thing in the morning). There’s no way to explain to my calendar what I’ve actually blocked that time out for, and thus no way for it to respond to whether I’ve done it or not, even though my computer knows if I’ve done my writing, and my watch knows if I’ve worked out. Wouldn’t it be great to see your calendar dynamically rearranging your day because it noticed you missed your workout?

My calendar is confused about what work I’ve hired it to do, and therefore does not know it needs to look in those places.

We’re so used to the idea that our software represents the work that we seem to have lost hope that it will actually help us do it. Most of the tools we use are entirely disconnected from the work they’re supposed to help us with. Marking something done does not do it, deleting email does not indicate communication has happened, sitting at your computer while your calendar says you’re writing does not produce text. The representations are not the work, yet we forgive our tools for only dealing in representations, not actual work.

I don’t know if that reviewer was right about why Zelda: BoTW is so great. I can’t even imagine what all the software I use would look like if it were built around where my work lived, rather than merely being used to model and manage it.

What I do know is that our software can and should be built to help us do the jobs we’ve hired it for. But because it is confused about why we use it, what we do every day is lower quality, less fun, and just downright confusing.

This also shows just how much opportunity there is to improve the software we use on a daily basis.

Founding Myths are Pernicious Propaganda

luke@lukekanies.com (Luke Kanies) — Tue, 06 Mar 2018 00:00:00 +0000

It’s only safe to learn from true stories

Every startup has its founding myth, the story that it uses to help draw in and motivate employees, customers, and investors. In most cases, those myths were cultured years after the company’s founding, and bear little relationship to reality. When you dig deeply into a company’s true origins, what initially looked like the product of far-sighted genius deflates into a mix of insight and smart decisions meshed with a series of serendipitous events.

This gap between myth and reality in no way diminishes the achievement of these companies and their teams, but it collapses our ability to learn the true lessons from those who made it and those who did not. If we can shift our story-telling from creation myths to capturing the collisions actually necessary to germinate greatness, we can better recognize what it will take to support it next time. Even better, it will allow us to pull forth those organizations not lucky enough to get all the draws, enabling our ecosystem to address neglected founders attacking neglected markets.

As I was building Puppet, I assiduously sought founder stories, trying to understand what it really took to do what they did. Over time, this turned from a quest to build “Good to Great” for startups (which was silly anyway, given how stupid that book is) into a collection of more-true founding myths:

Facebook: From judging girls on the internet to billions of dollars
Google: Good thing Yahoo! didn’t want our search algorithm
Patagonia: No one else will pay me to surf (at least he actually admitted it)
Intel: We really hate our boss

I find these funny, but the true goal is to puncture the story people want you to buy so you can understand what it really took. When you do that, you find that yes, people had to work hard, they had to be smart, they had to be creative. Those are necessary, but as testified by the thousands of failed companies full of hard-working, smart, creative people, they aren’t sufficient.

When you can find true founding stories, such as Phil Knight’s excellent Shoe Dog, you gain critical insight that might help you build your own business better, but you also realize how much of building a great company is expertly riding the tide of luck and opportunity.

On first blush, there’s no problem with this, other than the ridiculous levels of delusion necessary to turn serendipitous opportunism into genius founding myths that manage not to include the lucky bits.

On reflection, though, erasing the role chance plays causes systemic problems throughout the startup world.

We’ve already seen that human nature abhors a vacuum, refusing to accept that people don’t always deserve their circumstances. Luck is obviously not the only contributor to a startup’s success, because how they play the hand they’re dealt is at least as important as the hand itself. But let’s not lie to ourselves about the role of randomness in a startup’s circumstances.

When we do, it limits our ability to understand what it really takes to make a great company. This is similar to the deep structural flaws within “Good to Great”: If you just ask the great companies what they did and try to do the same, you sound smart but have only made your readers dumber. I recommend The Halo Effect for a more complete discussion on how this business-book analysis of success fails its readers. You can fatally pierce the concept by focusing on one kind of failure:

“The Delusion of the Wrong End of the Stick - successful companies may do various things but that does not mean that doing those things will make you successful”

As I was trying to build Puppet, I found this discrepancy between the stories and the realities immensely frustrating. I was uninterested in being valorized for something I felt lucky to be doing, but these myths were a screen obscuring information I knew was valuable. My goal in studying my predecessors was to improve my own chance of success, but it’s impossible to learn from propaganda. Instead of a community of founders learning from each other, with each iteration being better than the next, you get cargo cult companies that manage to copy every part of a successful business except the parts that made it work.

As just one example, Google’s own data now shows that its vaunted hiring practices did not actually help, but a whole generation startups copied their worthless brain teasers and discriminatory ivy league requirements. For years, Google’s dominance was partially explained by their great hiring, but what happens when it turns out they weren’t actually better than anyone else? Nothing to see here, please move along. Let’s just start another round, this time copying Netflix and Amazon. Forgive me for thinking that Amazon’s success has more to do with their taking Walmart’s extractive business strategy to the web than on their use of internal APIs.

What I found again and again when I peeled these myths back was far more genius in how people responded to their circumstances than in how they were created. Oracle is a perfect example: Larry Ellison was smart enough to realize that IBM had invented this great new database concept but weren’t trying to sell it, so he took advantage of that to build it himself. You can bet that’s not how Oracle tells its founding story, but only once you know it can you see that Ellison’s true strength was pushing hard and fast enough to ensure that Oracle was the first one to market with this free idea. I don’t look up to Oracle’s founder, but you can bet I learned from that story.

Google is another good one: One of the best CS schools in the world bashes together two random guys, who then go on to invent something and get lucky enough to fail to sell it. What you can learn from Google looks pretty different once you know that. Again, it does not diminish what they did after that failure, but it turns their stories of manifest destiny into a more true telling of wandering any icy landscape looking for safety.

When they say history is written by the victors, they mean both that only the the stories of the winners end up getting recorded, but also that the stories themselves get morphed, corrupted, to present those winners as just and deserving. That corruption is as pervasive in the world of startups as it is in the wider world.

There is tremendous value in understanding the real stories behind the great successes. Good luck getting companies and founders to tell them.

Apple Has a Focus Problem

luke@lukekanies.com (Luke Kanies) — Thu, 01 Mar 2018 00:00:00 +0000

But it’s not what you think

The iPad has made great strides in the last few years toward being a full-time computing platform. While many still cry that it’s just not very useful yet, others are out there using it as their only computer, or have at least shifted significant usage from desktops and laptops to it. I have been traveling at least a third of the time over the last few years, and the iPad is my only companion on the majority of those trips. It is by far my favorite computer, but it has one glaring defect.

Obviously, the heart of the iPad is its touch interface. The direct interaction is exactly what makes it such a joy to use for so much of it can do. However, even Apple has finally acknowledged that a keyboard is a necessary companion for many iPad uses. While their keyboard has some issues (or rather, their keyboard connection technology does), the overall experience is quite nice. Except for one little detail.

Unlike touch, keyboards are inherently targeted. While touch is powerful specifically because of your ability to directly manipulate the software you’re using, keyboards must first be pointed at a place that needs text. They need focus. And here’s where the iPad falls down.

It has no concept of focus. Or rather, it obviously does, but its designers are in denial about it. Keyboard focus is littered throughout the platform, from the presence of a cursor when inputting text, to the software keyboard auto-hiding when no text field is in use. When you’re producing text, this generally works pretty well.

But the keyboard is used for far more than typing. Whether it’s command-tabbing between applications or using shortcuts within them, the keyboard is a critical control device. And it just does not work right on the iPad.

Honestly, it does not work that well on the mac these days, either. Apple’s Mail application can’t seem to figure out how to pass focus between emails, especially when deleting them, and there are plenty of other situations where focus within a window - as opposed to between them - can neither be perceived nor controlled.

But because of its orientation around touch, the iPad is much worse. The vast majority of the time that I want to, say, delete an email, the delete key just literally does nothing. I can even touch the email I want to delete to “ensure” it’s focused, and yet still the keyboard is useless. I have to resort to touch for interacting with applications the vast majority of the time. Many iPad-specific apps now advertise keyboard shortcuts, but they’re useless. I mean, sometimes they work. But that’s not good enough when you’re trying to get something done; we learn, eventually, to do what’s consistent, rather than what’s fastest when it works but often fails.

I have so many memories of using my keyboard to tell some app to do something, and just starting at the iPad until I realize nothing is going to happen. I tap around, hoping to tell it, “start here”, but it’s usually no use. My expectations collapse, and I feel crippled, reduced to the level of those who just click around their GUIS. It’s not wrong, but it can be so much better.

I follow every conversation I can find about the iPad as a productivity platform. I’m deeply interested in the thoughts of people who are bought into it, such as Federico Viticci, so I am cognizant of the general thread of how this is progressing. As so often happens to me, I seem to be the only person concerned about this problem. Here are all of these people talking and writing about the iPad as a general purpose computing platform, yet they don’t mention this problem of the inconsistency and invisibility of focus at all. Do they just not use keyboard shortcuts? That’s not possible, right?

And don’t tell me it’s my iPad. I’ve had literally every version ever made (I currently have both sizes of the iPad Pro), and every few iterations I do a clean install. I’ve tried every variety of keyboard, from Apple’s to Logitech’s to a $15 piece of junk I bought at Brookstone at the airport one time because I managed to leave mine at home. I’ve changed every variable. The only explanation seems to be that others just don’t care about this.

I’d also like to see people rallying for Apple to shift the default orientation of the iPad Pro to landscape, because the keyboard is so central to its use, along with an automatic disabling of the rotation lock when the keyboard is connected, but these are minor compared to the core utility of a keyboard.

To me, one of the central reasons to want a keyboard, one of the primary purposes of the keyboard on my computer, is to control the computer. At that, the iPad is currently failing miserably, and it deserves better.

I fear that this can only be fixed by introducing completely new design concepts to the iPad. Obviously the OS understands focus, but the design team has worked hard not to ever indicate that to you. That has meant application developers have not bothered to manage it effectively, and has trained users to rely on touch rather than the keyboard.

While Apple is a design powerhouse, they’re also into brutalist design, always opting for less, always preferring to forego a capability if they can’t make it perfect. This causes me to despair that they’ll make material strides on this any time soon.

I’d love to be proven wrong, but for Apple to start caring about this, its customers need to first.

What’s your story? Do you just not use keyboard shortcuts? Do they work great for you? Or they’re totally broken, but the other broken stuff is just so much more important you haven’t mentioned them yet?

My Computers Are All Broken

luke@lukekanies.com (Luke Kanies) — Mon, 26 Feb 2018 00:00:00 +0000

Software’s focus on world-dominance has crossed with my incessant tinkering to result in a computing environment that is failing me utterly.

I’ve tried everything, and it still doesn’t work.

My first computer was from basically the worst era Apple has ever produced, starting with MacOs 7.6.1 and finally quitting around MacOs 9, switching to BeOS. While I was using these for fun, I was learning Solaris (and AIX, and HP-UX, and FreeBSD, and Debian) for work. I know some are frustrated that the Mac has lost its spacial finder, but I’m frustrated when I have to touch my mouse, because I spent years in a fine-tuned X-Windows interface that allowed me to do essentially everything from the keyboard. It was only marginally graphical; all of the windows except the browser were different kinds of text interfaces, from the terminal to vim to irc. I controlled everything with a Sun Type V keyboard, which relegated the caps lock and backslash keys to some far away corner like God intended, and gave prominence to control, escape, and delete, which matter quite a bit more. I honestly have no idea what mouse I used for the first ten or fifteen years; I don’t normally care about them, so I don’t normally notice them.

As I gradually switched from a sysadmin-turned-developer to a CEO, my computing needs changed dramatically. I spent all my life in email, calendar, and chat rooms, instead of text windows (notice they’re all still text, though). I did not even have a desktop computer for years, because a laptop was a better compromise.

As the iPad got more powerful, though, and Apple’s iMac computers turned from lickable toys into their most powerful computers, I moved most of my computing from laptops up to desktops or down to tablets. For a little while, all was fine, because I still wasn’t spending much time on the computer - as a CEO, most of my time was spent directly communicating with people, either in meetings or via email and chat. Being present means not being on your stupid devices. That was my computing experience.

Once I left my CEO role, I shrugged. I changed a few things (started writing in Ulysses, for example) but basically kept the tools and practices I had.

It’s become clear now that I have a solid decade of debt that’s built up in how I use my computers.

I really hate it.

Some of it is obviously just bugs. Or something. The keyboard (a KÜL tenkeyless with some kind of Cherry MX switches) and mouse (some large Logitech thing) just don’t work most of the time. The keyboard has to be unplugged and plugged back in 90% of the time the computer goes to sleep, and the mouse icon just does not seem to care about my needs, even after swapping mice, mousing platforms, hair shirts, and everything else I can think of (turns out that moving the mouse’s wireless adapter from a USB hub to the desktop might have fixed the mouse).

Beyond that, the software is out to get me.

Am I seriously the only person in the world who cares about keyboard focus?

I just deleted an email in Apple’s Mail.app on my desktop (running the latest os and patches, but this problem has persisted for as long as I’ve used the app), and I literally have no idea where the focus went. I hit delete, the email goes away; I hit delete again, and literally nothing happens. An email is highlighted, but, oh, I see, it’s a gray highlight instead of a blue one. I click on it, now it’s blue, and suddenly delete works.

I have essentially the same problem on my iPad (which I work on at least as much as my desktop). My only feature request for the iPad is to make keyboard focus predictable and functional. You can be scrolling through emails with the arrow key, and suddenly it will just stop working. Delete an email, no idea where focus is. I don’t even know how to tell where the focus is.

I’m in this insane world where I can feel utterly defeated by the need to click on an email to delete it, but if I zoom out, just about every other part of my computing experience causes similar frustration. I’m apparently the only person in the world who has quality studio monitors on my desk, based on how much everyone is freaking out over the HomePod price. I have separate audio installations in 7 parts of my house, and the HomePod in my bathroom is the cheapest one, beating the thirty year old (purchased used, recently) NAD and M&K kit in my bedroom by about $100. Nothing can cause you to lose hope that your needs will be met like the entire internet agreeing your needs don’t exist.

I don’t consider myself an audiophile, but I know enough to know that decent speakers start arriving at around $300 (each, not a pair), rather than topping out there. I never bought into Sonos because that required my believing they could deliver a good speaker, amplifier, and software experience for the price of a single decent speaker. Oh, and I had to join their walled garden; I’m willing to consider that, but it’s got to be worth it, and it never was for them.

So now most rooms in my house have audio streamed to them from an unsupported device that is going to become obsolete any day now.

Getting back to computers, it just could not be more clear to me that I’m in the shitty middle ground of the computer world.

I’m not a specialist any more. When I was a sysadmin, I was a specialist and I could build my computing environment to match that. (Although good luck finding specialized sysadmin hardware these days.) When I was a developer, I was a specialist, and my computing showed it.

Now I do what everyone else does: I email, browse, handle my calendar, chat a bit. My writing is a touch specialist, but not really; I’m using a specialist tool that’s great for writing books, but I’m just producing blog posts instead.

Even though I’m not a specialist, I’m still weird. I know that I’m using all of my tools differently than most of you are. I know we all think we’re special, but I’ve been around enough to know I am. Not in a good way, just in a “why are you doing that?” way.

Take my calendar. I’ve now twice written tools to tell me whether I’m meeting my goals in terms of how I spend my time. Sure, you have some sort of tomato timer to remind you to stand up or something. Amateur. My calendar should be a statement of my priorities, of how I will and do spend my time, and I want to hold myself accountable to my goals. I appear to be the only person who wants this, based on the searching I’ve done. Thankfully Google Calendar has APIs available, but why should I have to write this?

I have tried every email client I can find, but they’re all written for someone else. They all seem to offer, “How can I help you do email without email?” I don’t want that. I want the vim of email clients. I want the Photoshop of email clients. Can you imagine telling a graphic designer that you want to help them make graphics without making graphics? It’s stupid. They’re designers. They design graphics. I’m a communicator. I communicate. I read and write. A lot. Make a client that’s better for that. But nope. Instead you have the modern equivalent of a lickable interface that still can’t do inline reply and only has 5 keyboard shortcuts. _BZZZT_DELETED!

Some of it is just stupid. I have LED strips mounted to the back of my monitor, so I can get ambient lighting while I work. It’s actually an awesome feature, and I totally recommend it, but it’s a bit of a mess of wires with a ridiculous interface (a switch that keeps falling off my desk). I get not everyone has their monitor against a wall, but this seems so great it should ship by default. Can I just get all the LEDs you want in my keyboard moved back there? And, of course, I want it all connected to the computer so I can control it via software. Instead I’m wiring it all together myself and hoping 12V can’t catch my desk on fire. Yay.

I wish it was just that I’m a curmudgeon, that I can’t give up the old ways, but the truth is I like my iPad more than any other computing device I’ve ever owned, and honestly, I always hated the old ways. I’ve been hating software for as long as I’ve used it, and I’m proud I’ve been able to keep my edge as my career and the world it’s in has changed. I hated X-Windows. I really, really hated MacOS. I loved BeOS, but honestly, I held it to a very low standard. I loved every part of Solaris except the parts that actually existed or that I ever used, and I quit using it just when it stopped sucking quite so much (god, remember having to use Veritas to get decent clustering? Even worse, remember Disksuite?).

So it’s not that I miss the old days. I want to live in a different universe. I want a different physics model for our software world.

I know I can’t have it. I know I won’t get there.

But I’m an optimist. I’ll keep fighting.

Software At the Coal Face

luke@lukekanies.com (Luke Kanies) — Fri, 23 Feb 2018 00:00:00 +0000

Software should be for the people who do the work

I’m not a technologist. I’m a software person, but not in the way people mean when they say that. I believe in the power of software to improve lives in big and small ways, and I have a hard time imagining doing much except through software.

I’m less fond of the software industry itself. I think it is too slow at solving problems that matter to people, too myopic to see how much it could really do.

I ran a software automation company for twelve years, and when I explained it to executives or salespeople, they would respond, “Oh, so you can fire sysadmins!” (Draw your own conclusions as to why these are the ones who consistently said this.)

In fact, our strategy was the exact opposite: I set out to turn sysadmins from tactical tools into strategic assets, to make the individuals more capable, and thus more valuable and harder to fire.

It was always easy to show my strategy was the right one: Let’s say I can produce software that can either reduce cost (fire some part of your team) or improve service quality (help that team do better work), which do you pick?

Nearly every time, people pick a higher service quality. “Wait, that’s an option?”, they would say. (The rare exceptions to this response usually came from organizations I did not want as customers.)

Software sucks. It really, really sucks. It’s so bad that when people look at their software investments, and especially the infrastructure layer my previous company lives at, they really only know how to talk about cost. Sure, they know the software is critical, they can say how many nines they have in uptime, or what their NPS score is, but they can’t measure quality in the way, say, a car maker or theme park would. Turns out, though, it’s easy as all get out to talk about cost. So, people naturally gravitate from the stuff that matters into the stuff they can measure. It always reminds me of an old joke:

A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, “this is where the light is”.

It might not matter, but it sure is easy.

You could argue that what Puppet did was weird, was special; that I found a seam of critical work that was undervalued, incorrectly measured, and ripe for both automation and an increase in human capital.

I don’t think sysadmins are that special.

There’s been this wicked, stupid, and brutal trend over the last few decades to devalue people. I don’t just mean, to replace people with automation; I mean the practice of reducing the value of individuals in service to financial strategy. It might be my age, but I assume this all started in the 1980s when corporations were compensated for having fewer costs on the books (which also led to idiocy like building an office tower, selling it, then leasing it back; some realtor makes bank, and your stock goes up because your balance sheet looks better according to the skewed spreadsheets of some hedge fund manager). The claim of many companies that their people are their greatest asset is contradicted by their behavior.

This becomes more true as companies get bigger. Most large corporations have spent decades finding ways to rely less on their people, and then use the results to demonstrate the people deserved it. Under-train them, then over-supervise them because they don’t have the skills. Don’t give them any power, then consider them easily replaceable because they can only do small things on their own. Refuse to invest in better tooling, then complain about their productivity.

I have a different perspective. You might might think I’m antiquated, or silly, or just naive. Meh.

My perspective is that people have always mattered, and that they always will.

My perspective is that there will always, forever, to be money made by making people more valuable.

Further, just as a nice bonus, I believe that the things that make people more valuable are generally congruent with the things that make them happier, which means that success for me helps the company and the individuals both financially and personally.

Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats. - Howard H. Aiken

Considering that it’s this perspective that’s led to me to what success I’ve seen in life, and I’ve done enough work now to realize it’s also the only thing that I care about enough to put another decade into, it’s worth considering hiding this little gem, this little kernel of wisdom that others can’t seem to spot. I’m not worried. At the least, it goes against decades of corporate training: “People don’t matter, you should replace them, expect them to fail, they’re just cogs”. That kind of mental conditioning is hard to resist, especially when it’s imprinted on our financial system itself.

Beyond that, it just sounds too nice for others to see its value. Modern finance inherently distrusts anything that’s good for people, because they figure if you can do this thing and help people, you’ve got to be able to make more money by doing that thing and not helping people, right? Right?

No. In many cases, the thing that makes it valuable is exactly that it helps people. If anything, you could argue the entire software industry is about helping people spend more time on what makes them special, rather than helping people do something they could not do before.

Photoshop didn’t enable people to make drawings they could not have before; if anything, in many cases it’s less functional than using pens and pencils. It just enabled people to be far more efficient with the time they spent.

The difference between a great editor for coding and a bad one is not that you write better code with a great one, it’s that you can write good code that much faster and thus get a lot more high quality work done.

Often, the difference in speed is so great that the quality of work is actually dramatically better, but it’s a result of the user having far more time to spend on the problem, rather than the software itself directly improving the work.

It’s not a coincidence that boring, low-value work is easy to automate, or that people enjoy their jobs more when that work goes away. (Of course, this is assuming the job sticks around; in too many cases we use this as an excuse to fire someone rather than promote them.)

This was exactly Puppet’s goal.

Spend less time firefighting and doing menial work, and more time shipping great software.

I bet you can think of an industry or two whose people could stand to spend less time doing menial work, and more time on the things that matter.

I am not naïve enough think that every role a human plays today could be improved by better productivity tools; some roles become obsolete over time (not a lot of chimney sweeps these days), they really are just menial work or in an industry that cannot remain relevant. (Although, even in those cases I’d argue that both the people and the industries would be better off trying to find a way to work together on the transition, rather than the companies seeing the people as a sacrifice to the gods of productivity.) At the level of industry rather than individual roles, though, everything could be better through this kind of investment.

And in the end, I don’t have to believe every industry, every role is better off.

I just have to be able to find enough people, companies, and industries that are better off that I can keep doing great work.

And that’s what I plan on doing.

Strategy Is Culture

luke@lukekanies.com (Luke Kanies) — Thu, 22 Feb 2018 00:00:00 +0000

How you work determines your destiny

Peter Drucker famously said, “Culture eats strategy for breakfast”. This is often interpreted as culture being more important than strategy. These might not even be his words, which makes it hard to know his thoughts, but having built a company to almost 500 people, it’s obvious to me that culture isn’t more important than strategy, it is strategy.

I am confident he knew this. He worked with the Japanese manufacturing companies in developing their culture of kaizen, which helped them to dominate the automobile manufacturing world, and their practices have gone on to fundamentally change manufacturing as an industry.

Your strategy is not what you’re trying to do (those are your goals), but rather how you plan to do it, and your culture determines how you work. Pick any great, differentiated strategy, and you’ll see that how it translates the company culture is what determines its efficacy. We tend to think of culture as being about how people feel, or how they treat each other, but that’s a bare shadow of its importance.

Southwest is an amazing airline. In an industry with a long history of losing money, they’ve managed to make money year after year. How? Their strategy is simple: Be the lowest cost carrier. This isn’t something that the management says to the team who then try to interpret it; it shows up in every decision made by everyone in the company. It’s baked into the culture. If it weren’t, costs would creep in at every level of the organization. They could not be the lowest cost carrier without a culture of parsimony at every layer of the company. You will not be a culture fit at Southwest if you can’t be cheap.

Toyota is legendary for helping to drive a revolution in manufacturing, and their success is based on tight integration between company strategy and behavior at the front line. Many of their practices work against human nature, such as their “Five Whys” tactic, which seeks root causes for quality issues by refusing to blame individuals. Their culture is so unique that one of its standout features is how reliant they are on training and mentoring, from the front-line worker to top executives. Managers get promoted based on their ability to train their teams up, not just for driving results. Toyota understands its success is reliant on its management chain to connect company strategy to front-line execution, and it invests accordingly.

Atlassian has built an amazing business, not by being better at selling, but by ensuring the customer can sell themselves. The entire company maintains the cultural discipline of removing barriers to a sale, of asking why a customer needed help, hit a roadblock, or didn’t buy. This sounds easy, but it’s fundamentally hard, and more importantly it’s directly in conflict with the sales culture of modern software companies. You have to choose whether you care more about this deal or all deals, and Atlassian’s rare choice, and how that has permeated their culture, is a big part of why they’ve done so well. I expect Atlassian has lost countless great people who could not make that shift.

These companies demonstrate the inseparability of culture and strategy. Your strategy is how your company plans to win, and your culture is how people individually behave in alignment with it.

Some might argue that the above are the company missions, not their strategies, but they’re very different. Toyota’s mission is to build great cars, and a culture of kaizen is how they do it. Southwest’s mission is probably something like “Enable access to air travel to all”, and being low-cost is how they do that. Atlassian’s mission is clearly around enabling collaboration between teams, which they support by making their products easy to acquire.

If you’ve got competition, then your strategy needs to specify how, exactly, you’ll beat those competitors. You and your competition can have the exact same mission, but by definition your strategy needs to be different from theirs - you both have the same goal of taking the market, but you necessarily will be approaching it differently. If you don’t have competition, your strategy needs to clarify how you’ll win in a market where no one has thrived before. Neither of these is a simple question of setting goals; it’s about clearly stating how you’ll accomplish them.

Too often, strategies are placed on a pedestal, gesticulated at from afar and never allowed to get dirty, when a strategy’s value is entirely determined by how it hits the ground. Napoleon was one of history’s best military strategists, and he knew the importance of how it translated to individual soldiers. When he gave orders, he demanded they be repeated back word for word, and would do it again until they were right. He knew a strategy’s value was determined where it met the enemy, not when it was laid out in the command tent.

Contrary to what you might hear, I don’t think I’ve ever met a founder who didn’t have a strategy, and usually a pretty good one. In contrast, I have yet to meet an early-stage founder who can explain how that strategy will translate on the ground, or who invested hours every week in ensuring that his or her team was operating according to it. Even basic things like having better usability are hand-wavy at best, relying on constant input from founders rather than permeating the organization’s culture.

Simon Sinek has helped lead the charge in the value of ‘why’ as a force for motivation and alignment. Your strategy for how you plan to win is just as important, and is much harder to align a team around because it necessarily involves daily discipline. It’s not enough to have a great strategy or a great culture; they have to be one and the same.

Your culture is how your strategy is executed, and you’ve got to put in the time to make it work.

If You Take Venture Capital, You’re Forcing Your Company To Exit.

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

To understand VC, you must understand the consequences of how they make money for their investors. Part 2 of a series.

Originally published on NewCo Shift

Modern venture capital is obviously successful, as demonstrated by the fact that five of the world’s six largest companies were funded by it. However, success is as much about what you say ‘no’ to as what you say ‘yes’ to, and venture capital is no different. In addition to delivering massive collateral damage in the course of its work, the current model rejects all ideas that do not fit within its narrow definition of suitable.

The primary contributor to this wholesale rejection is how VC delivers returns, so to understand why it’s broken we must understand how it works. In this article we’ll go deep on how VCs get their money, how they turn that into more money, and what that all means in terms of what ideas they can and will back. Note that we’re focusing here on the ideas not the people; the structural biases against women and people of color will be discussed in later essays (but it’s worth recognizing that they’re just as baked into the model). Ross Beard’s The Innovation Blind Spot goes into great detail on this topic.

Venture capital firms generally have managers and limited partners; the managers are the people we think of as the investors (they sign the checks), and the limited partners are the investors in the firms; they’re “limited” in the sense that they have ownership but no real control. They don’t actually invest in firms; they invest in an individual fund, and all of the roles are built around the fund, not the firm. This is partially why you might seen an investor leave a firm but stay involved in investments from the old firm: the investor is still on that fund even if they’re not at the firm.

Most limited partners are very large financial institutions, like CalPERS, and they work with venture capital as part of a diversified investment strategy. They have pockets of money in all kinds of places, and VC is added in to ensure they have some high risk/high reward investments. These don’t necessarily even deliver better returns (and in general, VC as an asset class does not do that well), it’s there to get the right mix of risk in the portfolio. In most cases, the LPs are represented by people who would not fit in at a venture firm, because they’re usually finance people at governmental institutions.

A fund is raised by investors (“managing partners”, in this context) seeking money from high net worth individuals, institutions, and anyone else with a lot of money lying around. Money is committed for the life of the fund; except in rare cases there is only one way for an investor to get the money back.

One of the strange things about these funds is not just that they are planned to be locked into a fund for a long time, but it can be awkward if they aren’t. Limited partners invest with VCs as a means of putting money to work over something like a ten year period. If the money all gets returned quickly because of an exit, it throws off the spreadsheets and they quickly have to find somewhere else to put the money. This sounds silly, but it does have a real impact.

Venture capitalists then take this money, and use it to buy stock from startups. So now, the fund holds a bunch of stock instead of a bunch of money. Crucially, this stock is all in private companies, which means it’s generally illiquid (i.e., you can’t easily exchange it for cash). It’s also usually preferred stock, which means the investors get a few extra terms around control and how cash is distributed if there’s a below-value exit.

If this were a normal fund, there would be plenty of ways to make money, and the investors could deliver returns however they wanted; they could rely on growth, dividends, sales, or anything else. However, VC funds are limited partnerships with strict rules about what can be done with the money. No matter where you are in a fund cycle, if a company gets sold for cash, you have to distribute that cash to your investors (keeping 20% for yourself, of course). You can’t reinvest it in another company. (This is only generally true; firms that don’t have this restriction are called evergreen funds, and are usually funded by a single institution or family.)

This distribution on an exit is the primary mechanism for VCs to return capital to their investors. The other way is for a company to go public. This is a weirder one — it’s discussed as an exit, because it allows investors to return capital to their LPs, but it’s not a sale of the company. The difference is that the stock is now liquid, which means it’s basically equivalent to cash; the VCs give distribute the now-public shares to their LPs, who can now all trade it in for cash whenever they want.

Ironically, distributing shares to LPs is a big risk to the company — if 50% of a company’s stock is owned by investors, and they distribute all of that stock to their LPs the day a company’s lockup period ends, what do you think the LPs would do? Well, they’re not experts in tech, or high growth companies, and more importantly, this stock doesn’t fulfill the same needs as the VC fund did in their asset allocation, so they sell it. Of course. And what happens to a newly public company who finds that 50% of its shares are suddenly sold on the public market? The stock gets hammered, because a huge upsurge in supply means an equivalent drop in price.

That’s why VCs distribute shares over a broader period of time, usually 18-24 months. They have some flexibility in how this is handled so they can protect these newly-public companies.

Ok, now you understand how it all works — how venture capitalists get money, make money, and then give it back to their investors in turn. Why does that matter?

It matters because there are only two ways for a VC-backed startup to be a success for its investors: Go public or get bought. As the CEO of Puppet, I always said any company has four options: Go broke, go public, get bought, or stay private indefinitely. If you take VC money, that last option is off the table.

It’s worth saying again: You take VC, you are committing to getting bought, going public, or going broke.

Crucially, that means that investors must push you into one of those outcomes. The reason they deride private businesses that generate cash isn’t because they’re bad businesses, it’s because they’re structurally incapable of profiting off of them. Their system is limited to valuing sales or IPOs; nothing else can have value to them, because nothing else allows them to make money.

This means that if you’ve got a great company that’s taken some VC but is at real risk of settling into a mere 20% growth rate with a sight to profitability but only making, say, $30m a year, they’re going to push you out of that comfort zone. They have to. They’ll ask you to raise a “growth” round so you can “really scale this thing”, or they’ll try to sell the company. If that doesn’t work, they’ll just fire you and put someone in place who will do it for them. It’s not because they’re evil, it’s because their contracts essentially require it. They can’t return the stock of a private company to their LPs, so what choice do they have?

Now that we understand how investor behavior is driven by how capital is returned to investors, let’s discuss what it means to the technology startup ecosystem as a whole. (There are VCs for things outside of tech, but the asset class was basically invented for technology, and that’s where it is centered.)

If you’re seeking funding for your technology company, you essentially have to promise that you can and will sell your company for an outsized return, or that you can and will take it public. In reality, almost no one invests with the expectation of a sale; they’re all betting on an IPO, recognizing that a sale is a good second option. It doesn’t matter if you can generate a ton of profit; they have no use for that. In fact, it might get awkward if you started distributing dividends.

This has two big consequences. The first, of course, is that companies that don’t have a realistic shot of going public can’t get venture capital. This is a striking constraint, given how much of our economy consists of small, profit-generating businesses that generate jobs and cash locally, whereas the ranks of public companies that distribute returns only to the investment class have been shrinking for decades. The story they’ll tell you is that only those really high-growth companies “need” VC money, but it’s much simpler than that: Their business model doesn’t work if your company doesn’t sell or go public.

Bank loans do ok at providing funding for low-risk actions by mature companies, and VC does well at funding high-risk companies with the chance to be huge, but there’s a huge gap in the middle that struggles to get any funding. (Both of these funding mechanisms in the US also suffer from being overwhelmingly biased toward only funding white men, but that’s a different essay.) Medium-risk companies often do need funding, but can’t get it, which in many cases means the businesses either don’t exist or end up much smaller than they could be.

The second major consequence is that a lot of companies are able to convince themselves, and thus investors, that they could get big enough to go public. Yes, this is sometimes true, but in so many cases it is instead a lie that both parties tell in order to get the funding done. If you love your company, and the only way to keep it alive is to promise to keep growing, you will. You understand the risks, but they’re better than just letting your company die.

In too many cases, this absolute demand for continued growth is exactly what kills companies. They never learn the operating discipline necessary to generate cash (which, in the end, actually still is king), and they get too big to sustain themselves. At some point, the lie gets out, they can’t get more funding, the fundamental unsoundness of their business model becomes clear, and the whole thing deflates.

When you hear a VC say you should focus more on growth than cash, what they’re saying is, you should worry more about my ability to return capital to my investors than your ability to still have a company in a few years. It might be that growth is the right thing to invest in, but it isn’t automatically the right thing, and it’s at least fair to say that the investor is not a neutral party in this recommendation.

So now we see that so much of what we find poisonous in the world of venture capital is actually the result of how returns are distributed to investors. The growth-at-all-costs mentality, the huge amount of dead companies, pushing employees to work to the bone until you get an exit, and much more can be laid at the feet of this simple constraint.

I don’t know if there is an alternative model that will work in the world of high-risk tech startups, but I do know there are plenty of other investment models that are able to deliver returns without introducing this kind of dysfunction. Conglomerates like Berkshire Hathaway are able to own significant chunks — or even the entirety — of companies and deliver great returns whether via growth, dividends, or anything else. This provides them the flexibility to let their portfolio companies choose their own best means of returning capital to investors. Coincidentally, Berkshire Hathaway is the one non-VC-backed company in that list of six largest companies.

This essay series is an attempt to capture what I’m learning as I’m looking for a new way to invest in great startups. I think it’s possible to build an investment model that directly attacks the weaknesses of VC; success in this quest would mean both huge returns for whoever cracks it, but also a sudden increase in new companies with completely different promises and risk profiles.

One Investor Isn’t Enough

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

The success of companies and founders in modern venture-backed startups is highly reliant on peer validation of investor decisions. Part 4 in a series.

Originally published on NewCo Shift.

Say you’re an entrepreneur building something new and different, and you know you need capital. After pitching up and down Sand Hill Road (and all over South Park), you’ve finally found a believer, someone who sees what you’re trying to do and thinks you and your team are the ones to do it. Great! Now you can focus on building your business, right?

Nope. Get used to more of the same. You probably raised just enough to get to your next milestone, not enough to get to self-sustaining profitability, which means you’ll be raising again soon. After all, on average startups raise more than three rounds of funding. I know what you’re thinking: But this investor is a true believer, and given how hard it was to convince others, they’ll sign up for the next round instead.

Nope. It does happen, but it’s rare. In general, every round you raise has to be led by a new investor. Part of this is about dollars: Your seed-stage investor writes $500k checks out of a $50m fund, but your A-round investor writes $5-10m checks out of a $300m fund. That seed investor will participate in the larger round (doing what’s called their pro rata, to keep their ownership share the same), but if they led the round they’d burn through their fund too quickly and would not be able to lead enough investments to make their model work.

Even if dollars aren’t the restriction on your first investor leading later rounds, you’ll still likely find yourself pounding the pavement again. Imagine you’re an investor, and you see a peer investor leads follow-on rounds for most of their portfolio companies. One of those companies comes knocking on your door asking you to invest, and of course your natural question is: Why isn’t your existing investor leading? There’s no good answer to that question.

You can’t say, “Well, they’re a bad investor, and I really need new blood”, for pretty obvious reasons. Even if it’s true, badmouthing existing investors will never get you new ones. You can’t say, “Well, they like us, but even though they lead follow-on rounds in 90% of their companies, they don’t like us enough to lead one for us.” You’ve just told this new investor that you’re in the bottom 10% of your investor’s portfolio. Now there’s no chance they’re going to invest. If the investor that knows you really really well doesn’t want to write a check, no one else will.

To prevent this problem, the industry has the habit of not leading follow-on rounds. Again, not that it never happens, but it can’t be the common pattern, because the company that breaks it gets a black mark. I’ve had many investors (including those invested in Puppet, the company I founded) tell me they follow this habit religiously, for exactly this reason. “Nope, as much as I like you, you’re going to have to get the money from someone else.”

Out you go.

Thankfully, venture investors recognize the downsides of this and build deep networks of firms and individuals who frequently work together. There are even later-stage firms who specialize in following specific investors whose track record they trust. But while this pattern was developed for good reasons, it also has downsides that no amount of networking or help can compensate for.

First, of course, it means most CEOs spend a huge percentage of their time either directly raising money or doing the work necessary to do so later. You might not have wanted to become best friends with tens of investors, but if you’re taking venture capital, that’s your job now. Given that investors are professional meeting-takers, they’ve got time to meet for coffee any time, so this can be hugely time consuming. Then when it comes time to actually raise a round, you should expect it to consume your life for at least three months. And that’s the success case.

This time sink is pretty bad if you live near all the investors you need to meet, but what if it’s a flight to the bay area instead of just a drive? Oh, if you’re one of the top companies they’ll come to you, but if you’re not, it’s one more way you have to work harder than the ones they love. It was only in our late-stage rounds we had luck getting investors to come to us, and we were only in Portland, an hour and a half flight away. I can’t imagine trying to raise money in a place that shudder needs a connecting flight to get to. I nearly killed myself in a rented PT Cruiser (the first available car at SFO) trying not to be late to an investor meeting, and of course, he passed on us anyway because I could not convince/did not want his buddy to join us as COO.

This all adds up to a massive tax on the companies that do succeed, where CEOs become experts in fundraising rather than experts in building great companies, which is, of course, stupid. But it has a much worse impact on who and what can get funding in the first place.

Again, put yourself in the head of an investor. You look at tens of potential investments a day, and you have far more opportunities than time or money, so you have your pick of what to invest in. On the one hand you’ve got a woman or a person of color pitching a company that sells to markets they deeply understand, maybe something more focused on customers who look like them. On the other hand, you’ve got a Harvard-educated CS grad who’s found another great use for AI in the cloud.

What we want is for the decision to be made based on what’s the best investment, who’s the best founder, but it’s not. It’s obviously not. If it were, you wouldn’t see such rank discrimination in the world of VC, where women and people of color are almost entirely excluded.

Instead, a key factor is whether the investor believes this person can raise another round. Note: It’s not whether the person actually can, because you don’t know that until you try it. It’s whether the investor thinks they can. And, of course, investors know that women and people of color don’t fit into the pattern of other investors, so they pre-discriminate in expectation that later investors would have anyway. I mean, why give someone $500k if the company won’t be able to raise another round anyway? You’ll lose all your money.

Like with all patterns, it’s as much about the company as it is about the founder. It’s not just about who gets money, it’s about what kinds of problems are worth solving, and what kinds of customers make good markets.

Silicon Valley has a well-known fondness for investing in products that solve the needs of white boys who just got out of college and are having to learn to live on their own, but less obvious is that this means they often consider other customers to be worthless. It is fantastically hard to convince an investor to back a product built for women, or people of color, or international buyers, when the investor is none of those things.

That is, it’s not just about investing in people who are different — it’s that their ideas are different, the problems they care about are different, and the markets they want to attack are different.

In a world where you’re taking risks, where you’re actually focused on brilliant founders in big markets, those differences would be positives, they’d be signs you can do something ground-breaking. But when that world requires multiple rounds of belief, where failure at any round destroys your company, suddenly those differences become reasons for people to say no, for companies not to get funding, for founders not to get support.

There are some firms out there, like K9 Ventures, who make these bets anyway and recognize that it turns their job into finding follow-on rounds for existing investments rather than just finding new companies. Too many investors either don’t see the consequences of this pattern, or preemptively admit defeat and just don’t even consider investing in a company that they are concerned couldn’t get another round.

Once again we see how a key aspect of venture, one that exists for good reasons, has pernicious consequences that help to explain how the world of venture works today, in all its glory and misery.

There’s no obvious fix to the problem, as either an investor or an entrepreneur, if you truly do need capital to grow but you don’t fit the pattern. One of your best defenses is to focus on profitability first, so you don’t need those follow on rounds and the levels of approval required to make them happen, but that’s not possible for every firm, and even when it is it can result in heavy compromises on growth.

Thankfully, there are now firms out there focusing on founders who are women and people of color. These firms will help in multiple ways. First, of course, they’ll provide the direct funding that is not currently available to so many great founders and companies, but second, they’ll begin to build out those networks of social proof that will enable these companies to get as many rounds as they need, rather than just the ones they can provide.

We’re going to need a lot more firms like that to truly unlock the potential of venture capital, to bring world-changing solutions to those who can get the most benefit, wherever they are and whoever they are. I’m hopeful that the competition these new firms bring will change the behavior, and the opportunity, of the existing ones enough to make the difference, but what’s really going to shift behavior is when the companies invested in by these companies start to deliver outsized returns specifically because they don’t fit the pattern.

That’s what I’m looking forward to.

Unicorns Distract Us from a Graveyard

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

Venture capital’s reliance on unicorns provides cover for the huge failure rate of startups, and investors make no effort to reduce it. Part 5 of a series

Originally published on NewCo Shift.

Venture investing is fundamentally uncertain. You’re making big bets on people, ideas, and markets that might never work out, and there are more ways to fail than succeed. As a result, investing has to take into account the likely failure of many efforts. If your financial model assumes each of your investments will be a success, you will have a short career indeed.

Many investors have written about how they need some companies to win big in order to cover for other companies failing completely. As a simple example, Fred Wilson at Union Square Ventures tells his investors to expect 1/3 of his investments to fail, 1/3 to return their capital (which is also failure; they sell for a small enough amount that investors just get their money back, and in most cases the founders and employees get nothing), and 1/3 to “succeed”, where his definition of success is that they return 5-10x the original investment.

He says his actual record is a bit better than that, but like Warren Buffet, he’d apparently rather set achievable expectations.

Let’s use some concrete examples. Remembering that most companies raise more than three rounds of funding, and keeping in mind that investors usually get about 20% of your company through each of those first few rounds, here’s what needs to happen to deliver that 10x return:

Your seed round is $500k at a $2.5m pre-money valuation, so you have to sell for $25m dollars. The investor gets $5m, and founders split $20m.
Your A round is $5m at a $25m pre-money valuation. Now your company has to sell for $250m. Each investor gets $50m, and the founders split $150m.
Your B round is $15m at a $75m valuation. Your target exit price is now almost $750m. By this time the founders own less than 50% of the company, but hey, if you can exit at that price everyone is pretty happy. Notice also that while this is a solid 10x win for the last investor here, it’s delivering close to a 300x return for the first investors (not counting pro rata costs). It’s nice work if you can get it.

Beyond three rounds, investors usually have smaller return expectations (e.g., 3-5x) but also have a shorter time horizon. That growth round investment of $50m is only expected to turn into $150m or so, but it needs to do it in 3-5 years instead of 7-10. Tripling a $750m valuation ends up being pretty hard in any time horizon.

It’s worth noting that if the company sells for $20m after that B round, then the founders get nothing. According to the preference stack (where the later investors all have priority over earlier ones), even with the cleanest term sheet the B and A investors get all their money back, but the seed investor, founders, and employees get nothing. In practice, the buyer will usually negotiate something for the employees and founders — you rarely buy a company without wanting some kind of golden handcuffs on the people who work there — but it’s basically a pittance. You’ve always got to manage your downside, even while you build toward the upside.

Note how quickly the exit price for the company escalates as you raise money. Realistically, it’s only once you’re around a billion dollars in valuation that you can consider going public, so if you’re smaller than that your only choice is to sell the company.

This model helps to explain the industry fetish for unicorns. The returns you get from a billion dollar exit swamp all the failures. And if those unicorns hide a lot of ills, the really big ones overwhelm even the successes. WhatsApp returned $3b to Sequoia on around $60m invested for a 50x return, which means every other investment in the portfolio could have failed and they’d have still made a ton of money.

You can see how the unicorns make or break a firm. How does this affect how they treat the rest of their portfolio?

When you know that a small percent of your bets end up mattering, you don’t worry much about any individual one, and that plays out in the world of venture capital.

Obviously investors don’t actually ignore the other firms; after all, they don’t really know which ones will win big. Equally, though, there’s no evidence they care whether any given startup succeeds.

Of course, investors would say otherwise: They’d say they work incredibly hard to help their companies, they work massive hours, answer the phone late at night, etc. Sure. I mean, they don’t put in nearly as many hours as the founders they’re helping, or even as much as a typical financier does (just thinking of the hours bankers put in these days makes me shudder) but I do believe they work hard. I do have a couple of anecdotes that show it’s not as hard as they’d imply, though.

I had one investor tell me that he loved the transition from operator to investor because the lifestyle is so much better. Again, this is from an investor class that publicly derides “lifestyle” businesses that generate cash for its founders but don’t scale massively. When I asked him about the hypocrisy of him working 9-5 but demanding his founders put in crazy hours, he defended it as their needing to lead from the front. Guess that tells you where the investors aren’t.

I also know a great investor who left a top-tier firm because he said he could not spend any more time working three days a week and being paid for five. Pretty honorable, if you ask me.

But mostly, yes, I do think many investors work hard.I just don’t think the work they’re doing helps their companies much.

Let’s walk through a couple of obvious examples.

Given the high probability of failure of a given investment, you’d think that the industry would be great at reducing the risks for their companies and thus increasing the survival rate. Not so much. For example, many investors have told me that the most likely reason for a company to fail is the team. Ok. So what do they do to reduce the probability that a founding team will fall apart?

Ah… nothing. No coach for each founder, no coaching plan, not even a packet providing best practices. Nada.

Their explanation for this is pretty simple: Coaches are expensive, and the investor can’t afford to have them on staff because the measly 2% on their $300m fund just can’t support bringing on staff to help founders. They could have the company fund it, but then that’s less money going to build the company.

This is the highest risk to your investment, and you’re literally not willing to spend any money mitigating it? Further, you’re tacitly recommending that your founders also avoid this easy bit of risk mitigation? Huh. Ok.

Investors will also tell you that the most valuable resource at a company is the founder’s time, and he or she needs to be laser-focused on building the business. It’s obvious they don’t actually believe that.

We’ve already established that founders will spend about a quarter of their time fundraising, rather than building the company. You could argue that this is the most valuable use of their time, but that’s only true in the sense that it has to be done and there’s no one else to do it. Most founders suck at fundraising and are tortured by their need to focus on that rather than building their business. Investors do help a little with this, but not so much that it implies the founder’s time actually is a precious resource. There’s a pretty clear sink-or-swim attitude around fundraising, even though success at it has little to do with the ability to build and run a company.

You see this same disregard for the founder’s time when you look at what they end up spending it on.

There’s a vanishingly small part of any business that’s truly innovative — maybe some part of your market definition or your solution itself — and everything else you do is disappointingly similar to what every other founder ends up doing. Great, so investors have figured that out and as part of their investment they deliver a playbook that uses the collective intelligence of their portfolio to help founders avoid having to make all the rookie mistakes, right? Hah! Nope!

The best firms do enable founders to talk and work together, but it’s all ad-hoc, and let’s be honest, that’s pretty minimal help. Every founder is basically doing a random walk around the possible solution space for “how to build a great company”, taking on huge technical risk with untried platforms and experimenting with idiocy like holacracy rather than focusing on the most important parts of their business, the one or two bets that will make or break the whole thing.

It shows how little investors are willing to do to help founders mitigate the biggest risks in their business, thus improving its probability of survival. If they cared about their portfolio companies making it, they’d specialize in helping them navigate the different phases of the company, minimizing probability of failure at each phase and especially when transitioning.

So now we see that it’s not just that investors are focused on unicorns, but also that the failure rate that those unicorns cover for is just irrelevant to investors. They know most of you will fail (again, they expect 2/3 to at best return their capital, which is failure in their model and even then only accomplished by a fire sale of the company). Heck, if you don’t fail and instead just continue on being neither a big sale nor a failure, they’ll have to push you into one or the other category in order to close their fund.

As I found running a growth company, success hides many ills. One of the biggest problems in venture capital is how much they let the success of their unicorns hide their indifference to the rest of their companies. This fails their founders, their employees, and the whole market, for no reason other than that it’s easier this way.

I’m convinced that a firm that directly invested in reducing its failure rate would have as many unicorns, but would also have more positive returns throughout their portfolio, and in the midst of building more companies and making more money, they just might do a little good at the same time. That would be a nice change.

Venture Capital Is Built on Serendipity

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

Software has the potential to increase productivity as much as electrification or steam power did, but its impact is stunted by its reliance on random interactions. Part 6 of a series.

Originally published on NewCo Shift.

The venture capital ecosystem bills itself as a meritocratic miasma of genius, with smart founders getting smart money from smart investors. In reality, there is an overwhelming reliance on privileged people bumping into each other at just the right time. This serendipity has spawned some great companies:

Warby Parker was started because someone in an elite graduate program lost an expensive pair of glasses.
Apple was started by a couple of guys who met at a hobbyist group in the computer heartland.
Google’s founders met when one of them gave a tour to the other when he arrived at Stanford for a CS graduate program.

But how many great problems are being ignored because we didn’t get that lucky alignment of particles?

The remodeling industry is a perfect example. It’s an 83 billion dollar market, yet it’s only now starting to see software solutions. The industry itself bemoans neglect by the software industry. The article linked above has some impressive stats about how much waste they experience:

“…studies suggest 30 percent of the construction process is re-work, 60 percent of labor is wasted, and only ten percent of losses are due to wasted materials”

Shouldn’t there be companies fighting tooth and nail over that market? Shouldn’t there be tons of solutions out there, spending money like Uber and Blue Apron are to acquire new customers and take a cut of the productivity gains?

Yet I’m in the late-stages of having a garage built at my house, and as far as I can tell software was only used during design, not actual production. One of the contractors we considered seemed to be an Excel wiz, but wasn’t using off-the-shelf software. How many months of productivity could have been added back into these teams’ lives if they had better tools? How much less disruption could I have experienced, and even, how much less could I have paid if my contractor could get three jobs done in this time because she was so much more productive?

(Did you notice that even I’m relying on the serendipity of my building a garage to illustrate my point that VC relies too much on it?)

In a rational world, every reasonably sized market would have a well-funded ecosystem of software companies vying to take it into the information age. When I got my home equity loan for the garage, I should have been inundated with offers from software companies to help improve the project. Heck, someone should have offered me the loan interest-free if only I required my contractor use their software. Instead, my project is late, costs me more, and makes less money for all the workers because it’s left out of the information technology revolution.

And that’s just one industry, chosen at coughrandomcough. What about all of the other industries the software kings have not yet anointed as worthy, filled with deeply skilled and energetic experts who aren’t lucky enough to run in the right circles, or live in the right zip codes?

Venture investors famously want passion for the problem they’re investing in solving, so much so that the companies also then demand that any employees also be passionate in turn. And we want our software companies started by developers, by product people, not by business analysts. Or carpenters.

So now to start a company you’ve got to have a software developer thrilled about and experienced in a problem, able to accept the risks that come with starting a company (e.g., health insurance and wage loss), who is living in or can move to San Francisco, and hopefully is a white dude who went to Harvard or Stanford. One way to look at that is how discriminatory it is, but another way is just how much you’re relying on everything lining up just right. It might be that you’ll find a Stanford-educated software developer who deeply cares about building houses and can take the leap into entrepreneurship. But what are the odds that that person has the right insight at the right time, and then can find the right people to partner with?

Twenty years in I’m still awed by the opportunity for software to connect, educate, and empower people, but I’m incredibly disappointed by how little of that opportunity we’re progressing against. I think our inappropriately slow revolution is in large part thanks to this reliance on randomness. We have got to get past this if we truly want to get the most out of software before the heat death of the universe (coming more quickly now with all the power being consumed to mine bitcoin). If we can build an environment that does not use serendipity as a crutch, I am convinced we can generate more great companies, and importantly these companies can cover a broader swathe of the economy, and be run by a more representative sample of the market.

Let’s look to biology to see how much of a difference shifting to a constructed environment can make. Living creatures are full of enzymes, which are basically proteins that speed up the rate of a reaction. These reactions are critical to the function of the organism, and without the enzymes speeding them up, life as we know it could not exist. (Conveniently, I did my senior thesis at Reed College on protein structure, so I’ve got some knowledge here.)

In most cases, the reaction that they catalyze (that is, cause to happen) would happen without the enzyme, but it would do so at a far slower rate. For instance, mammalian milk contains the sugar lactose. This sugar will break down in water into glucose and galactose of its own accord, but not quickly enough to digest all the lactose in milk you drink. Mammals have evolved the enzyme lactase, which causes this splitting of lactose into simpler sugars to happen much faster.

Enzymes are incredibly complex — lactase has 1927 amino acids in five separate groups, arranged in an amazing 3D structure: A rendering of the structure of lactase This huge structure is all necessary to enable the protein to place a lactose molecule near a water molecule in exactly the right arrangement to ensure the reaction happens immediately, every time, instead of eventually, sometimes. For all this structure, the site where the reaction takes place is quite small, just big enough for the two target molecules. Those 1927 amino acids mean the protein is about 37,000 atoms. Lactose is 35 atoms, and water is, ah, 3.

That’s a lot like designing a building the size of a sports stadium just to catalyze a meeting of two people.

How much quicker does the enzyme work? About 75% the world’s human population is lactose intolerant, meaning that if they drink milk as an adult, the lactose will cause adverse reactions instead of safely being broken down in the intestines. The rest express enough lactase that they are able to comfortably metabolize lactose, and thus can drink as much milk as they want. Again, remember that lactose breaks down in water on its own, just too slowly to be useful.

So here we have a situation where one of the major sources of calories around the world — cow’s milk — is enabled by this enzyme dramatically speeding up reaction rate.

What does this have to do with venture capital?

Again, venture today is heavily reliant on serendipity; that is, the right people bumping into each other at the right time in the right context. This is exactly how chemical reactions happen normally: Two molecules (e.g., lactose and water) live near each other, and every so often they bump into each other in a way that enables the reaction to happen. Most of the time, however, they fail to hit exactly the right setup, and nothing happens.

When the enzyme is present, though, its unbelievably complex structure ensures that the water and lactose molecules are placed into exactly the right orientation every time, and bam, magic happens.

The probability of a great company getting founded today is a lot like the probability of lactose degrading naturally: It happens, but slowly and infrequently.

I smile at the idea of complexes the size of sports stadiums built for speed-dating founding teams, but that’s not necessarily what I’m recommending here (although if that’s your plan, I’d love to consult on the project).

Even if we wanted to, I don’t think we could build a structure (physical or otherwise) like this, because we don’t yet understand yet what it takes to build a great software company, which means we can’t construct or evolve a perfect environment in which to make it happen.

All I really know is that what we’re doing now isn’t working. We’re not attacking the right markets, we’re not including enough people, and we’re not having a big enough impact on the economy.

For our ecosystem to be healthy, for it to be effective at transforming the industries that need it most, it has to do something differently. We can really only increase the rate of great company creation by increasing the rate of experimentation, or increasing the rate of success. Incubators and early stage investors are doing what they can to run more attempts in parallel, somewhat like a generative algorithm, but this is bound to have little impact because the goals — “be worth a billion dollars” — are so separate from the founding event. Investors are starting to figure this out and pull efforts back accordingly.

That leaves us the challenge of finding ways to increase the rate of success.

Of course, I have my own ideas for doing so, but I was always told as a leader my job was to present the challenge to the team and leave the problem of solving it to them.

Consider yourself challenged.

Venture Capital Is Ripe for Disruption

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

It’s time to develop new sources of capital for founders, to help them generate wealth through solving their customer problems without the massive failure rate. Part 7 in a series.

Originally published on NewCo Shift.

The venture capital world that funds the technology ecosystem appears to be specially designed to back the best founders working on the economy’s most important problems. This series has shown that it has instead evolved over time, with no higher purpose in mind than any other financial instrument.

This evolution is in many ways a strength, as by definition it is built on the successes of the past, but it leaves our ecosystem more blind than we realize. We can fear the fragility this engenders, but should instead see it as an opportunity to reach beyond its artificial limitations, to solve hidden or devalued problems. Technology funding’s demonstrated ability to change should give us confidence we can stretch it further, clearing new paths to success.

Wikipedia covers the history of venture capital better than I could, but it’s worth highlighting key epochs. The system as we know it was birthed by the windfalls from early funding wins, including DEC and Fairchild Semiconductor, so by definition there was no technology funding system in place at that point. Every deal involved people flying around the US collecting enough money to back a new venture.

These early big successes motivated a few people in the west to set up firms dedicated to funding technology companies — prior to this, the vast majority of American capital was in New York. Within a couple of decades, partially enabled by some regulatory changes in the US, there were enough firms around (including modern heavy hitters like Sequoia and Kleiner Perkins) that we had what felt like the first stable system, which of course led to over-investment and the first pull-back in the late 1980s.

What survived went on to fund the internet boom in the 90s, when a huge amount of wealth was created (and then destroyed) and this new ecosystem first made it into the public consciousness. Much of what we believe about venture capital comes from those days, but it was still changing quickly, with no seed funds, relatively small amounts of funding for software companies, and no obvious pattern of success.

Right now, the system looks dangerously stable. There are hundreds of seed and venture funds, all following the same playbook: Try to get their investments to the magic number of $1m in annual recurring revenue (ARR), raise an A round of funding, and keep on the funding train until you go public or go bust. There’s so much pattern matching going on that founders are contorting their companies to fit the funding schedule rather than discovering their destiny.

It’s important to recognize that this appearance of stability is a recent arrival. We might tell a story of how it’s a natural consequence of previous eras of success, but much of current best practice is cargo culting, copying the behaviors of the successful rather than understanding what made them work. If you step back even a little to gain perspective on the industry, you quickly see how much the system is still changing, and still needs to.

Don’t get me wrong: the system we have works. It is, essentially, functioning as intended, and any ideas or recommendations need to take into account not just what we dislike, but what makes it work. I hope this series has educated you somewhat both on how VC works, and why it works that way. As usual, when we dig deeper we find no villain at the heart of a web; we might not love venture capital, but it makes sense, and it works this way for good reason. And indeed, the system is working very well for a few people, and in the process is driving huge change in our economy and lives.

As much as the system of venture capital makes sense, we must ask: What sits outside? The industry generates money through positive feedback loops, but absence from the industry is merely an indication that something hasn’t worked, not that it can’t. What are we missing by doubling down on what we know, instead of exploring the unknown?

Investors are reliant on people near them, who resemble them, and who can absorb the weighty downsides of entrepreneurship. We’ve seen that investors don’t really know what separates great companies from bad in the early days, so they don’t strive to create the conditions necessary for gestation, and once a company is started, they do little for the winners and even less for those who fail. But don’t worry, all of this is hidden by the massive profits that the biggest winners generate for the top-performing investors, and the rest of the industry (while failing to meet its investment return goals) glides along in the afterglow.

(To think I was asked recently if I had become cynical about venture capital.)

It’s a funny thing. I grew up a communist (literally, on a commune) but have become a pretty big fan of well-regulated open markets (although they seem to exist only in theory; in practice we have lost the taste for effective regulation). A self-respecting capitalist can and should argue that this is a market, and it’s performing exactly as it should. I can hear it now: “Capitalism is inherently Darwinian, where evolution gives all prizes to the winners and the losers don’t live long enough to make it into the archeological records.”

It’s a fair point. Humanity can afford stretch goals like less collateral damage than the battle for life and death on the savannah, but we could ask for better even without that ideal. It took millions of years for nature to come up with the Dodo, only for it to promptly die off once it encountered outside species. How convinced are we that our apparently stable system is any more safe from an outside force?

The ultimate weakness in the Capitalist defense of venture capital is that for all the apparent competition we have a homogenous system. Shouldn’t we have multiple types of funding competing for the best companies and the best outcomes? That is, not competition between VCs who all work the same, but competition between different funding strategies?

Because there is no open market here. At best we have a dysfunctional oligopoly (is there any other kind?) with some churn at the top. For all the talk of disruption, everyone is trying to win by copying the winners, rather than seeking to disrupt them. The only people willing to step outside the current system are those who don’t have a choice because they aren’t allowed to succeed within it. Unsurprisingly, they find it challenging to compete not with another investor but with a whole system of funding.

As just one example, the most common barrier I hear to starting a new kind of venture capital is that the limited partners — that is, those who invest in the venture capital funds — would not be willing to support a new kind of capital. This is a perfect example of an ecosystem limitation, rather than a problem with individual players. I hear no argument that founders, employees, and customers don’t want competitive models; only that the source of capital would need to be educated, and that’s just too hard. Except… this whole industry is only a few decades old, and its creation required that same kind of education. Why should we expect a new kind of financing to be any easier to start, require any less systemic change, than the one we’re fighting against? And isn’t it ironic that an industry built on stories of disruption finds the idea just too hard for its own work?

That competition will show up eventually, though. We need it. There are too many software markets lying fallow, unfundable in the current model and thus deemed to be of no value. Someone will figure out how to finance those companies. And just as the first winners in venture were big winners indeed, the first few investors to step out of this world into a new one should make out like the oligarchs who laid the groundwork for our current world.

I’ve said before I don’t have the solution, but there are some market truths give me confidence there are better answers available:

The best way to make money is to hold high quality assets for a long time. If nothing else, Warren Buffett has demonstrated this is both the best way to make money and indefinitely scalable.
The majority of employment and wealth generation is provided by companies too small or too closely held to be public.
The steady state of good companies is cash-flow generation managed by long-term teams who take pride in their work. This is literally the entire history of for-profit enterprises. Any other solution must either fail or revert to this at some point. None of these realities show up in modern venture capital. Companies can’t run on venture capital forever (although try telling that to Uber), and do usually need to show a profit to be sustainable (I expect Amazon begs to differ), but the companies that do either of these are explicitly leaving the world of venture capital.

It’s unquestionable that the financing structure of venture capital is tied in to this separation from market principles. The risky software companies we build today are funded via a structure invented to support the risky ventures of the 19th century: whaling. Suddenly the term ‘venture’ in venture capital makes more sense, doesn’t it? (Tragically, even though it was the days of slavery, those whaling fleets had better representation in some ways than current tech companies, with up to 20% of their employees being African American. Wow.)

We’re using an incentive structure that works perfectly to support individual voyages that might last a couple of years. Is it any surprise it is not great at building companies that last for decades, or have a high survival rate? In fact, whaling had a better survival rate than current venture capital, with more than 80% of the fleet surviving, and delivered better returns (14% IRR on average, and 60% IRR for the best). The funding perfectly matched the ventures.

I should not need to say this, but whaling is unlike company building. It’s unrelated to developing a product, it has nothing to do with creating a new market. It’s inanity to expect a funding mechanism built for one would work as well for the others. The fact that it’s making some people rich, and it hits a jackpot once in a while, should not confuse us.

Venture capital’s apparent stability convinces me it’s at its most vulnerable. Instead of continuing to fund disruptors, I think it will itself be disrupted.

If you’re a founder given a choice between a firm that kills most of its customers and one with demonstrated success at creating long-running companies that generate wealth for everyone involved, why would you pick venture capital? The only reason you do today is because it’s your only option.

Founders want this competition right now. Some want to build Facebook, but most want to build a great company, help their customers by solving a critical problem, and hope to get rich along the way. They don’t want a lottery ticket; they want upward mobility, entrepreneurial fulfillment, and to feel like they made a difference. Unfortunately, low-probability gambling is all the venture world sells.

The new models will start at companies run by women and people of color, because they’re the ones shut out of the current system, but as they start to succeed, they will start to pressure to rest of venture capital, and we will see just how stable the system really is.

I have tried in this series to help you understand not just what venture capital is, but that what you love and hate about it are intrinsic to how it works. I hope this deeper knowledge will help you make higher quality decisions about how to involve yourself in this world. Even more so, I hope it convinces you to seek out, or even create, other ways of funding companies, other ways of building them.

It’s time for founders to have truly competitive options for funding. Let’s go make it happen.

Why the Most Successful VC Firms Keep Winning

luke@lukekanies.com (Luke Kanies) — Tue, 20 Feb 2018 00:00:00 +0000

In an industry built around investing large sums in uncertain ventures, the best companies seek out the best investors, and gains accumulate at the top. Part 3 in a series.

Originally Published on NewCo Shift.

Investing in software companies is inherently an uncertain activity. It’s called high risk, but highly uncertain is a better label. Yes, you’re taking a risk with money, but the real problem is the widely variant potential outcomes. If you invest in a restaurant, you are taking a risk but you will pretty much end up with a profitable restaurant, or lose your money. If you invest in a software company, you can go bankrupt, have a small but profitable company, sell for five times the money in, or end up with a world-spanning multi-billion dollar behemoth that turns everyone it touches into a millionaire. That dramatic range is why you can get a bank loan to start a restaurant but not a software company. It’s exactly why people invest in software, but also why it’s so difficult to do well.

There’s no proven method for managing that uncertainty. The most successful investors frequently get it massively wrong, and a playbook that worked perfectly in one circumstance falls flat on its face in so many others. Yet, even when they frequently make monumentally bad investments, the best investors keep delivering the best outcomes. If no one knows what separates the best from the rest, how can some firms or individuals keep winning?

Of course, many would disagree with my claim, they would say the best keep winning because they can tell a great company from a bad one, but if you look at the trends in venture capital you can see the industry as a whole has given up on a clear system, even if individuals still cling to deserving their greatness. Fantastically successful investor Paul Graham once said that he can be tricked by anyone who looks like Mark Zuckerberg. He’s since claimed that was a joke, but he built his empire by making more bets than anyone else, which is a strategy explicitly designed around the fact that he doesn’t actually know why some things succeed and others don’t. Disgraced investor Dave McClure started 500 Startups with the similar goal of just making lots of bets, rather than making any attempt at making “good” bets.

Even those who invest in venture capital firms have given up on knowing who’s best. Given a pot of money allocated to VC, limited partners will distribute it across many firms, knowing that they have to play many hands to get a winner. After all, the industry average return for venture funds is, ah, absolutely nothing. The winners win big, and the rest balance that out, so LPs need to put money in enough places to be confident they end up with the winners.

If no one knows the difference between the best and the worst, why do the winners usually keep winning?

Access.

Venture capital is all about access: Founders having access to capital, and investors having access to the best deals. If you’re a founder today and you have a choice between taking money from a top-tier firm that keeps delivering hits, or another firm you don’t know and who hasn’t done well, which do you take? Of course you take the best firm with the biggest network and most well-known brand name.

Similarly, if you’re an investor who’s helped take lots of companies public, how does your deal flow compare to those who are just starting out and who don’t have a reputation for building big companies? Of course the best companies come to you.

In other words, there’s an implicit matching algorithm, where companies that are obviously doing really well are able to work with what look like the best firms, and as a result they are able to reinforce each other’s success. The best firms look better because the best companies seek them out, and the best companies do better because they’re getting the chance to work with the best brands. (For all that I am skeptical of repeatable investment skill, I am a deep believer in the value of brands.)

Venture capital is defined by the asymmetric stresses pressed on investors and founders by the need for access; every entrepreneur stresses over how they’ll get access to capital, and every investor’s business model is built around managing deal flow. Entrepreneurs who already had a great outcome magically have no trouble raising huge amounts of money, and yesterday’s great investors have no trouble convincing today’s great companies to work with them.

This focus on access also helps to explain some of the churn the system experiences. If no one knows what makes a great company, how can the best investors always get access? They can’t. There are plenty of great companies that fail to get first-tier support early on. If they do raise money, then those who backed them end up looking like tomorrow’s geniuses, and the cycle starts over with them closer to the top.

This access-based sorting also helps to explain how the VC industry is so discriminatory. Less than 5% of investments go to women-led companies, and just having a woman founder ruins a team’s chance of getting funding , and the numbers are as bad for firms led by African Americans, for example. If we believed investors actually knew what they were doing, then we could only conclude that they were correct to exclude women and minorities from investments, that these founders just couldn’t build great companies.

Of course, the data clearly says otherwise: Founding teams with women on them significantly outperform male-only teams. Because investors don’t know how to pick a good company from a bad one, they are relying on access and reputation, and because they’ve never let women or minorities in before, they can’t now. Their “pattern matching” doesn’t hit here.

This matching algorithm that runs our industry is reliant on privilege and luck. Venture firms and founders are almost exclusively white men from expensive schools (with a huge proportion from just Stanford and Harvard), and if you were lucky enough to be an early employee at Facebook or Google (who have historically used the same sourcing requirements), then that’s a big leg up, too.

To be clear, I think some investors are much better than others, and entrepreneurs haven’t built huge, successful businesses out of sheer coincidence. It’s not that there’s no skill involved, or that the people who get so rich instead deserve nothing. It’s that skill is an over appreciated (and often small) part of what determined their success.

You will rarely find communities admitting that privilege and luck are what determine outcomes. Human nature itself has a deep aversion to accepting this. Instead, we do what humans have done forever: We develop myths.

Humans deeply believe that people get what they deserve, and deserve what they get, despite the evidence to the contrary. So many of our cultural biases are a story created to justify a reality we would like to perpetuate. For millennia we’ve been told that royalty was special, and that’s why they were in charge, when it was patently obvious that their ancestors were just the best and most ruthless at organizing enough troops to control a chunk of land. Genghis Khan was history’s greatest murderer, which enabled him to spawn kings and kingdoms that lasted for seven centuries, but you can bet his descendants didn’t use his skills at genocide as justification for their lofty positions.

Similarly, myths have grown around venture capital exist to explain the winners and losers. Somewhat like royalty, these myths help convince us that VC is more than privileged people using their positions to make lots of money. They must be winning because they deserve to win. Equivalently, people lose because they didn’t deserve to win. You could waste your life reading about how this founder got rich because they were smart and worked hard, or that investor succeeded because of their investment strategy, but you couldn’t consume a whole morning with the stories of equally smart founders who worked just as hard but went broke, or investors who applied that same strategy but somehow didn’t make it on the Midas list.

Thankfully, we’ve seen some really interesting experiments focused on eliminating access as a criteria for investing. Social Capital recently launched a programmatic investment algorithm, and Village Capital uses peer decision making between entrepreneurs. Backstage Capital was founded explicitly to invest in those who can’t get capital from the system as it exists today.

With these and related efforts, I’m optimistic that we can begin to peel back the myths about what makes a great investor, entrepreneur, or company, and instead begin building a more open market around investment and company creation. Only then can we hope to see venture capital include, enrich, and benefit all parts of the economy.

The Tension at the Heart of a Freemium Business

luke@lukekanies.com (Luke Kanies) — Mon, 30 Oct 2017 00:00:00 +0000

Giving something away for free can be a fantastic way to achieve adoption, but it raises a permanent conflict. The conflict is even greater when the free products are open source.

Driving adoption is a key requirement for any product business, and a popular tactic for doing so is hooking people with something free in order to sell them products once they’re invested. The most famous example is Gilette “giving away” razors, but this model is now widely adopted by software companies striving to grow quickly but cheaply. Splunk and New Relic are examples of fantastic businesses who allow their products to be used for free in some circumstances in order to drive long-term adoption and revenue.

Success with this tactic requires mastering the tension that it introduces: The thing you give away must be valuable enough that it drives adoption, but not so valuable that people don’t eventually need to upgrade.

If it is insufficiently valuable on its own, no one will use it, but if it is so valuable that people can succeed without ever paying, then you have users but not customers.

The goal of a freemium business is to separate the commitment from the buying decision. I want you to become so successful with my product that you become committed to it, which means when I finally ask you to pay the sale is both easier and more valuable.

For you to become committed, you must be successful. You must achieve whatever goal caused you to download my software in the first place. However, in your success, you must also hit some wall that requires you to upgrade.

Managing that balance is crucial to success with freemium. Give too little away and you don’t get any adoption, but give too much away and you have a passionate community but no money to pay for building the software.

This balance is complicated by the fact that the best communities are built around authentic identities, so changing what you give away involves changing who identifies with your company and why, which is much more fraught than tuning your business model. It’s a sufficiently complex operation that it’s one of the key dials that a freemium business will manage throughout its existence.

As difficult as this balance is in a proprietary software business, it’s much harder when dealing with open source. After all, when you decide to open source something, you’re not just choosing to make something free, you’re giving your community permanent rights to something you own. While you technically have the right to keep private any further updates, in practice once you open something up you have to either keep that project free forever or let it die.

Your community considers the opening of your code a permanent commitment to maintain this software for free forever, and anything less than that will generally be considered betrayal. They didn’t adopt you, or your revenue streams; they adopted this free thing that you promised would work well for them, and they’re going to raise hell when it doesn’t. They don’t care that your business model requires that you charge for analytics, or for clustering. They need those features to be successful, you implicitly promised them success, and now you’ve got blood coming out of your ears.

In some sense, successful open source software companies require lightning to strike twice: They need to free something that it is so great you’ll adopt it without paying, then they need something else that’s also so great you’ll pay them. Most OSS companies try to provide this extra value at the margins, because getting that second lightning strike is so hard. Proprietary software companies can provide hard limits on how you take advantage of their most useful features, but if those features are open source, then of course you can’t limit them in any way. You’ve got to develop additional features instead.

It’s not a coincidence that we’ve seen so few open source software companies build large revenue streams. Most end up shifting their focus from the open source that started everything to proprietary software that drives their business. The best companies remain community-oriented, but that is by no means a given.

If you’re considering building a freemium business, you must treat the success of this balance as a key business metric. It underpins the unit economics of your business, determining how big the funnel is based on adoption and how many convert based on the willingness to pay.

Getting it right is worth it because it enables a fantastic company with low marketing and sales costs, an engaged community, and easy upgrade paths for your best users.

Should You Open Source Your Product? That’s the Wrong Question

luke@lukekanies.com (Luke Kanies) — Mon, 23 Oct 2017 00:00:00 +0000

Don’t get stuck on a solution until you know what problem you’re trying to solve.

I often get called in to help companies make decisions about their open source strategy. They want to release key parts of their software as open source, but they need some help figuring out the best way to make it happen. I always ask them the same question:

Why? Why are you planning to open any of your code?

They rarely have a good answer. They’ve already decided that this is the right decision, because a board member, founder, or customer has said it’s necessary, and they are just trying to figure out how to do it. But it’s impossible to build a strategy to accomplish your goals if you’re unsure what they are.

Are you trying to build a community? To get public review of core functionality? To grow adoption? Something else entirely? By now most people have realized that open sourcing software isn’t a route to magically get free contributions so you don’t have to write your own software, but there are plenty of other myths around it.

I’m a huge fan of open source. I’m an even bigger fan of the companies behind it building a sustainable business so they can stick around for the long term. Open source is a tactic, taken to accomplish (hopefully) a key goal for the business. It has upsides and downsides, like most tactics, and it has to fit your goals.

There are damn good reasons to open source software, either as a business or as an individual. Most motivations I’ve heard from founders don’t stand up, though. Companies have built healthy communities (Github, Atlassian, VMware, Microsoft) and scalable freemium models (Github, Splunk, Slack, Trello), all with no notable reliance in publishing open source software.

The fact that these businesses have been built with proprietary software doesn’t mean yours should be. But it at least shows that your goals have multiple routes to accomplish them, and you can’t just say you need to open source your product because you want the same adoption path as MongoDB.

Many open source software companies don’t have the luxury of starting with goals and working backwards. If your project started first, and you only built a company once your community made it clear you should, then many hard questions are already decided, and you have to work around the reality of your situation. Docker is a great example of a company being built in response to community demand, because an existing project got adopted broadly enough that the opportunity arose to build a business (or in their case, shift the focus of an existing business), and some of their struggles can be attributed to the path they took.

I open sourced Puppet through a combination of ignorance and confidence. It honestly never occurred to me that I could build a company around commercial software, since I really only knew the OSS world well, and when I started Puppet, around 2005, there seemed to be plenty of great examples of successful business models around open source so I assumed I’d figure out which of those made the most sense when it came time. In the mean time, I did exactly what needed doing: I focused on building software that people loved, and then convincing people to use it. By the time I realized how hard it really was, we were too far down the path to dramatically change our strategy.

If, however, you are early enough that all options lie before you, you need to take the time to ensure you have the highest probability of success. It’s hard enough to build a company from scratch; don’t make it harder. Your team should actually view open source as a liability, in the financial sense: You’ve made a commitment (usually implicit) to your community that you’re going to spend money indefinitely to make sure this software gets better and better. Just like other financial liabilities, like office leases, employee contracts, and partnership commitments, these can be fantastic successes. But like any liability, they can just as easily be a painful drag on your work if done poorly.

I think open source can be a huge help in building community, widening your marketing funnel, increasing the quality of your code, and building software people love. But you have to do it with clear ideas of what you’re trying to accomplish and what you’re willing to do to make it happen.

Moving Beyond Silicon Valley Software Companies

luke@lukekanies.com (Luke Kanies) — Mon, 02 Oct 2017 00:00:00 +0000

We need a new financing model to build new, better companies. Part 1 of a series.

Originally published on NewCo Shift

Two decades into a software career, I’m still moved by its potential to improve people’s lives through connection, automation, and access to information, yet I’m less convinced than ever that our financial systems are built to get the most out of it.

This is the first post in a series I’ll be writing on the structural problems in venture capital. These problems aren’t a condemnation of the industry, they’re an attempt to outline where the industry fails the market. This failure helps to explain people’s experiences, but I think also helps to outline the opportunity and need for other ways of funding companies. These ways will also have flaws - they’ll likely not be great at building unicorns - but they’ll be finding people and markets ignored by the current environment.

Like the general financial industry, the world of venture capital has become adept at using money to create more money, but it does not consider of the wisdom of its actions. It chooses easy answers, thus leaving harder but better questions unexplored, and accepts high collateral damage to the employees, customers, and industry that at best is painful and at worst is pure exploitation.

I am pulled to build more software that, like Puppet, helps people get higher quality work done in less time and with more joy. But that kind of utopian phrasing is used by every company in silicon valley, whether they do advertising arbitrage or sell you pet food, all while asking their workers to work crushing hours for lottery pay, no safety net, and 19th century ideas of labor force participation. The devaluing of women and minorities as either workers or buyers is both discriminatory and bad business. It’s true I’ve heard no overt support for child labor, but I expect that’s mostly because kids don’t have CS degrees from Stanford or Harvard.

I believe it is possible to design a kind of financing vehicle that is less subject to these flaws. There is a lot of money to be made in enabling the whole market to participate in the technology economy, and given that productivity has stalled since 2004 (coincidentally around the time that social networks and attention-seeking advertising-driven business models took over), there’s a lot of opportunity to deliver value by increasing productivity.

The major concern about increasing productivity is that it generally means fewer jobs, and the lowest-skilled workers tend to be first and hardest hit. I do actually believe in reeducation and the movement of labor to new opportunities, but you can’t ignore the trauma of career changes and industry churn. My work at Puppet showed that empowering people at the front line is how you drive both change and value. Too many industries focus on getting rid of the experts at the coal face, when instead they should look to elevate them. This would improve productivity while developing careers, instead of destroying them.

Unfortunately, venture capital is structured to require trauma to everyone involved except the investors. Too often, even the limited partners who are the source of capital suffer, with only a few firms delivering the kind of returns that the asset class purports to offer. The industry is built around making many bets and expecting most to fail. Even worse, every company who wants to participate must make a claim to be able to reach these heights, even if they don’t believe it, and then they must risk their own death attempting to keep that promise.

The model itself requires that companies either go public or kill themselves. Nothing else fits in the spreadsheets. Again, this guarantees trauma to nearly everyone involved - even the ones who make it out suffer the whole way, leaving a trail of burned out employees and failed customers.

I think there are amazing companies waiting to be created that can deliver life-changing benefits but can realistically “only” generate $30m, or $50m, a year in revenue. At 25% margins for software, these can be huge sources of profit, but a venture capitalist would derisively call that a lifestyle business and either not fund it, or force it to kill itself in an attempt to scale beyond its natural size. These can be great businesses, but because business funding generally fits into either conservative bank loans, or 10x-oriented venture capital, there’s no model today that respects them. Jason Fried and DHH at Basecamp have done a ton of great writing on this.

Jennifer Brandel, Mara Zapeda and others have launched the Zebra movement, focused on helping founders shut out of the VC world start companies that enrich themselves and their communities rather than their investors. I think this is an awesome effort, and has been an inspiration to me.

It’s true that this kind of company could not have as high a failure rate as venture capital does, but, ah, that’s not exactly complicated. I mean, VC literally requires failures of most of their companies, so I’ve got a nice anti-pattern to work against. There are well-worn practices for improving operations, people, and efficiency at even young businesses, but VCs haven’t bothered to invest in any of them, because again, they expect most everyone they work with to fail. Vista Equity, among many others, has shown that being more than dumb money can be more than just talk.

You might say there aren’t enough entrepreneurs out there, and all the great ones are focused on building unicorns in silicon valley. I say phooey. Tell that to the millions of people who start restaurants, corner shops, and franchises around the US. Frankly, tell that to all the people who pitched the valley but weren’t white men, or couldn’t afford to live in the bay area, and thus could not get funded. Because the valley itself refuses to believe great entrepreneurs can be women of color, or uneducated, or have a humanities degree, there is a long waiting list of great people ready to be given a little money and a little trust.

Silicon Valley today is baseball before Jackie Robinson, golf before Vijay Singh and Tiger Woods, tennis before Arthur Ashe and the Williams sisters. It’s the World Series with only North American teams, the World Championship game with only American athletes. It might do great things and be a great spectacle, but it’s weak sauce, because you know you’re not really competing with the best. In fact, you’ve structurally guaranteed you won’t, with all your stories of pipeline problems, lowering the bar, and various other grandfather clauses.

I do not believe in the primacy of ideas. I do not believe great entrepreneurs are in short supply. I do not believe we will run out of awesome opportunities in software in my lifetime.

I want to collect funding that will enable those unsupported entrepreneurs to reveal and develop their greatness, I want to build software companies in spaces that currently have no software, and I want to generate great returns for everyone involved without hemorrhaging people and money.

Yes, I know that means I have to find a different way to deliver returns to investors, because I don’t want my portfolio companies to have to sell. Yes, I know that means I will be creating a new asset class, with all the complications that entails around convincing LPs to invest in it.

The fact that others dismiss it out of hand for being impractical is exactly what excites me about it.

Please follow along in the rest of my series as I delve into the individual structural flaws in venture capital that I think outline what a competitive funding instrument must find a way around.

Stopping the Software Factory

luke@lukekanies.com (Luke Kanies) — Thu, 28 Sep 2017 00:00:00 +0000

It’s only a good practice if you have the cultural discipline to make it work.

Stopping the factory used to be sacrilege - companies figured they were only making money if the line was moving - so when Toyota adopted this practice on their manufacturing line is was a huge shift. It was taken so they could resolve quality problems immediately, which saved them time and money because otherwise the problems occurred in many cars and had to be fixed later. It was better to pay the price of stopping the line now than the price of redoing the work later.

This was a huge cultural shift throughout the organization. Management had to recognize the cost of fixing quality later, and change their short-termer mindset around the moving line. The workers on the line had to learn not to let problems slide by, to ask for help immediately and not rest until the problem was truly resolved. Everyone had to learn to diagnose problems in the line without blaming individuals, otherwise trust was impossible and the real problems could not be diagnosed. (This is also where Toyota developed their ‘Five whys’ practice for getting to the bottom of problems.)

While we’re obsessed with individual techniques like Kanban, the team at Toyota knows that it’s culture that allows them to win, not the tools they use. That difference is also exactly why it took decades for the rest of the industry to catch up: You can adopt technology quickly, but culture? Not so much.

We experienced the same problem when we tried to adopt this practice in our software teams. People loved the ability to stop the factory, and they used it all the time. Often, it did actually increase the quality of the work we did. But overall, it made things worse for us, not better. It was causing arguments, bad relations, and most importantly, was reducing our long-term efficiency, not increasing it. It became nearly impossible to ship software.

What went wrong?

We had adopted this practice without developing the cultural discipline to make it work. People weren’t stopping their own lines to resolve systemic quality issues; instead, they were stopping the work of other people to question their decisions. A technique for improving our work became a technique for attacking our strategy. Disagree with the product that team is building? Stop the factory! Don’t like the database they chose? Pull the cord!

Yuck. That’s not how that’s supposed to work. It didn’t help that I’ve always pushed hard for people at the front line to be opinionated and educated about as much of the product as possible. Suddenly they’re applying those opinions to the work of others, and we’re not building higher quality products, we’re just arguing non-stop about what we should be building and how.

This required that we develop a couple of new cultural skills. When you read about the Toyota system, it’s striking how much of what they accomplished was essentially cultural technology - that is, tools for developing and sustaining culture - rather than manufacturing tech.

Our failed experiment at letting anyone stop the factory showed that first everyone needed to understand the value in stopping the line. We started to point out that they should be focused on their own work, not others’, and thus should only be able to stop their own line. Most importantly, remember back to the point of pulling the cord: You’ve discovered that your own work is compromised because of a quality problem in the system, and you need time and help to fix it. That had to be why we stopped the line, and nothing else.

That being said, people’s concerns about decision making in other parts of the organization needed to be heard. Expert teams should being given the power to build what they think is best. But even the best teams need outside reviewers, need other experts to question their assumptions and conclusions.

Our work cycle needed to include productive, constructive feedback opportunities. The best process like this I’ve ever seen is in Pixar founder Ed Catmull’s Creativity, Inc, where he describes their “Brain Trust” system for helping directors make great movies. This is such a great system that it’s worth reading yourself, but the aspect that stands out is the responsibility of the team giving feedback to the director:

Your job is to help them see the flaws in their proposal. You can not and must not propose solutions, and you can not demand that they agree with your complaint. Even if you’re the CEO. You are a collaborator helping someone do their best work, not a competing director trying to get your ideas into the movie.

See the parallels to the value in stopping the line? It’s about improving the quality of work, not making a power play, or being right about something.

Pixar has a critical second layer to this process: Management decides whether to ship the movie. This allows them to give the director full responsibility for the movie. If directors don’t agree with the team’s list of flaws, that’s fine, but in the end, you have to convince the management team that the movie works.

The thing I love about this is it gives you concentric circles of iteration and control. The movie team makes decisions constantly about what to do and why, then they loop out to the Brain Trust to get feedback on what they’ve done, and finally there’s a business cycle that determines whether the movie should ship. Everyone gets to contribute, but your business concerns are isolated from the work cycle, giving teams the freedom they need to build something great.

I was never able to figure out how to adapt their process to software, but I hold out great hope that there is a way, it just requires a lot of evolution. Pixar gets to take five years to make a great movie, but you never get that kind of window to make software. They also kept all of the iteration inside the building, where modern software should be built in layers, in collaboration with your users and the market.

Even without being able to directly adopt a better practice, we recognized the need for two layers of process. We thinned down people’s ability to stop the work of others, and at the same time built feedback loops at larger intervals and in different forums for strategic concerns to be heard. We also began building cross links between teams that allowed those with concerns to collaborate with those doing the work, rather than leaping in and shouting ‘stop!’.

There are many great inspirations for how to build better software, faster, but all require some level of adaptation. I am absolutely convinced we will see a software production system as coherent and clear as Lean Manufacturing, but I also think it’s going to take a long time, a lot of experimentation and failure to get from here to there.

Hopefully our experience, our successes and failures, can help you get there faster.

Framing the Risk in Your Business

luke@lukekanies.com (Luke Kanies) — Sun, 11 Jun 2017 00:00:00 +0000

Growth requires risk. But don’t overdo it.

Originally published on NewCo shift

I was asked by a CEO recently, “How do I know if my product is ready to scale?” He thought he was ready to raise money and start growing the company, but he didn’t really know how to be sure.

Venture capital exists to invest in enterprises that have a huge opportunity but are also a big risk. Yet VC firms tend to actually be pretty conservative, relying on pattern recognition and social networks to make their decisions. This turns investor pitches into bizarre encounters where you have to help them see the huge risks in your business and how this risks can generate massive returns, but you also must convince them that you have all of that risk managed, so there’s no reason to be afraid. I’ve been turned down so many times by investors “until we’d taken the risk out of the business,” and every time, I’d sit in the car outside their office park thinking, “But don’t you exist specifically to make big bets?”

I can’t tell you how to raise money, because no matter what it’s hard, and there’s no special trick to it. Well, there’s one trick: Sell a company for a billion dollars. Do that, and you’ll never have trouble raising money.

This article is only for those who are not quite so lucky.

What I can help with is framing your company so that you can more coldly see and explain where the risk is, and with that hopefully you can help others get excited about the vision in your head, the beautiful thing you’re trying to build.

Step one is understanding your market risk. If you’re raising money, you have to convince your prospective investors (if you’re talking to typical valley VCs, anyway) that you can build a company that can do $100m in revenue at some point. So, convince me your market can support a company that can hit that scale and still grow. That means the market needs to be hundreds of millions, and probably billions. With Puppet, we knew the overall management market was between $6B and $25B a year, depending on your definition, which made this part pretty easy for us, but lots of companies are creating a market, so they have to spend a lot of time on this topic.

The next big question is why you, particularly, will win. Sometimes this is called technology risk, but companies win for many reasons other than technology, especially these days. Puppet didn’t necessarily have the best tech in the world, but we had a focus on the user that no major player in our space had. Everyone else was worried about the buyer, and we focused on helping the individual users succeed. Other companies have a cultural edge, or even just a mindset that others can’t copy. Whatever it is, though, there needs to be some reason why you’re going to take this big, awesome market.

I call this strategy risk. You’re planning to take the market in a particular way, and you think it will work but you don’t really know until you play.

A high-growth company usually trades off strategy and market risks. If everyone else agrees this is a great market, then you’ll have lots of competition so you need a unique strategy that sets you apart. If it’s a mature market with clear revenues and margins, you need a great strategy to fight against big incumbents, who won’t go quietly. If, on the other hand, no one else agrees this is a good market, and you get it all to yourself, then the strategy doesn’t need to be differentiated, so you can run the least risky strategy you can think of.

You can’t walk into a VC’s office and say there’s neither market nor strategy risk, because that business is just too obvious. It’s either so obvious it’s actually stupid, or so obvious that you’re one of a hundred players running the same game - both of these are bad bets. You’re not getting that funding round.

The last piece is execution risk. You’ve got a good market, you’ve got a solid strategy. Now convince me that you, particularly, can build a team and make this happen, within the window you have available. This is 99% about the team. Can you hire people? A lot of them? Get them working together? Do you know how to ship software, sell software, market it, etc? Some of this you can do through force of will, some you can do by just being smarter or faster, and some requires that you really nail a couple of pieces, but most of it is about building and scaling a company that can execute your strategy. This is the grit, the work, the hard part. The best strategy in the best market is worthless if you can’t do the work.

There’s one more critical point about risk. It should be obvious, but somehow it’s not.

You want to minimize the risks you take. There’s something about what you’re doing that’s unlikely, probably scary, and quite possibly stupid. That thing has to exist, because it’s what makes your business valuable. Without that huge risk, you can’t possibly achieve the massive payoff you’re looking for. Take that risk, put it on a pedestal, love it.

And then do everything you can to not let other types of risk into the rest of your business. If you know your major risk is strategy, why introduce a massive execution risk at the same time? No. Your work is scary enough that you should be conservative everywhere possible. Pick something you know works when you have that luxury, because you won’t get it very often.

This frame should at least get you the first three slides of your presentation. There’s plenty more to know before you can convince someone you can go out there and win, but being able to clearly talk through the risks in your business and how you’re managing should at least help you get a seat at the table.

Productivity Is Not About People

luke@lukekanies.com (Luke Kanies) — Mon, 22 May 2017 00:00:00 +0000

How best to combine “software” with “management”?

First published on NewCo Shift

You’re doing productivity wrong. Actually, it’s worse than that. You have no idea what it is. And no, this isn’t some sort of technical, jargon-y sense where I’m arguing over whether to measure it in terms of lines of code, hours spent typing code, or something else. Your core understanding of productivity is entirely wrong, and it’s making your company worse at everything it does.

Productivity in the software world is discussed in terms of the individual, and usually phrased as getting more of a person’s time on the thing they were hired for. “Hey, I didn’t hire you to talk to users or attend training! I hired you to write code!” Even the developers join in: “Every minute I spend in meetings instead of writing code is wasting company money.”

This is stupid and wrong.

I had a conversation with a CFO recently who asked me why his company should use Puppet. I asked him in turn, what does it cost you to ship software right now, and what’s the value of lowering that cost? He said, not surprisingly, that he could not answer that. This isn’t to pick on him - most software CFOs would say the same things, since their job rarely delves into software operations.

Can you imagine having the equivalent job description with a manufacturing company? Picture the CFO of GM saying their job doesn’t require they understand the financial aspects of building cars. They’d be shipped out in disgrace. Yet somehow the software world tolerates ignorance of the financial implications of their core work product, software.

Sure, you might say, our finance teams can’t help us build more, better software for less money, but we don’t need their help because we intuitively know that more time spent writing code equals more productive development teams. Right?

No, you don’t. Again, you’re wrong. This is exactly, specifically how you’re wrong.

Toyota showed decades ago ensuring everyone is busy all the team is a great way to lower productivity. Yeah, you read that right. Lower. If you can’t shut the factory down (thus making everyone idle), you can’t fix problems at their source, which means every car you make is broken in the same way.

As another example, teams can almost never be perfectly balanced in output. Maybe you make doors much faster than you make engines, so if your door team is always busy, you end up with too many doors. Just like in development: The interface team might work a bit faster than the backend team, so they build an interface on a myth and then you can’t ship their work because there isn’t coverage on the backend. Oops. But hey, at least that interface developer didn’t spend any time in training, testing their prototypes with users, or bringing fancy coffee to the backend team.

The stupid thing is modern industry figured this out with its very first business consultant, Frederick Taylor, who developed a thing he called ‘Scientific Management.’ His ideas sounded good: I’ll hold a stopwatch and find ways to encourage people to get more done in a given amount of time. Seems reasonable, right? Probably more advanced than how most software companies do it today. In fact, he was really successful: He spawned our nation’s first management consultants, and they’ve continued to make tons of money on the fraud that he perpetrated more than a century ago.

Because that’s exactly what he was: A fraud. He was fired from his first gig because it ruined actual productivity, yet managed to convince corporate America that it was such a good idea they should ignore the little problem of it not working. Here we are a century later and the Harvard Business Review is still giving advice using Taylor’s own language.

But, you ask, what do I focus on if I’m not allowed to just track what the developer works on?

Now, Grasshopper, you set foot on the path to wisdom.

These are examples of waste in the form of rework (fixing quality problems later) and inventory (the built but unshipped interface work), but there are many other kinds that pervade modern software development. Lean Manufacturing is our most complete and coherent philosophy of productivity, and its name isn’t just decorative. It reframes the problem of optimizing productivity into the practice of reducing seven (or sometimes eight) kinds of wastes, including those above.

The funny thing, though, is that none of these wastes are visible if you just look at the individuals involved, so measuring what the people do isn’t just worthless, it’s actively counter-productive. See what I mean about all the wrongness?

Transport is a great example. You might have a person at your company specifically tasked with this (the most famous example from this is certainly from Office Space, but there are rational reasons for such roles in modern software teams). Intuitively you’d want this person to be 100% busy, yet optimizing the system to need more transport hurts the system even while it makes your individual stats look better.

Our world of software is fundamentally confused because it can’t move past thinking about the people to seeing the system. The first page of results on software productivity pretty much exclusively focus on the people, and even developers will say they should be spending more time writing code and less time doing other stuff (like in meetings with product managers or customers).

This is the challenge of our industry over the next few decades. It took around two centuries to get from the first industrial mills in the 1700s to the development of lean in the late 1900s. There are times where I think we can do better, learn faster, but then I realize how much more complicated our problem domain is, and I start to wonder. At least in factories you can physically measure inputs and outputs, and you’re consuming and producing discrete, easily measurable work. With software - especially SaaS built on the public cloud - discreteness is impossible, and even measuring the cost of inputs often approaches impossibility. It’s much harder to optimize systems that extend far beyond our own data-centers (if we even have them).

Nonetheless, this is our challenge. The first step is to move away from this focus on people, from this view that the developer’s precious time at keyboard is our main concern. Only then can we start to truly get better at building better software, faster, and for less money.

Leadership Is Direction Plus Constraints

luke@lukekanies.com (Luke Kanies) — Mon, 15 May 2017 00:00:00 +0000

How I went from a capricious boss to a powerful partner.

Originally published on NewCo Shift

Early in my tenure at Puppet, I had one of my employees, José, make laptop stickers. He said we already had some, and I said, yeah, but they suck. So he designed something different. I said nope, still not right. Finally, in frustration, he said, “You clearly know what you want, can you just tell me what it is?”

I expect many of you will recognize this problem. It is sometimes called “Bring Me a Rock”, which pretty well captures its absurdity. Becoming a better leader required I find a way past it.

To my chagrin, I am often described as having “vision.” I hate this. It implies I know what I want, that I have some kind of clarity. I don’t. If anything, I pride myself on my uncertainty. I am a deep believer in open-minded, unsentimental experimentation and I think one of my true skills is knowing where to focus that research, rather than knowing what the research will find. This is pretty much the exact opposite of having a vision. So why did so many people think I had one? Why did everyone around me look to me for answers, instead of doing their own exploration?

I was tempted, but Kanies’s Razor kept me from believing it was just because I was so smart. Finally, someone partnered fantastically with me and helped me see that these are the same problem, solvable through better communication on my part.

In 2014, Puppet moved into a large, new office in Portland, OR, and we had the opportunity to strip the building down to its bones and build out the space we wanted. We were lucky enough to work with Corey Martin of Hacker. He and his team were great at really listening to me, and pulling out what I truly cared about, never getting frustrated or giving up when I was equal parts opinionated and incoherent.

I don’t always know what I’m talking about, but I’m pretty much always sure that I’m right. - Mojo Nixon

Corey quickly realized that I didn’t know what I wanted, but there was something worth extracting from all of the beliefs I was expressing. And, of course, I was paying him, so he did kind of have to actually listen to me. We spent the first term of our partnership working out the direction: What do you want the space to feel like overall? What impression do you want to leave? There are a few different ways to arrange this kind of office, which one appeals more and why?

Once we had that theme, now we could create an actual design. This is where we started pulling little ideas off the shelf - some mine, many theirs - but a design needs rules, some rubric to tell the good ideas from bad. For instance, one of the awesome things about our space is all the great windows and the views they provide. It was important to me that every person be able to get natural light (which is in short supply in Portland) and to have part of that view. This is one area I wouldn’t compromise, but there were many other hard constraints, for reasons of style, cost, or good old Newtonian physics. We captured all of these, and used them to quickly reject ideas that didn’t fit, no matter how great they might have seemed.

We still didn’t have a design, but we had a direction, and a bunch of constraints. Crucially, the whole team had them, they weren’t just some black box between my ears.

It turned out that this was enough of a platform that the team could quickly generate, tune, and reject new designs, so their creativity was opened wide, and my feedback on their ideas made sense. Once the framework was explicit, it became easily extensible. Suddenly discover a constraint you care about but haven’t shared? Add it to the list. Reevaluate your design with the new rules. Done.

They built a beautiful office. Yes, there are some details I lay claim to, and there are a couple of areas where I put my foot down on high-level design components, like open stairways between the floors, but this is their design, their awesome work space.

As I reflected back on how successful this partnership was, I knew it was a teaching experience. You learn far more from successes than from failures, and most of my attempts at this kind of partnership had failed.

Obviously, a big part of it was just how well we were able to partner. You can’t force this. Corey and his team trusted me and knew they had to deliver something I loved, and I trusted them, knowing that they were great at both the creative and implementation aspects of their jobs.

The framework that grew from this partnership enabled the team to do great work, work that I loved. I think I’m most proud of just realizing how special the experience was, ensuring I took the time to understand why. That investment provided a tool I’ve been able to use in almost all of my subsequent work as a leader.

My single most important role as a leader is to describe the direction I want to head, and if at all possible, I need to explain why. A lot of leaders can’t or won’t cover that, and frankly, lots of people have done great work without ever knowing why they were doing it. I agree with Simon Sinek, you’re a better leader if you Start With Why, but you don’t meet the basic qualifications of a leader if you can’t at least point the team in a direction.

That’s not enough, though. The gap was why I often found myself saying the equivalent of, “No, a different rock.” Working with Corey and his team taught me the importance of expressing the constraints, not just the direction. These allowed the team to take ownership of the design, which was absolutely critical to unleash their best work.

This framework of communicating direction and constraints provided necessary separation. I could step away, stop being in people’s faces and checking their work, and they could go off to their lab benches and iterate in peace, knowing both that they could quickly see if they were close, and also that if we had some sort of problem, we had something we could tune and evolve.

In the other big projects I’ve had since then, such as rebranding Puppet, designing new products, and hiring executives, this framework has helped immensely. With it, I am a better leader, and a more pleasant leader, and the teams I worked with do better work, faster. And we all enjoy the process much more.

When It Comes to Culture, You Can Be Right, or You Can Be Successful

luke@lukekanies.com (Luke Kanies) — Tue, 09 May 2017 00:00:00 +0000

Apply the lessons of product design to your company culture

Originally published on NewCo Shift

Every founder understands the importance of culture in the long-term success of their company. Yet rather than valuing and supporting all employees, organizations like Uber still manage to build a toxic, poisonous one. How does this happen, and what can you as a founder do to prevent it?

We’re still in the early days of understanding how to build great culture. However, the barriers to doing so are surprisingly similar to another area where we’ve come leaps and bounds in the last decade: Creating great products. The similarities in their problems mean the tactics for solving them should be portable, too. In both cases, the barrier is essentially:

You’re creating for someone else, and they get to decide whether you succeeded.

Your opinion matters, but only as part of the feedback loop between your work and the outside world. Eric Reis and Steve Blank have done a great job of teaching us that facts live outside the building, and the real test is to go find them. You can’t rely on your own perspective, because you’re not the ones deciding whether to buy.

A product solves a specific problem for a specific customer, whose perfect solution might fail the very same problem on another person. When it comes to testing your product, the only experience that matters is that of your target customer. Failing them is failing full stop.

Your culture has the same need to dial into your audience. As the founder, it doesn’t matter what you think of the company’s culture. It’s not for you. But for better or worse, you do get to decide who your culture is for. A lot of these failures of culture are actually the CEO making bad decisions about who the culture is for.

For example, we all know stories of toxic employees driving other people out of the company. The excuse we hear is that this person is “too important to fire.” It’s presented as a choice between firing this person or making some people uncomfortable, in which case it’s easy to keep this high performer around. But that’s not actually the choice you’re making.

When you choose not to fire someone who harasses women, what you’re really saying is, “This person is more important to my company than women are.”

You’d rather your organization and leadership discriminate against women, have them leave your company, and have your people and teams suffer all the psychological damage that results from choosing to protect one person over a whole class of people.

It’s the same for an employee who discriminates against minorities, veterans, disabled people, or any other group. You can keep that one person, or keep the ability to hire from that entire labor pool.

Of course, that toxic person won’t actually prevent you from hiring from a whole group. That would actually be better in the long run. Instead, you’ll hire a few, but they’ll only stick around long enough to be almost valuable to you. People who stick around for one to two years are incredibly expensive - but your toxic employee will cause them to leave. You get to pay to recruit and replace them, to train them up, to watch teams form, and then to watch them fall apart again. And again. All because you couldn’t make a hard call on one person.

Conveniently, you’ll then be able to look back after a couple of years and say that these people who left just didn’t fit in, as though it’s somehow their fault that you’ve designed an organization that excludes them as target users.

I think there’s a strong moral case to made for inclusion, but you don’t need it. All you need is basic economics. Great people are scarce, and every group you exclude reduces that pool even further. Your investors want you to have the biggest possible user base to increase your addressable market; don’t you also want the largest possible employee base? Women are 51% of the population, and in the US, whites make up 72% of the population. If you only hire white men, with maybe trifling exceptions, then your target market is only 36% of the country. Reduce to just the working age population, and you’re at 22% of the pool. And that’s before you slice for experience, location, etc., much less silly requirements like a degree from an elite school and experience working at Google or Facebook. Every demographic you exclude reduces your possible employee base, and with it your chance for building a great business.

Let’s say I’ve convinced you. You have to design your organization to include other groups. Now what do you do to ensure it’s working for them?

Again, the facts live outside the building. Even worse, as the founder you don’t get the truth. Most people do not speak truth to power because they either feel unsafe, or actually are. Even worse, most powerful people don’t want to hear it. This attitude helps explain why a lot of cultures are so broken. You have to fight your instincts, your comfort, and often, your happiness to get the truth from those who own it.

In the fall of 2014, I had dinner with eight women who worked at my company. This was my most difficult experience as CEO. They were pissed off. Their experience was very different from what I thought was happening, and hearing it directly from them hurt.

I realized in hindsight that I’d made the tactical mistake of collecting the most upset women in the company - getting together with everyone who was having the worst experience- but that didn’t make their experiences any less valid or their feedback any less important.

Thankfully, I was aware of some aspects of what they were struggling with, and I was able to point to three separate projects I was working on, all with defined goals, owners, and deadlines, that would target what I thought were the biggest issues. But I had not realized how bad it was for them, and I was far from achieving my own goals in this area.

My behavior as a result of that dinner would make an explicit statement about who my company was for. I could have taken that deep pain, that searing discomfort, and run from it. I mean, I didn’t experience any of that, and all I had was these whiny women who had this problem. Right?

Would you accept that with your product? Would you dismiss the feedback of eight customers who were on the verge of dumping your product? Would you look at their feedback and say, well, it’s just eight whiny users, I can ignore them?

Many founders choose this path in culture. They keep around the bad managers, the toxic star player, or the oppressive HR policy. But like with your modern software, you have the opportunity - and I say the obligation - to do better.

So go, build your best culture, set high standards for your team. But be very clear about whose feedback you rely on to test whether you’re meeting those standards. If your goal is inclusion and diversity, which it absolutely should be, then you need to listen, really listen to diverse voices, and to those who are systematically excluded from most organizations.

If you can do this, you can emulate the Dodgers hiring Jackie Robinson and the Sorbonne University promoting Marie Curie as the first woman professor of general physics. If not, you will find yourself competing with them instead.

The High Cost of Fitting In

luke@lukekanies.com (Luke Kanies) — Tue, 02 May 2017 00:00:00 +0000

They say authenticity is the key to success, and once you can fake that, you’ve got it made. My experience says it’s not quite so simple.

Originally published on NewCo Shift

When I was 23, I was hired as a system administrator for the first time. I joined BlueStar Communications, which was a young but well-funded company stupid enough to take on the incumbent telecom carriers. Their CEO was a maverick, especially in staid telecom in Nashville, Tennessee. He was bringing always-on internet to small businesses in the southeast (yes, there was a time when this innovative), and blended in about as well as a hockey player in a three piece suit. I was excited to work with someone who I could identify with, and learn from.

He was fired the week I started.

Like the founder of BlueStar, I’d had my own struggles with long tenures. I was fired from a cabinet company after only a week. I lasted a full three month contract at Adidas before having it ended the day I left to visit family. I also lasted only three months in QA and Mac administration jobs.

For all of these firings - except maybe the cabinet shop, which bored me to tears - I wasn’t bad at the work, I just didn’t fit in. You could say I wasn’t really housebroken, that I didn’t know the rules of how people acted in American corporate environments.

All of my prior work experience was remodeling houses with my family, after growing up on a commune. I had no idea what made people normal, I just knew I was missing it.

These failures inspired me to work harder at being worth keeping around, but in parallel I started learning to look like I knew what the rules were and was at least trying to follow them. For someone who only a few years earlier walked around campus with knee-high boots, a spiked leather jacket and a mohawk, this was no mean feat.

This experience with firings was a huge influence when I started Puppet in 2005, six years after I met the CEO of BlueStar. I bootstrapped the company for more than four years, partially because I failed to find an investor I trusted to keep me in the CEO role. The first term sheet I ever received was on the condition that I accept a friend of the investor’s as CEO. (I declined.)

As I grew the team, things got more difficult. One of the first people I hired immediately declared his greater fitness for the CEO role, with zero relevant experience, and tried to convince others to oust me from the company I’d built and they’d just joined.

Yes, I was paranoid, but they really were out to get me.

From my first hire through raising $87m in funding and growing to nearly 500 employees, I could never get comfortable. Everyone I worked with reminded me - unintentionally - that I didn’t fit in, that I didn’t behave as they expected. As I grew into my role, I excelled in areas, but continued stepping in holes that everyone else could see.

The suspicion that I wasn’t faking things well enough was confirmed as I was raising a later round of funding.

Before a pitch meeting, an investor said to me “Now try to be more like a Valley guy, not so much a Portland guy.”

Infuriatingly, I knew what he meant, but also that I’d never be able to pinpoint what I was doing wrong. I worked every day on my “Valley guy” pantomime, from the clothes to the books to the words. This pointed statement told me in stark terms that my efforts were obvious failures to even the casual observer.

Knowing the world saw me as an imposter caused me to hold back. I don’t mean I had imposter syndrome; I suffered from it like most high performers do, but that’s not what this was. The world around me constantly pushed back against what made me “me”, making me worse at just about everything.

I had put myself in a box. I wasn’t even willing to consider ideas that I didn’t think the people around me would accept. I was brave, within that window. I was daring, but not too much. I could do anything I wanted, as long I still kind of looked the part. This box excluded many great options, and notably, excluded a lot of what I most wanted. My weirdness isn’t skin-deep, and a lot of what I wanted just didn’t fit, so I tried to do something that did. Thankfully a lot of it worked out, but I think it could have better, and I know it would have been more pleasant, if I had been more brave, more willing to own my lack of belonging.

It’s worth noting, this was all as someone who did theoretically look the part. I’m a medium-sized white male with a degree from a great school.

I can’t imagine how much worse it would have gone for someone who literally looked different - wrong skin color, wrong gender, wrong accent, disabled, too short, etc. Maybe that was my real problem - people let me in the door thinking I was like everyone else, and only once they started talking to me did they realize how weird I was.

Finally, after almost ten years of running Puppet, I found a way to escape this box I had put myself in. I would quit.

It’s not fair to say this was the only driver for my decision, or even that I was thinking of it this way at the time. What can’t be denied, though, is how much it changed me. I lost my fear of being fired for not fitting in, because I was working to leave anyway.

I couldn’t see the box when I was in it, but when freed, unavailable actions suddenly became doable. I could trust myself for the first time since that first hire, so my cost of decision-making plummeted. I didn’t need to look to society as some sort of arbiter of what’s reasonable.

I had been preventing myself from using my now-highly trained instincts, which reduced me to tackling easy problems or making slow, bad decisions. Or sitting there and doing nothing, which is generally an even worse decision.

Outside the box, my inductive reasoning center could operate without all the second-guessing. I was able to hire a product leader based on instinctive conviction that we were aligned on how to work. I made an incredibly tough call on hiring for Business Development, by following my thread of fear that maybe I was being pulled toward too easy of an answer elsewhere. Most importantly to me, though, I was able to develop and begin rolling out what I think is a truly great product strategy.

I did some of the best work of my life.

This experience has an interestingly conflicting lesson.

On the one hand, the cost of trying to fit in is often too high. No matter how much you want it, you might have to choose between failing at what you want and succeeding at what you can authentically do. If you’re building a team, the choice may come down to those who are great at the job and those you can work with.

On the other hand, I somehow fooled people into thinking I was normal (well, normal enough) for long enough to become a successful CEO in a field where I seemed like an alien to everyone involved. That pantomime was critical in developing the instincts I was able to apply so well as my tenure wound down, and now I have opportunities I never could have dreamed of.

I think the duality of this lesson is important in the conversation around diversity. Puppet couldn’t have existed without some tolerance for my weirdness, but it was also much harder because of it.

I’ll never know if getting out of that box earlier would have caused me to do even better as CEO, gotten me fired ignominiously years earlier, or even maybe caused the company to fail early on. What I do know is that I was deeply hurt by not facing and acknowledging my fear of being fired.

Fear is healthy and reasonable. But you have to pursue it, nail it. Understand it. Not run from it.

I am privileged to have no idea what is in store for me, and no fear at the prospect. I feel no need to fit in anymore, both because I have nothing to prove and because the cost of not fitting in is now one I can afford to pay. If anything, I’m now considered more valuable because I don’t fit the mold.

The lack of pressure to conform brings incredible freedom. Freedom that everyone deserves.

How Can I Help?

luke@lukekanies.com (Luke Kanies) — Mon, 24 Apr 2017 00:00:00 +0000

I am not a technologist. This surprises many, including a CEO I was on the phone with recently. I explained that I had no pet software projects I was working on at home, and thus couldn’t demo her software. She paused for a second, like, “Uh, why are we on the phone, then?”

It’s true that I have worked on tech since graduating from college, and that I wrote Puppet essentially alone while I bootstrapped the company for years by myself. I enjoyed the work, but those were all a means to an end, not the goal. This became more and more clear to me as I hired large teams who really were technologists. I was able to do the work, but they loved it. I naturally fell into different, complementary areas.

So no, I can’t really help your company in sorting out its software stack. Or rather, I could, but you really shouldn’t want my help there. There are better people. Far better. People have found my advice really helpful in the past, but not in this area.

Strategy is where I’ve had the biggest effect as an advisor. You are already deeply committed to your goals - you don’t need my help figuring out what to do. You are just as committed to how you’re going to achieve them, but probably haven’t spent as much energy thinking about it and expressing it. This ‘how’ is your strategy, and key aspects are decided early on, whether you mean to or not.

Do you want a big field sales force, or a self-service model? Either way, why? How does that choice affect your product price point and service attach rate? There isn’t necessarily a right or wrong answer, but a choice will be made, and it has massive consequences on the life of your company. My great ability is pestering you with questions until you’re forced to put your opinions on the table and really examine them. As a leader, your job isn’t just to be opinionated - it’s to be able to usefully express that opinion to your team.

Product is the second major area I will push you. Again, this isn’t about the tech, or the code. I don’t care how it’s built. The first step is being clear about what problem you want users to hire you for. I bet you have a decent grasp of this, but you have to go down a layer into which users you’re going to start with, how you’re going to parlay them into a larger group, and how all of that relates to adoption within a single organization and across a market. The path of a product’s adoption is as critical to plan out as the features you build.

All of that ties into how you price. How does it drive user behavior? What do you want to incentivize through low or free pricing, and what must you charge for to make your business work? How does charging per seat vs consumption vs features change their behavior and affect your business?

All of this must come together into a coherent system that pushes you, your team, your customers, and the market to focus on the right problems at the right time. You should seek my help in seeing the whole system, and especially the gaps in it. I hate software, but oh boy, do I love systems. My brain is so optimized for managing, storing, and assessing systems that I lose nouns constantly. It’s worth it, for me and for you.

I can also help you.

You’re not a coincidence. You have to understand, it’s not an accident that you’re here. Even if the only thing that makes you special is that you were the first one to raise your hand… it’s been a few years now. Because of that one little action, you’re different than everyone else. It’s up to you to demonstrate whether that difference is good, or useful, but it’s definitely there.

I don’t mean to say that you’re better, or that only certain people can be entrepreneurs. History shows the exact opposite, and I’m a huge believer in empowering ever more. What I mean is, the mere act of taking the step permanently changed you. One of the hardest acts for most founders, especially those from underrepresented groups, is believing that they belong, that they deserve to be out front. I can help you see how just sitting in the seat has led you to be a different person than you were before, led you to special insight and special opportunity.

It’s up to you, now, to make the most of the opportunity, to believe in it and to deliver on it. You have to learn how to extract that difference, to bottle it, to share it. And when to dump it down the sink.

Founders are so full of dreams that they have a hard time letting go. “It’s true we can’t do this today, but I’m going to keep talking about it in hopes we can do it tomorrow.” Your business is on death’s door and the wrong success gets you all fired, but sure, go ahead and distract your team with something you know you can’t and shouldn’t build, and that your customers would never buy.

Everyone knows founders have to make hard decisions, but most don’t seem to realize the hardest ones are about their own dreams. To build something great, you have to give up on other dreams. You can’t build it all at once. You can still hold it, treasure it. But you don’t get to talk about it. You can’t distract people with it.

You haven’t earned it yet. When your company is a massive success, and throwing off more cash than you know what to do with, that’s when you pull out your other great ideas and turn your success into a platform for experimentation. Until then, you have to focus. Let go.

Beyond all that, I enjoy working through demos and user experiences, helping people see your work through new but educated eyes, asking a thousand questions that you might not have answers to. This teaches us both a lot about you, your product, and your company. The differences between the easy and hard answers teach you a lot, too.

What I don’t like to do is tell people what to do. At most, I will share frameworks I’ve used for decision-making in the past and recommend some of them for you, but preferably, I will focus on pulling from you what you really believe, and then make you really confront it. It’s not about me. I can’t live your life. I don’t know your customers. I can’t run your company.

But maybe, with the right prompting, I can help you look at it in a new light, help you make the right decisions faster, and help you avoid some of the worst parts of this insane decision you’ve made.

It Shouldn’t Get Easier

luke@lukekanies.com (Luke Kanies) — Wed, 19 Apr 2017 00:00:00 +0000

Anderson’s knife can cut anything, taking a chunk from everything in the land.

Master Terrence’s strokes remove less with each cut.

Greg LeMond once said, “It never gets easier, you just go faster.” This quote has been a rosary for me, a source of contemplation and meditation over the years. I think of it every time a new problem reveals itself as an echo of something I thought I already solved.

When I started Puppet, everyone I worked with stressed the need for me to recognize my position as founder and CEO, to bring people with me. The summer before I stepped down, more than a decade into practicing this skill, it still showed up in every coaching session. Not because I haven’t improved - but because it is a life skill that I can improve at every year and still die with more work in front of me than behind.

I found it incredibly hard to hire those first few people. I second-guessed myself, was slow, looked like a fool, felt an even bigger one, and finally made bets based on too little information. When I rebuilt the executive team in my last year, I second guessed myself, went too slowly, made what looked like basic mistakes, and felt incompetent the whole time.

This isn’t a coincidence. It’s not a sign of my incompetence. It’s the exact opposite: It shows that I never let things get easier, instead I kept my intensity up and always focused on going faster.

LeMond knew how to win. You train, you work, you focus, and all that effort delivers leverage. What you did yesterday when giving 100%, you can do today giving only 97%. What do you do with that 3%?

If you want to win, you reinvest it. In what? Counter-intuitively, exactly what got you that leverage in the first place.

For each and every one of us, there are two kinds of skills: Those it’s worth devoting our lives to, and those it’s not. A given pursuit can be less important because it doesn’t matter to you, because you’ll never be good enough at it, or because you just don’t like it. Those that matter, though, are a perfect intersection of your love, your abilities, and your values. They will reward any amount of investment by making you better at what you care most about, and are best at.

You have to love it because you really can’t devote the time and energy needed to dominate unless you like the work. You need at least some ability. You don’t need to start with a natural talent, but you are most likely to be rewarded for investing in areas that come easier than when you’re starting at the bottom. And your investments have to match your values. Some people care most about skills that earn them money, others about having an impact on people’s lives, and yet others want to build. You have to believe that what you’re investing in will help you spiritually, not just materially. It’s the only way you can convince yourself to work as hard as you need to.

Yes, there absolutely are things you will never be good at that you have to invest in. When I started Puppet, I was an outright liability in some areas, such as business operations. I had to get better at those. But I was never confused into thinking I would be great at them. That’s what team building is for.

Given two skills, one where you’re 8/10 and the other where you’re 3/10, where do you invest? Some might recommend the skill you suck at.

Not me. If that skill mattered, you would never have gotten hired in the first place. The reason you have a job is because of your 8/10 skill. Get 10% better at your weakness, and wow, you’re at 3.3/10. Big whoop. Get 10% better at your strength? You’re at 8.8/10. That’s a huge difference.

But getting 10% better in your area of expertise is fantastically difficult. It’s your life’s work.

I am suspicious of people who say the hard things are easy. What I hear is not that it’s easy, but that they’re not trying very hard. Or they’re too embarrassed to be honest.

Greg LeMond was the fastest cyclist in the world, but never stopped trying to ride faster.

Miyamoto Musashi won more than 200 individual duels with a sword, but never stopped trying to cut faster.

Excellence requires perpetual intensity. You should be confident enough in your strengths to admit that it’s hard. It should be hard. It’s the only way to get better.

Learning to Write

luke@lukekanies.com (Luke Kanies) — Thu, 13 Apr 2017 00:00:00 +0000

Reese’s keyboard produces truth of complexity and beauty, admired from a distance by all.

With a violent strike of Master Aaliyah’s pen, Jorge is enlightened.

I set out in January to study the realms of finance, software, and my own desire, but found myself adrift with no laboratory for experimentation. Programming was my testing ground for the hypotheses that led to Puppet, but my new questions cannot be answered in silicon. Clumsy studies provided two conclusions: Writing itself can and should be how I express and test my beliefs, but only if I get much better at it.

I started Puppet with core hypotheses, considered stupid by the experts around me. There was no point in talking about them; anyone can talk, and listeners similarly get to pick their conclusions. Only those I could prove had merit.

Proof is complicated. Few of us live in the world of math, where there’s enough overlap between objective reality and our language for discussing it that we can be truly sure. Computer science is itself lacking the unsentimental judge that the natural world provides to actual science. In truth, I should not discuss proofs, but rather disproofs. My real challenge with Puppet was to get rid of my false beliefs and let the remainders shine through, and there, programming was the perfect foil.

The best product idea in the world is worthless if it can’t be expressed in software in a sufficient timeframe. Merely building Puppet forced me to discard many convictions, and early rejects often became critical axioms undergirding the whole system. Of course, in the world of software, the compiler is only the first test. The real arbiter is your user, your customer. Once you’ve expressed your belief in a form someone can use, do they? I remember arguing for hours with a customer against a feature he requested, but the cold hard reality of his problem had me spending that night in my hotel room fixing it.

I am often asked if I miss programming. I do not.

What I miss is the laboratory it provided me, and the complete world that enveloped me, pressing in on me with its constraints, requirements, and complexities. I miss the hours I spent focused on one problem, and the complex systems needed to turn my ideas into a form usable by others.

I am thrilled and relieved to see that writing can be a new and even better laboratory for me. When I was programming full time, problems would haunt me, refusing to leave. I wore holes in my shoes walking back and forth between my keyboard and the local coffee shop, trying to line things up so they made sense. I’d scrunch up my face while drinking the coffee, drawing enqueries as to my wellbeing.

Writing is harder than that. The problems are bigger, and yet deeper inside, and harder to extract. I was never afraid of programming, but every idea I fail to write frightens me at least a little. On the far side, successfully expressing something is cathartic, a release, and it washes everything out with it.

It’s a better laboratory, because I have far more opinions about the real world than about the software world. Like those hypotheses that led to Puppet, I don’t know if they’re good. But I do know they’re different. I’ve bounced off reality enough times, asking for help from the crowd of onlookers and then getting back up, that I have a good sense of which of my beliefs are widely shared, and which are rare. For better or worse, little of what I believe, of what I think is important, is widely shared.

I’m excited by disagreement. Alignment is critical to execution, but diversity is needed for learning.

More than anything, I look forward to sharing my ideas, and as I did with Puppet, either finding them useful to other people, or having them cut to shreds to reveal new constraints, insights, opportunities. To do that successfully, though, writing is not enough: People must be able to read it.

Writing is no easier than coding, and in both, it’s ten times harder to write for others as for oneself.

One of my earliest optimizations in building Puppet was to prioritize my own productivity wherever possible. I explicitly chose to program in Ruby because I was faster there, even if it was slow and unpopular (Puppet was started before Rails was released). It took years for my programming style to reveal itself as an implicit personal optimization, highly effective for me but inscrutable to others.

My writing turns out to have a similarly mixed legacy.

All of the great shifts I initiated at Puppet began life as an essay, some extruded in a single sitting but more often sculpted over months and years. Once a hypothesis could defend itself, I then spent months and (more often) years translating it, turning it into something people could execute.

I’m proud of that work - how can I not be, when it helped build Puppet into what it is today?

But it’s fair to define good writing as something that doesn’t need a translator into its own tongue. By that measure, I’d failed.

Like a young programmer, I used to see people’s confusion as a sign of my genius and the value of my work. Now I look back with my designer’s eye and see it as a missed opportunity. We could have been there years faster if my beliefs had come with a better user experience. Kanies’s Razor is as applicable in prose as it is in code: Never attribute to genius that which can be adequately explained by incompetence.

I sit at the keyboard today as thrilled and scared as I was at the shiny benches of my science classes in college. Today I smell tea instead of banana oil and denatured ethanol, and I have no lab tech to stonewall me when I ask for easy answers, but the feeling of hope, of optimism, of a world to be discovered, understood, and fought through lifts me up just the same. I believe I can enjoy writing as much as I ever enjoyed programming, I can develop and test a wider range of hypotheses with a greater impact on those around me, and I can even learn get those ideas across to other people.

This, to me, is joy.

The Job of the Filesystem

luke@lukekanies.com (Luke Kanies) — Mon, 03 Apr 2017 00:00:00 +0000

It should do more so you can do less

Originally published at Hacker Noon

Apple just released iOS 10.3, which for the first time puts one of their production platforms on their new filesystem, APFS. I’m pretty happy that they are finally replacing such an aging, obsolete piece of core technology, but I’m nowhere near as excited about it as John Siracusa is. All APFS seems to do is finally meet the basic needs of a modern operating system, and not even all of those. It doesn’t come anywhere near doing what I care about most in the filesystem, which is owning metadata so applications don’t.

As anyone following the discussion of federal surveillance knows, metadata has become at least as important to our lives as our data. It’s not just the phone calls, it’s who you called, when, and for how long. It’s not just the phone, it’s which ones are your favorites and how they relate to each other. This metadata is as important to us personally as it is to the NSA, because it’s what brings simplicity, usefulness, and most importantly accessibility to the reams of information we create and rely on.

The reason I’m disappointed in APFS is that it missed the opportunity to promote metadata into something as important as the data, and as a result I’ve largely lost hope that computers will ever be as useful and open as they can be.

I’ve been trying for months to convert from Apple’s Photos to Adobe’s Lightroom for photo management, and the biggest barriers to doing so are metadata. It’s easy to get all of the photos - just drag the Masters folder into Lightroom. Oh, you organized your photos into albums? Yeah, that’s all gone. You had thousands of photos categorized as favorites so you could easily find the best? Oops, we ignore that.

Google Photos has the exact same problem. I can’t imagine how anyone who cares even a snit about photos could migrate to it, because there’s literally no way to do so that preserves any metadata at all. You get to keep the photos, but not how you organized them, and your only option is to rely on what they think matters to you.

Can you imagine switching email providers but losing all of the information about who the email is from or when it was sent? That’s as idiotic as what’s happening here.

If my filesystem owned this metadata, on the other hand, no conversion would be necessary. Any application could be written to read and write it directly, or I could trivially use any scripting language I wanted to do so. In fact, I could easily switch back and forth between different apps for different purposes, because they would not be able to lock me into their proprietary databases.

This shift is hard to understand, as we’re so used to thinking of applications and their metadata as somehow intertwined. For those in the programming world, there’s a clean analogy that helps to explain the horror of the modern filesystem:

For most of the history of software, applications have been written to directly access databases. They needed to understand the structure of tables and rows, and they had to write and manage their own queries for interacting with that data. Because of the complexity of duplicating this ability, applications tended to own their data entirely, and no other apps could get access.

We’ve recently instead seen a trend towards building very simple data services on top of databases, so that no app directly accesses them. This data service provides an API that understands how all of the data works, and also provides all of the key operations that can be performed on the data. This way, any application can access the data - for both reading and writing - without worrying that its use of the data is somehow incompatible with another consumer. You get the added benefit that any optimizations in the data service help every consumer, not just the one or two apps you remember to change.

Those data services are exactly what have enabled modern applications to scale to the level they do. The application developer can focus on their goals for the data, relying on the data service to provide consistency, portable operations, and everything else.

In the land of the operating system, though, we have no such luck. Everyone who talks to the filesystem gets about the thinnest interface imaginable: Get me a blob of data. Yes, there’s basic metadata (who owns it, when it was created, etc.), but none of it is or can be custom to the application, which makes it useless. Can you imagine how unpleasant it would be if we had to shoehorn both the subject of an email and the subject of a photo into the same keyword?

As a result, everyone turns that blob that the filesystem is trusted with into a database, and that’s where they put all of the metadata. Some even put the data there, even if it means huge database files and entirely non-portable systems. Really great app developers then go to the effort of building a full read and write API on top of this database that allows you to manage and port everything in the database. That’s enough work that most people skip it, though.

I would never have seen this missed opportunity in the filesystem if I hadn’t used BeOS. I went to Reed College, where Steve Jobs famously attended briefly (I made the unfortunate mistake of graduating, unlike him). This meant I was a Mac user all through school, which were the bad days of Quadras and MacOS 8 and 9. shudder I switched to BeOS because, well, I could, and it’s what really turned me into an OS junkie. There were many awesome things about it (many of which are now in OS X), but my favorite became how much responsibility the OS took for metadata. Applications became smaller, simpler, and in many cases, you realized your whole concept of an application was a way of organizing metadata, which meant you could rely on the OS entirely, and needed to write no code.

The greatest irony is that the author of Be’s awesome filesystem, Dominic Giampaolo, is now a lead engineer on APFS. Through the work of him and the rest of the team at Be, I came away with a clear idea of the value of my metadata, and especially the benefit of the operating system putting it on center stage.

So while I’m happy that my phone is no longer running the oldest, crappiest filesystem around, and I’m looking forward to the days when my computers aren’t either, I’m not excited. Until it was released, I could always dream that Apple saw the same future I did.

Now that the new filesystem is here, that hope is lost.

The Wrong Successes Kill Companies

luke@lukekanies.com (Luke Kanies) — Thu, 23 Mar 2017 00:00:00 +0000

Just because it’s working doesn’t make it right

Startups are in a constant life and death struggle, where a short succession of failures can destroy them completely, or a sudden string of successes can lead to growth and stardom. Exactly because of this constant risk of death, startups grasp at every flash of success, and their eventual failure can often be traced back to those successes they bet on, rather the roadblocks they hit.

This means what you decide to double down on is as important as the fires you decide to fight. This is true in any company - a specific form of this is covered in depth by Clayton Christensen in “Innovator’s Dilemma”, where successful companies over-solve their customers’ problems rather than finding additional customers. It’s especially true for startups, though, which are so risky that every potential customer, employee, investor, or partner can be the difference between making payroll and going bankrupt.

Steve Blank and Eric Reis have done a great job of teaching the world about the importance of quick learning and iterating until you get wins, but reality is more complicated. Say you’re in the middle of rapid product iteration and you get a rash of customers who sign up but are completely different from those you have been trying to attract. Is this awesome or horrifying?

How could new customers be such bad news, you ask? Easy: They could be the wrong customers. “Wrong” could mean many things. They could be from a very small market, such that success with them isn’t enough to build a scalable business; they could be unprofitable, in that they’ll be very high-cost to acquire and support, so every added customer loses you money over time rather than making it; and most commonly, they’re just not the customer your company strategy set out to find.

Eric Reis might say finding this kind of customer is the sign you need to pivot. That might be true. But it’s not automatically so. You were right enough to get this far, why give up so quickly on your definition of the perfect customer?

Because once you change your direction from focusing on the customer you want to customer you have - that is, once you start focusing on whatever seems to be working rather than your goals - you will quickly find yourself running a different company than you had planned.

This is one of the hardest problems for entrepreneurs: How do you decide when good news is leading to a better place, or a fatal compromise to your dream?

This came up constantly for me while running Puppet, in almost every part of my job. For instance, we did all of our high-growth hiring from Portland. Because of the small market and especially small tech sector, you have to be pragmatic about who you hire. You look up in 2 years, and you’ve got complete teams built off that first compromise hire. That first developer hire was a success, but changed your team’s direction. Now that that person has hired a team, or at least provided the template for the team, are you where you wanted to be, or completely off track?

You can argue that this isn’t a problem we would have had in the Bay Area, but not compromising when hiring is as pernicious a myth as true love. Even if you think someone is perfect, they’re still a real person, with opinions, behaviors, and habits that affect the destiny of your company, in good and bad ways. Again, the point here isn’t that you failed when you hired this person - the point is that the success you experienced changes your destiny in ways you can’t undo or predict.

That first customer started making feature requests and filing bugs, and two years later you’ve built something that can attract a lot more customers like them. Yay, or boo? There’s no right answer. I know one company that was almost destroyed by its biggest customer, and easily lost two years of roadmap progress focusing on them, but I know another company who built an amazing business by initially focusing on a couple of heavyweight customers.

When no decisions have been made, all life in front of you is opportunity. Choosing one opportunity inherently closes off others, and great decision makers know and accept this. If anything, sometimes a decision is great because of the opportunities it rejects, rather than those it selects. Running a startup is an accumulation of these bets, these selections and rejections. It’s hard to predict the consequences of even one of these big decisions, and it’s impossible to know what their legacy will be in a few years. You might end up exactly where you want… but you might be sowing the seeds of your downfall. That’s what makes the job hard.

The only tool I ever developed for managing this over the long term was to hold clearly to a specific set of goals, and to a specific strategy. When successes came along that didn’t fit our goals or strategy, we could decide to change them. But if we chose not to, then we essentially ignored it. It was a false positive. On the other hand, if you look up and a series of false positives starts to look like a trend you want to refocus on, then you must first rethink your goals and strategy, and only then switch your execution.

Or at least, that’s what I did. In truth, though, I don’t think I held the line enough. I think I was too willing to listen to people who were tactically great but didn’t buy into our strategy, and I was too willing to believe someone else’s expertise should take priority over my opinions. That doesn’t mean these were all mistakes, but it does make my time at Puppet easy to see through the lens of compromise and regret rather than the great success it really is.

In the end, when I look at how Puppet evolved, my sharpest pains come from compromises in strategy, and my brightest joys shine from a flawed execution in service of a pure vision.

The Binary Future of Software Companies

luke@lukekanies.com (Luke Kanies) — Tue, 14 Mar 2017 00:00:00 +0000

We’re seeing a rapid separation into SaaS companies and suppliers to SaaS companies

Software as a service is the most important technology business model innovation my lifetime, and before too long all important technology will be either provided as a service, or be an expert tool purchased in order to provide a service.

Software as a Service (SaaS) will not just restructure the entire economy of technology but dramatically improve it, because the rate of learning in a SaaS company is orders of magnitude better than for on-premise software (and oh my god better than for hardware). A really good on-premise software product is released and upgraded quarterly, meaning its fastest learning cycle is a 3 month cycle. A good hosted product is released tens of times a day. Twenty releases a day, times 5 days in a week and 12 weeks in a quarter mean that a SaaS company gets 1200 releases out in the time an on-premise company gets a single release.

Every release is a learning opportunity, which means a SaaS company can learn, and thus improve its user experience, more than 1000x more quickly than even a high-performing traditional software company. With this kind of difference in the rate of improvement, before too long anyone who isn’t a SaaS company is irrelevant. Literally - you can just ignore them.

Except of course that’s not true. If you’re a SaaS company, you can’t rely only on other SaaS companies; there are problems that can’t be solved off-premise, complexities that can’t be abstracted into a service, and technologies needed to provide your service that can’t be procured as a service. The most obvious example is that it all has to hit silicon at some point, and someone somewhere does actually have to buy CPUs, hard drives, and memory, with enough duct tape and baling twine to hold it all together and enough fans to cool it all down. While this is one obvious exception, there are plenty of others.

Thus, even with the learning rate of SaaS companies, and the resulting obsolescence of most other kinds of tech providers, there is still room for those who sell to the SaaS companies. This is somewhat akin to the ‘49 gold rush, when there were gold miners and those who sold to gold miners. Both were valid pursuits, and tightly entwined, but they were very different businesses.

In the early days of the software world, and especially the early days of the enterprise IT department, every company evolved to be mediocre at any kind of technology, and they all looked pretty similar. They could do just about anything, and they sold to pretty much everybody, but they couldn’t do anything particularly well. This impending world of SaaS companies hires only experts; they are absolutely fantastic at everything they care about, and they have an equally fantastic service partner to whom they can outsource anything they don’t care about.

In some ways, this world is even more dangerous to the status quo of the technology industry. Our entire industry has evolved to sell to generalists: We build pretty decent stuff, and sell it to people who are ok at managing it. Our stuff can’t be too great, because great stuff requires expert users, and we can’t demand too much of our users because they have to be competent at nearly everything within a very large field (“networking”, “hardware”, “applications”), so they can’t invest in being particularly excellent at any one thing. Also, great stuff would be really expensive, and companies don’t buy expensive stuff, because no particular investment is all that important to them.

In this new world, there exist only experts, whose entire mandate is to specialize in the specific tools and technologies that will allow a SaaS company to excel, to win. For the investments that can make a real difference, no cost is too high, and no expertise is too narrow. For investments that can’t make a real difference, of course, we just find a service partner who cares so much about it we don’t have to think about it. Thus, as a SaaS company, I only invest in technology when I can afford to invest in experts, and I immediately reject any technology built for generalists because I can’t achieve outsize results with tools built for generalists.

Here we reach a future where there exist only SaaS companies, and companies who build expert tools for narrow use cases that exist within SaaS companies. Anyone else is fiercely riding a bicycle while watching a train recede into the future. The pundits of today are correct that the cloud is the most important trend of the modern era, but they’re wrong in thinking that AWS or Cloud Foundry hold a candle to the restructuring that SaaS will wreak.

Start With the Dangerous Questions

luke@lukekanies.com (Luke Kanies) — Tue, 07 Mar 2017 00:00:00 +0000

Throughout my 12 years as CEO of Puppet, I made critical decisions that affected nearly everyone involved in the company: What investors should we work with? Who should we hire? What products should we build? Should we take that deal with a customer?

These decisions are scary. Getting them right can be a huge lift for a company, but getting them wrong can destroy one. I worked at a company that lost more than a year of growth and roadmap development because they signed their largest customer ever. One of my advisors told me a payment of more than one hundred million dollars from a partner destroyed his company. I’ve also taken big risks on key employees, and had some of them work out fantastically, and others flame out spectacularly.

We’ve all been there. You’re in an interview, the first of many discussions with a candidate. You’re focused on building rapport, getting an overview of their career, but some niggling fears are pushing down on your sense of comfort. What do you do?

I know what I used to do, and it didn’t work. I’d focus initially on an overview and getting to know them, then I’d dive deep into their experience and skills. At that point I would find I still had fundamental questions I need answered, but it’s a bit awkward to ask these basic questions in the 3rd interview, isn’t it? Awkward indeed. You either take the risk and hire without those answers, or you take the loss and reset, looking like an amateur. I’ve done both of these more times than I can count. Just talking about it brings up again the anguish I’ve had in those late meetings, realizing there were critical questions I didn’t have answers to, and I just didn’t know how to get out of there.

So I flipped it. Now I chase the fear. I pin it to the wall, and I scrutinize it until it withers away or takes over the room.

With customers, one of my scariest questions has always been, “Why are you buying our product?”, as if merely asking them would cause them to reconsider. The only thing worse than losing a prospect, though, is having the wrong customer sign up. I’ve had customers who I spent hundreds of thousands of dollars supporting who never succeeded with the product and then didn’t renew a year later. Some have signed up then complained incessantly that we don’t have the features they need. I’ve said yes to a painfully low-priced deal to land a big customer, only to have them change all the terms at literally the last minute because they know they have us over a barrel. These are all signs that someone should not have signed up with you, that you have a mismatch you’re dodging.

I have hired people with time at important companies during critical growth years, and then found out later for all their knowledge of the events, they weren’t remotely involved. That was early in my experience of hiring - I’ve since learned to ask, “Yes, but what exactly did you accomplish while working at that great company near those great people?” I don’t care if a previous employer did great things, I care if you helped them do great things. Otherwise, it’s irrelevant.

This change in practice was initially frightening, and felt almost like I was breaking the social contract. I’m already hard enough to get along with, and not a person people usually enjoy interviewing with. I also have great loss aversion, especially when trying to convince a talented executive to move to Portland. The truth is, though, if you aren’t going to move, I should learn that in our first conversation, not after I’ve put 30 hours into interviewing you only to have to reject the offer because you can’t pull your kids out of school. I understand, but shouldn’t we have learned that together earlier?

Once I forced the conversation through these risky channels, though, the rest of the work is done without much fear. We quashed all the really scary stuff in the beginning. Even better, because we’ve walked the deep dark forest together and come out the other side (assuming we have), we understand each other better, trust each other more, and all of our conversations are tinged with that greater knowledge. When I recently went to hire a CFO, I rejected multiple highly qualified people very quickly because they were looking for the badge of leading an IPO rather than wanting to help build a great company. That’s not necessarily bad, but it’s not what we were looking for.

The best thing about this technique is that it’s good science. I have a chemistry degree, and I really kicked myself when I realized how inconsistent, how unscientific I was when making decisions. In some areas I experience no real loss aversion, so I can dig right into the scary stuff, but in hiring, signing large customers, and a few other areas, I found that the fear had been too strong and I kept tying myself in knots. Once I backed away and considered any candidate, any decision as a hypothesis, and then looked at my questions as experiments trying to disprove that hypothesis, the answer was dispassionately clear: You must run the most dangerous tests first.

Sure, you can do a bunch of simple experiments that are highly unlikely to prove you wrong. But if the 9th test was always the most dangerous one and your hypothesis fails there, then you just wasted a lot of time and paid a high opportunity cost.

The objectivity that came from looking at this problem through a scientific lens helped me recognize that my loss aversion was making my decision making much worse. I didn’t so much learn to operate without fear as learned that the fear was rational and was a useful signal. It gave me the strength to pursue that fear, rather than hide from it, even in the scariest areas.

Maybe you aren’t hiring people, or seeking investors. But I know you make key decisions, decisions that affect you and those around you. If you don’t get out of your comfort zone and ask the important questions, not just the easy ones, then you’re basically filibustering your work: “Well, we’ve run out of time, guess we’ll just have to skip those questions.”

If instead you can find a way to focus first on the scariest parts of those decisions, the parts that can least stand the light, then I think you’ll find you make higher quality decisions, you will enjoy the process more, and you’ll have better outcomes for everyone involved.

Your Whiteboard and Post-Its Aren’t Kanban

luke@lukekanies.com (Luke Kanies) — Wed, 01 Mar 2017 00:00:00 +0000

Kanban is an incredibly useful productivity tool, initially developed in Japan on automobile manufacturing lines. It has since become a widely adopted practice, including in software development and project management. Or has it?

That cute, simple tool you have that uses post-its, or skeuomorphic representations of them, to keep track of the state of some task or project? It’s not Kanban. To paraphrase Bill Hicks: No no no, I know you think it is. But it’s not.

What you have is a useful means of task and project management. It might be awesome. It might be saving you effort, time, and stress, and actively making your life better. I’m sure it’s a good tool, Brent. But it likely has nothing to do with Kanban.

To be clear, that’s fine. There’s no rule that says Kanban is useful to solving your problem, or that you ever need to use it. It’s just, you know, words have meanings. And the meaning of Kanban is all about inventory management. It’s true that you totally could be using post-its on a whiteboard to track inventory. But you’re probably not.

In both your task tracker and in Kanban, the card represents something. That is, the card itself is not relevant, but it represents a thing that you care about. In your tool, it’s representing some task that someone needs to do and the state that the task is in. This helps you to understand and communicate key information across all of your tasks, projects, and teams. I can see why you find this useful. Heck, I find it useful. I’m using it to track the state of this article, for instance.

In Kanban, the card represents something completely different: The need to refill inventory. At its simplest, you use cards to denote the minimum allowable inventory in a system, such as car doors sitting at an installation station. You do so by literally placing a card on the door at the minimum level. You pair these cards with separate rules about the maximum allowable inventory. Now each of your inventory pools (doors, engines, seats, etc.) have maximum and minimum levels - if the inventory gets low enough, the installer encounters the card and orders a refill, which itself is never above the maximum allowed. As you operate the system you tune it over time to make sure your min and max levels are right.

For most of your work, you can ignore the card and focus on what’s in front of you, but as soon as you encounter it, you must take action. This gives you two features that are otherwise lacking: You get to ignore the card and focus on your work for the majority of the time, which is incredibly important for productivity, and you also get to explicitly separate the process of optimizing the inventory pools from how you consume them. You can always be in the moment when you do the work.

On first blush, you might think to yourself that this doesn’t sound very useful. I mean, how much of your life is really affected by inventory problems? Pffft. Literally all of it. You deal with this constantly in your car, for example; its maker decides on your maximum fuel level (the tank is fixed in size), and you never want to run out of gas, but instead of a card you have a light on your dash when it gets too low. Obviously every grocery store and restaurant has to think about this, but so do banks (envelopes, paper, checks), mechanics (parts, tools), and coffee shops (coffee, chairs - yes, chairs).

You have personal inventory problems, too. We keep hearing about these magical fridges that will order milk for us automatically (but are more likely to be used in a DDoS); Amazon has released one-touch buttons that enable us to trivially order new inventory; and most of us have experienced the ignominy of running out of a key supply at just the wrong time, such as when using the toilet. To see these problems for what they really are, you need to step into a different mental model, a new world.

You need to step into the world of inventory. Rather than seeing everything around you in terms of work to be done, see it in terms of pools of inventory to be shifted, consumed, and refilled. It’s not necessarily “better”, but it is often enlightening. Kanban got created as a tool specifically for increasing the efficiency of such a world, and only makes sense when you’re in it. In fact, the cards themselves aren’t important at all - there are plenty of different triggers available.

It might shock you to realize just how much of your life would be improved by viewing the world this way. Suddenly all of those latent tasks that are sudden emergencies when you run out of something become simple efficiency problems that are easy to model and solve. In my last few years of experimenting with this in my personal life, I’ve built many triggers into many of our inventory pools. None of them are cards, but they are all closer to Kanban than your Trello board.

For example, we go through a lot of granola in my house. Our means of ensuring we never run out is to have two containers, about the same size. We always pour breakfast from one and refill from the other, and the emptying of our refill container is the trigger that causes us to buy more granola.

We keep one in-use and one unused toilet paper roll in each bathroom, plus a cache in a closet. Emptying the in-use triggers using the extra roll, which triggers pulling another roll from the cache. If that is the last roll there, pulling it triggers buying more.

In each of these cases, we’ve set up inventory pools that match how long it takes to refresh them. For example, our granola containers are sized that so that we don’t go through a whole container faster than it takes us to buy more. We never run out of toilet paper, but we don’t have to dedicate a room to storing it.

This perspective also allows us to recognize when we are missing a trigger to refill inventory, allowing us to shift the conversation from personal blame to process improvements. For example, in a bid to teach our kids to self-regulate their sugar intake, we’ve started making our own fruit yogurt and letting them add sugar, rather than buying pre-made fruit+sugar yogurt. We kept running out, though, because it took a day to thaw frozen fruit. We didn’t have an appropriate trigger to start this task at the right time. Having recognized this problem, we created one (I get frozen fruit out to thaw when we have about one meal left of pre-mixed yogurt), and on first blush, it seems to be working. We haven’t yet integrated it with one that buys more yogurt on the right cycle, though, so it’s not yet a complete system.

These are examples of using non-card triggers for Kanban-style inventory management. It’s the triggers that matter, not using cards to represent them. If we tended to have larger collections of unit inventory, cards might be appropriate. E.g., I usually buy razor blades in bulk, and it might be appropriate to label one of those blades with a card to trigger repurchase when I reach it in my stack. Here I’d have to find the right optimization between managing a large inventory, finding the right trigger, and getting the lowest cost per blade (which requires buying in bulk). Combine that with the fact that I usually use an electric razor (which means I rarely assess the state of my blade inventory) and the likelihood of making an inventory mistake goes up, thus increasing the value of a trigger-based system.

For all that I love tools like Trello, and systems like Kanban, I’m not sure they can ever actually be used together. That is, I think we have a whole industry of tools built to model a specific kind of problem, which are instead useful for many things but specifically not the problem they’re meant to exemplify.

The beauty of Kanban is that it’s out in the world, where your work is. (Don’t be confused into thinking that that board or those cards are your work; they just represent it.) I’ve been trying for years to build a Trello board, or some equivalent, that enables an inventory-oriented view on what I’m trying to do, but I’ve not yet succeeded. For instance, [WIP limits] mean something completely different when they represent tasks instead of inventory. That doesn’t mean they’re useless, just not useful for the same reasons.

My recommendation is that you enjoy your task management system, and continue to get what you can out of it. Maybe just stop calling it Kanban. At the same time, though, ask yourself: Where are the inventory pools in my life? What do I run out of, and how can I build triggers at the right point to prevent that? How does my world change when viewed this way?

Most of all, get out into the world. That’s where the work is.

I’m Often Asked

luke@lukekanies.com (Luke Kanies) — Thu, 23 Feb 2017 00:00:00 +0000

Since these are questions I’m often asked, I thought you might be interested in their answers.

How did you get from a hippie commune to starting a software company?

I was born on a hippie commune in Wisconsin, then moved to a related one in Tennessee when I was 4 (this was “The Farm”, best known for having produced Spiritual Midwifery, a book that was a major contributor to reviving midwifing in the US). When I was 8, I cut a foot of hair off my head and began attending public school in Nashville, Tennessee as a vegetarian who’d never heard of capital-G God.

Suffice it to say, it did not go well.

Much later, as I worked my way through college, I realized that my coping mechanism for dealing with the stark conflict between those two cultures was to literally forget everything I knew. It was then I realized I only retained a few memories of my childhood on the Farm. Given contradictory but unverifiable information - and Nashville and the Farm were definitely both - the only reasonable response is to discard it all. That explains why I didn’t trust the kids in 4th grade who told me I was going to burn in hell for 10,000 years because I wasn’t baptized, and it also explains why I do not resemble someone raised on a hippie commune.

I graduated from high school a year early, mostly to escape my incredibly violent 3,000 person high school run by jocks. I didn’t exactly have role models to show the real possibilities of what going to school can do - nearly every adult I knew went to college, but I knew I didn’t want to use my degree to build shoddy houses and dig outhouse holes in the woods. When it came to picking colleges, I eliminated all schools that had fraternities, sororities, or organized sports (because I wanted my school run by the geeks, the nerds, the brainiacs), and then I picked the best school I could find the furthest from my home town.

I looked at schools in Alaska, but the one I found that fit the criteria was too small at 400 people. It never occurred to me to consider overseas schools. Then my home room teacher pointed out Reed College, in Portland, Oregon. I’m sure their whole book was useful, but the only bit I remember was how their Guerrilla Theater of the Absurd ingested red, white, and blue mashed potatoes in preparation for a visit by then-vice president Dan Quayle, and then threw them up at his speech. I was in. That was a whole different kind of patriotism than they practiced in Nashville.

I was too poor to visit any schools, so I showed up at Reed having never been on the west coast, or within a thousand miles of Portland. The black and white photos in the school book didn’t quite capture the place. Seeing the campus for the first time is unquestionably the first time I remember honestly crying for joy.

One of the first things I did there was buy a computer, and one of the last was decide not to be a scientist.

How did you get from a chemistry degree to starting a software company?

I had seven jobs in two and a half years at the end of college, so I tried a lot of things. I got fired a lot. Until my last year, I was planning to be an academic scientist, but Reed did a great job of training me on exactly what that job entailed, and the result was that I didn’t want it. For all that science is all about trial and error, they don’t actually allow much failure in your career - you better pick the right boss, the right school, the right project. Anything else means you can’t get the grants, because there’s just too much competition for too little money.

Once science was out, there weren’t a lot of other great options. I am not one of those who grew up with a computer; I didn’t get one until my sophomore year in college, and taking a loan out for it is one of the first things I did in school. I had spent a lot of time playing with my computer, and I found I was particularly adept at breaking it. When are you most likely to break it? When you’re procrastinating. And when are you most likely to procrastinate? When you really, really need your computer to work because there’s something big due the next day.

This meant that I also got pretty good at fixing it quickly. Or maybe, setting it up in such a way that it was always easily fixable.

When it came time to look for work, this is pretty much what I had to go with: A science degree, and facility at breaking computers. That led to a QA job, a couple of mac admin jobs, and finally a support job, which soon turned into a Unix administration job. Most of those jobs I was fired from (who gets fired from the Plaid Pantry?), but the last one was a great fit for me, and I only left because I was moving to Nashville.

Once I got there, I continued my investment in scripting and automation, which two jobs later resulted in my being a consultant, having worked myself out of a job. I quickly concluded I could make good money at consulting but hated the job. I thought about an MBA, because the badge is useful, but I didn’t think the schooling would be. I almost went to law school, but then I realized it’s so expensive you have to become a lawyer afterward, which I didn’t want. So, I did the only thing left: I started a software company. I figured I’d learn more failing to start a software company than I would succeeding at getting an MBA.

Puppet wasn’t my only idea - I’m still pretty enamored of a software product I wanted to build for scientists - but in the end I concluded it was the one I was most likely to succeed at, based on my own knowledge and on the market. In the end, I started Puppet to get out of system administration, not because I loved it.

Did you ever think Puppet would get this big?

I always knew it was a possibility, but I never let myself get hung up on whether it would happen or not. Any given situation has many possible futures, and it’s generally unwise to be too attached to any one of them. With Puppet, I was always committed to some of the constraints, but generally not so much to the specific outcome, and certainly, I didn’t spend much energy trying to predict it. With the right constraints, I hoped we would end up in a good place, which was the most I could hope for.

In terms of those constraints, they were things like maintaining a high quality business, where deals were good deals and customers generated real revenue, where we focused on the user and not the buyer, and where we maintained our authentic voice even in marketing.

That being said, I did think that Puppet could succeed, and in a big way. I knew the market was measured in the billions of dollars a year, and I knew it was composed primarily of bad software sold by dying companies. Someone was going to come in and take business away from those companies, take users away from them, and I saw no reason why it wouldn’t be me.

“Someone has to do something, and it’s just incredibly pathetic that it has to be us.” - Jerry Garcia

Did I hope for something like this outcome? Heck, I hoped for more, faster. This is one of the better possible futures Puppet had when I started, but there were far better futures available, and it’s tough not to see those and ask, “What if?”

In the end, though, I am incredibly proud, pleased, and surprised by what we were able to accomplish. I know how lucky I am, how rare this outcome is, but I also know that it wasn’t entirely accidental, that I started at the right time with a good idea, a good market, and a pretty decent plan, and I worked intensely while passing up many opportunities to make mortal mistakes.

Why That Startup Advice is Useless

luke@lukekanies.com (Luke Kanies) — Thu, 16 Feb 2017 00:00:00 +0000

Starting companies is a high-risk enterprise, especially so for high-growth, venture-backed companies, which fail more than 90% of the time. Yet people generally talk about successful companies as though their achievements are somehow inevitable and reproducible. We look at Google, Netflix, and Amazon thinking that if we can just copy their practices and decisions, we can also achieve their outcomes. After all, their actions are clear-cut (in most cases), as is their success; what’s missing?

Yet, no amount of studying these companies has significantly increased the win percentage. Part of that, of course, is that every startup is studying the same playbook. I think the bigger part, though, is that we don’t talk about high-growth companies in a way that really reflects the experience. In years of researching growth companies and talking to leaders of thriving and failed enterprises, I’ve found that even the best companies went through what seemed to be life-threatening experiences, and in general, you couldn’t tell from within the company that it would achieve the success that it eventually did. The steps to prosperity are obvious in retrospect, but their rightness is nearly always concealed when looking forward. What follows is a metaphor that helps to explain why it is so hard to think about this clearly.

When we look at a successful company, we can clearly see the path it followed to get where it is. You can look at the key decisions or hires they made, the practices and habits they adopted, the market forces that affected them (or didn’t), and how they worked with and around key players. I call this the ridge they walked. We can look back and say, Wow, that one decision, or person, or market change, really made the difference. What if Google hadn’t gotten ad selling just right just then? It doesn’t matter, because they did. What if Amazon hadn’t invented S3 when they did, giving them the freedom to create all of AWS? It doesn’t matter, because they did. What if Netflix hadn’t been brave enough to switch from DVD distribution to online video? It doesn’t matter, because even though they made some missteps, they made it through.

Looking backward, that ridge is clear.

However, in all of these cases, and countless other equally critical events for these same companies (and for every other growth company), they couldn’t see then what we see now. What they saw then is what everyone leading a growth company sees: an infinite expanse of uncertainty, akin to a field of ice that you have to pick a path across. As the leader of a growth company, you have to believe that there is a path across that ice that leads you to (at least temporary) success. Your job is to find that path. As the company progresses, the ice alongside you falls away. If you are lucky, you are standing on solid ground and it’s only the ice on either side that falls away, leaving a clear ridge behind and below you. If you are unlucky, you picked wrong; you step off the ridge and the ice cracks. If you are really unlucky, there wasn’t any solid ground anywhere, and you’ve led your company to an ignominious end where everyone suddenly realizes the whole company is built on thin ice. Everyone laments the massive mistake that is now suddenly evident. But crucially, until you took that step, the difference between your path and one that was successful was invisible.

I don’t mean to imply that leaders have no visibility into the likely success of their work, nor that the only way to manage risk is to plow forward and hope it works out. This analogy does, however, help to explain why seeing someone else’s clear path to success isn’t nearly so useful as we’d like in helping us navigate the infinite expanse of ice in front of us. It might be that working in small increments and building a lean organization will make the difference between small, correctable errors and catastrophic mistakes, but it might not. Building a great advisor network of people who have done it before might be exactly what you need to navigate the ice fields of entrepreneurship, but no one gets to navigate the exact same ice field twice, so they might just as easily confidently lead you to a crevasse that didn’t exist when they ran this race.

Note that no matter who you are, and how well you’re doing, at some point you will hit a growth wall. All marriages end in death or divorce, and all great companies end up getting bought or going flat in growth, because infinite growth just isn’t possible. At this point, everyone will suddenly say they could see it coming all along. Well sure, you did too. It was one of the possible futures.

When you look to understand a growth company, either because you are hoping their lessons will increase your chance of success, or because you want to share the key lessons with others who are striving, you get limited utility from studying the ridge of non-deadly decisions behind someone. Equally useless is studying the infinite expanse of deadly but featureless ice in front of an organization.

Instead, to get the most out of studying a company’s success, you must live their experience at that seam between the proud success behind them and the scary uncertainty in front of them. It’s not useful to simply understand that Intel pulled off a massive strategic shift in switching their focus to microprocessors. The real value comes from examining what state were they in at the time that enabled them to make that decision. Oh, it turns out that they were having their clocks cleaned by competitors in memory, and microprocessors were already generating a lot of their revenue, so it was less about switching focus and more about shifting identity than business. If anything, Intel failed in making fast enough a decision that observers and many insiders knew was right. When you frame the decision that way, it seems more manifest and relatable. The important lessons are about emotionally wrenching identity changes and making correct decisions with urgency, not some sort of prescience about how the market was moving.

We so often ascribe some kind of mystical foresight to great entrepreneurs, when in fact, they suffered just as any of us do, but for whatever reason, had a different result. The founders of Google had no pretensions to organizing the world’s information, and instead desired to sell their algorithm. They started the company only because no one took the algorithm seriously. Mark Zuckerberg had no particular interest in building a social graph; he was just rating girls on the Internet. He built a company after it became clear he had lucked into something great.

And perhaps most notably, Steve Jobs is considered the exemplar of tech industry triumph, as evidenced by the early success of the Apple I and II, the truly innovative Mac computer, and the wild popularity of Apple products in his second stint with the company. However, to focus our attention solely on these successes overlooks many key aspects that limited or propelled his achievements. For example, the Mac shipped so late and was so expensive that it was functionally irrelevant for a long time, and the rest of the industry caught up. Would a wiser Steve Jobs (or you, having internalized his lessons) have shipped earlier before the competition claimed the market? Would he have made compromises to bring down cost and make the Mac less of a specialist device? Would he team up earlier with someone with operations chops, freeing him to exercise his product design prowess? Can we learn these lessons without spending the decade in the wilderness that Jobs did? Only if we examine his steps and choices in their actual ice-field context rather than with the 20/20 hindsight we tend to use when canonizing our heroes.

In retrospect, the right answers to these questions are often easy and obvious, but the full context that was necessary to see those answers wasn’t available to anyone at the time. We build myths about why people did things, or how evident greatness was at the time. Those myths are not just wrong, they’re pernicious. The simple truisms they provide keep us from examining the real motives and conditions that were in play, and obscure the truly useful frameworks that we can apply to our own situations. They also dramatically underplay the role of luck in success.

Building greatness is a miserable journey, largely because you’re trekking over an infinite expanse of ice with unknown thickness. So much of greatness is being willing to continue pushing forward, even in the face of fear and uncertainty. We do a disservice to people who did important things if we act like fundamentally tough decisions were obvious at the time, or that great entrepreneurs had a single good idea that led them to greatness. In truth, the successful entrepreneur grows their knowledge and experience in ways that no one else can replicate.

I hope that in the future, people will look back and say I built a great company. I hope they laud my good decisions and lambaste my stupid ones. But I also hope that people are honest about the fact that I started the company with small goals, and only through success was I able to build larger goals. I hope that my decisions are studied within the context of hope, fear, and experience that I made them in, rather than their historical obviousness.

Developing My Future

luke@lukekanies.com (Luke Kanies) — Wed, 01 Feb 2017 00:00:00 +0000

Those who know who I am are likely aware that in September I stepped down as CEO of Puppet, the company I founded, and whose first product I built. The question everyone asks these days is, “What’s next?”

However, I am committed to not committing to anything until at least the fall of 2017, which means I couldn’t answer that question even if I wanted to.

As a result, you have an opportunity to watch and participate with me as I take this journey. Along the way, I’ll be trying to share what I have learned and what I believe, and to the extent I can, my thought process as I figure out what’s next. If you follow along, I expect you’ll be informed, sometimes entertained, and at least periodically offended.

Taking Time

Part of my reason for delaying a commitment is that I want to spend the summer traveling with my family (a summer where both parents are unemployed and have some cash is a privilege and luxury I’ve never had and don’t expect again). Primarily, though, it’s about giving myself enough time to think deeply about what I want to do next, and why. By the time my last day at Puppet rolls around in March, I will have been working on Puppet for 12 years, full time.

Most people seem to think I started Puppet (or, more insultingly, I decided to turn it into a “real company”) when we first got investment in 2009, but in fact it had been my full time job since March 2005, and we were ramen-profitable by the end of the first year. Even before that, I had been doing sysadmin work full time since 1997, which means 20 years in one industry. Talk about a monogamous relationship! It’s impossible to spend that much time in one area, and then immediately pick a new direction that isn’t encumbered with biases resulting from such focus.

I am truly thrilled not to know what I’m doing next, to have the opportunity to explore ideas without a strong gravitational pull or a narrow time window in which to work, and just to be in a state of high uncertainty where I can pursue curiosity without worrying about how it relates to commitments I’ve already made. I am quite confident, though, that I will not be starting another company in the infrastructure space.

There are multiple areas where I think I would be excited to start another software company (most of them somewhere in the productivity space; if you squint, even Puppet qualifies as a productivity tool). But I’m also interested in helping to create many companies, not just one, which makes investing, advising, and board membership interesting. Diversity, especially in the tech world, is a huge priority for me, so it would be great to find some way to contribute meaningfully there. And whether I want to or not, I expect to spend some chunk of my time learning how to be productively involved in our civil and political discussions. Heck, some part of me feels guilty for not investing all of my energy there.

About the only thing I can promise is that whatever time I put into companies will almost all be focused - whether investing, advising, or operating - on helping individual people spend more time on the things they care about and add value to them, and less time on the menial work that gets in the way. That could take the form of productivity tools, automation, or management tools, for example. I’m generally more comfortable with B2B models, because I understand better how to build a business there, but I’d love to help build great tools companies for consumers that aren’t ad-driven.

If you’re interested in following along at home, I’ll be writing in this space as I pursue this decision, and hopefully after. My goal is to write often, and on any topic that strikes me, but you should expect to see articles on technology, finance, people, and the industry, with a periodic dose of just me being a person. I have many hypotheses right now, and not a lot of data, so I will be quite surprised if this space looks in a year like I’m thinking of it today.

My hope is that my writing is more about what I learn and conclude, rather than sharing my personal journey, but don’t be surprised if some of the articles are more about me than the industry.

For those who do decide to follow along, I hope you get some value, some interest, even some excitement from some of what I write. I also hope you’ll share with me anything you think is related, intriguing, or just confusing in topical areas. The best place to find me at this point is on twitter.

Thanks,

Luke

No, You Don’t Learn More from Failure

luke@lukekanies.com (Luke Kanies) — Tue, 24 Jan 2017 00:00:00 +0000

This article was originally published on Medium.

You probably believe, like so many people I’ve talked to, that you learn more from failure from success. Unfortunately, that’s total bullshit - in general, the only thing you learn from failure is, of all the ways you could have failed, you have discovered one of them. As a result, you’re wasting your time, making yourself and the people around you less happy, and losing the opportunity to be better, faster.

I used to believe this, too, but I’ve since learned that success is dramatically more important than failure, which has made me a better leader, friend, and father. In fact, I’ll show that you agree with me, even if you don’t realize it. If you can briefly invert what you’ve likely heard and said so much, this essay might just help you achieve more success, and be happier while on the path.

You Don’t Believe It

I’ve got a simple proposition that makes this really clear, but I also want to go deep in a couple of areas to explain why this belief is not just wrong, it’s dangerous.

Let’s say you’re building a garage (which, it turns out, I currently am), and you have two contractors to choose from: Someone who has attempted to build ten garages, and has successfully built ten garages; or someone who has tried to build ten garages, and has successfully built zero.

Obviously, you and everyone you know would hire the person who has experienced more (or rather, any) success building garages, and you’d ignore as a quack the person who couldn’t even build a single garage. But I thought you learned more from failure than from success?!

There are a bunch of other obvious examples. Do you want to learn basketball from Kobe Bryant or a basketball player who got dropped in college, you go for the one with success? Does your restaurant belong on a popular street with other successful restaurants and lots of reasons for people to visit, or a desolate strip where no restaurant has succeeded? Even, do you fight to take control of a busy drug corner, or try to convince users to go to a different corner? (Yes, I’m watching The Wire.) Should you emulate someone who has started 5 companies and never made any money, or someone who’s started one and built to a billion dollar company? There’s a reason we lionize the founders of Google et al, but can’t remember who started Webvan, much less any of the thousands of people whose companies never even got off the ground.

Why is it so alluring to think we learn more from failure than from success? A lot of it comes from the value of studying failures, both your own and others. The fact that you learn more from success doesn’t mean you can’t learn from failure; often, the only way to succeed is to study the failures, because, funny thing, in the beginning failure is all we usually have.

But don’t let that confuse you into thinking failure is somehow more worthwhile than success. When you fail, you often get stuck - you can’t move forward until you’ve fixed it. You lose time, momentum, and more. When you succeed, you can move on to the next step in your project, but more importantly, you have a single thing that you know works. There’s always a chance something else works better, and you might conclude at some point it’s important to improve what works (I’m always worried about local maxima), but if you’re failing, you can’t even start to worry about that.

Not Just Wrong; Dangerous

Think about your behaviors if you’re focusing on the failures instead of the successes. You’ve got a big sales team, a broad customer base, or even your own child. There’s always a wide variety of success and failure across your team, or even within an individual. If you focus on learning from failure, you’ll spend all your time with the failing salespeople, the pissed off customers, or the part of your kid’s life where they’re struggling.

Contrast that with focusing on success, on what works. You spend all your time with your best salespeople, ensuring they’re closing better deals even more quickly, and you learn from them what helps them outperform, so you can bring it back to the rest of the team. You work most closely with your happiest customers, figuring out what they love about your product and how you can find and create more customers like them. You’ve also spent a ton of time with your kid in the areas where they’re strong and awesome. They get to build life skills, and enough self-confidence they can more easily tackle the problems they’re not as good at.

In all of these areas, the individuals who are most important to you know you care about them, because you’re spending time with them, and they know you respect and appreciate their success because you’re focused on what they’re great at.

Think how your best people feel if you show up and instead of talking about the great deals, successful usage, or artistic talent, you only ever discuss their failures - “Because you’re focused on learning from failure.” Really?

Yet this is exactly the naive behavior of many managers, product managers, and parents. You ignore your best people, you ignore the things that are working well, and you force successful people to wallow in the misery of their failures.

Route Around the Failure

It’s not just that you should be more focused on the things that are working than those that aren’t; it’s that, in general, you should just literally ignore the failures.. You’re standing at a golf tee and you hit 20 balls. Most of them go wild and do stupid things, but one connects cleanly and lands on the fairway. Who cares about the other 19? Just figure out how to copy that 20th shot every day!

Obviously it’s not possible to ignore all failures, but when you can, it makes a ton more sense to just keep iterating until something works, without really making any attempt to understand those things that aren’t working. You try something 20 times, and only one works? Awesome! You found something that worked! Run with it.

Nature fully understands this. Nature cares nothing for failures. All those animals that failed to pass on their genes to viable offspring? Nature’s too worried about letting the successes run things to worry about the missing genes of the failures. Yes, I’m inappropriately ascribing intent to a natural process, but you get the idea. And yes, Nature generally operates on a longer time scale than the average startup, but you never get to viable offspring by spending all your time with animals that can’t have kids, and you’ll never get to a great product by worrying about the customers who think your product is stupid (unless that’s the only kind of customer you have).

Focusing on Failure is Depressing

I’ve never been accused of having too sunny a disposition, but this shift in perspective has dramatically improved my own outlook on life and how I work with everyone around me. The shift was heavily inspired by reading Switch by the Heath brothers; its subtitle is, “How to make change when change is hard”, and it really hammers home that focusing on the successes, no matter how small, is what allows progress. It’s not just that this works, though - it’s a lot more enjoyable.

Everyone hates spending all their time talking about the things they suck at, the projects that aren’t working, the customers that don’t renew, the classes you’re failing. Yes, you do have to do some of that, but it turns out, you don’t have to do nearly as much as you think. In fact, you should spend the majority of your time on the things that really are working. It’s not being a Pollyana - it’s following success, and it makes you and everyone around you happier and healthier.

One of the implications of this practice is that you rightfully give up more quickly on the failures than you might otherwise. You focus on the paths that are working well, and tend to quickly abandon approaches that aren’t working. All of your efforts and experience naturally concentrate on the areas most likely to lead to successful outcomes. .

Use It On Yourself, Too

This isn’t just about how you work with other people or stuff; it’s also about you. I’m not a big believer in following your passion, but I do believe strongly that nearly everyone has a different collection of strengths and weaknesses, and that most people have at least one or two strengths that they can form into truly valuable assets.

You have a choice in your life between spending all of your time on those things that you can be truly great at, or spending it trying to turn the things you suck at into things that you are merely bad at.

I’m personally strong on product, brand, and culture, but I’m never going to be great at operations or sales. I could work my whole life, and probably go from being a 2/10 in operations to being a 4/10, which still couldn’t get me a job. However, if I work enough, maybe I could turn my natural strength in product design from a 8/10 to a 9/10 or even 10/10. Which of these is a bigger asset to me personally, and to the people around me? Even better, which do you think is going to be more fun for me?

Yes, there are some areas where you have true liabilities, and you sometimes have to invest enough focused practice in these so they’re not holding you back, but even in those areas, you’re better off working hard to be part of a team that complements your weaknesses, rather than trying to make sure you’re good at all of it.

Yes, Failure Does Actually Matter

It’s true, this article is a touch hyperbolic, and I suppose some readings of it could cause one to conclude I think failure is irrelevant and you should always ignore it (even though I explicitly say above that failure is sometimes critical to understand).

Of course, I don’t actually believe that. I get a huge amount of utility from failure. I’ve studied crash logs with the best of them, I am a big fan of postmortems, and I prefer never to experience the same failure twice, which usually means I need to invest in understanding it well enough to prevent its reoccurrence.

What I want you to learn, though, is that you need to seek success. If you’ve got a product that isn’t quite doing what you want but has some happy customers doing some weird thing you don’t understand, go study their success and learn how to build on it. If you’ve got one programmer who ships more high quality software faster and more frequently than anyone else, shouldn’t you deeply invest in knowing what makes her special and how to spread that skillset around your organization? Your kid doesn’t fit in, and isn’t going to become the doctor you always dreamed of, but might accidentally be a music prodigy or a professional athlete; shouldn’t you dive deep into that, rather than wringing your hands about them not fulfilling your dreams for them?

Water flows downhill, routing around blockages, and everyone’s path to greatness involves developing that same ability to put all the weight behind the things that are working, and not get too fussed about the things that aren’t. If you can do that, you’ll be happier, more successful, and actually enjoy the time you spend helping the people around you achieve meaningful success in life and in work.

The case for the iPad’s long-term future

luke@lukekanies.com (Luke Kanies) — Sat, 24 Jan 2015 00:00:00 +0000

Based on both individual anecdotes of purchased iPads lying fallow around the house and Apple’s recent announcement that iPad sales were essentially flat year over year, some are predicting that the iPad is not the future of computing that has been predicted.

I’m not quite willing to make big predictions about computing overall, because I really hate being wrong and there’s no real benefit here in being right, but I couldn’t be more confident in the iPad’s future, and it’s not an argument that I’ve heard widely.

TL;DR: The iPad already has great successes, and just by itself those will do well. Most of our apps and workflows haven’t been rebuilt from the ground up for the iPad, though, so we’re not getting the best from it. And there is a great market opportunity in the millions of iPads that are underutilized, and the first app developers that crack that market by playing to the iPad’s strengths will make it big and create an even bigger pull for the iPad through those successes. If you love a computer, the iPad’s not for you, but it’s definitely for someone.

Longer version:

First, let’s look at where the iPad is successful. And I don’t mean, let’s look where it’s purchased; I mean, let’s look at where its users actually get fantastic usage out of it. If this usage is small and meaningless, it doesn’t mean the iPad is meaningless, but it does limit past data in usefulness for predicting the future. But if that success isn’t meaningless, it points to possibilities.

It’s absolutely true that the major use cases for the iPad are in consumption, not production. Weirdly, the vast majority of what humans do, in general, is consumption and not production. I receive 230 emails a day and send 30, on average, so an iPad that was 10x better at managing incoming mail than sending new mail might work better for me than a laptop (depending on how I rate its relative strengths).

People have found the iPad is great for watching videos, reading - books, magazine articles, comics, twitter, and more. People dismiss the iPad for this - “consumption isn’t as important” - but the reality is, your laptop sucks at consumption. Reading magazines or books, watching TV, and reading twitter are all pretty much crap on the laptop compared to the iPad. Yes, you can do it; no it’s not as good.

So, if the iPad were just relegated to being the best enabler of consumption, I think it would do pretty well, since it would also leak over to not-quite-consumption, like trawling the internet for great pictures to post to Pinterest. This might not be the super-exciting future, but I think it’s still a better business than I could think of building.

Beyond consumption, though, there’s another big area it’s doing well: Replacing computers for people who don’t have computers. I’ve personally given away about 15 iPads (this is just for personal stuff; I’ve given away more for work, including 12 of the very first iPads to all the employees I had at the time), and for most of those, they didn’t have a computer, and for most of those, they now don’t need one. Of course, many of the iPads were to young kids, aged 5-10, by those kids will get most of the benefits of a computer without needing the complexity of a full computer.

It’s not just kids, though; my dad could use the computer he shared with my mom, but he never embraced it. He has been literally emailing me weekly about how giddy he is to go to a coffee shop and write email on his iPad. He didn’t feel comfortable doing this with the laptop, but he loves it now. He’s by no means the only person I know who either doesn’t own or doesn’t use a laptop because they now have an iPad.

Everyone who needed a computer already has one, but not everyone has a computer. Many of those who don’t need a computer also don’t need an iPad, and maybe a smartphone is perfect for them; but the group in the middle, who don’t need a laptop but for whom a smartphone isn’t sufficient, could really thrive on an iPad.

Just these two successes are a great business, if not necessarily a 100% growth business indefinitely. But there’s a lot more.

The next thing that gives me confidence in the iPad is how few of our tools have been rebuilt to work with an iPad workflow. Most of what I try to use on the iPad is an attempt at porting either iphone or laptop apps. That can work, but it won’t automatically. I often use a keyboard for my iPad, but essentially nothing has good keyboard shortcuts, for instance; I would never tolerate this in a laptop app, but it’s not really a choice on the iPad (for now).

I don’t know what it will take to rethink my critical apps and workflows to work on the iPad, I just know it hasn’t been done yet. And yet, even without that, it’s literally my favorite computing device by a mile. I use my phone constantly. My laptop is a workhorse. But I love my iPad. Every time I pick it up I can feel the future of computing just fighting to get out. There are so many little bits of my iPad life that need to be shaved, molded, tweaked, cut, poked, prodded, or beaten to a pulp; when that happens, we’ll be in a whole new world.

The world just hasn’t been creative enough yet to figure out how to take advantage of what the iPad can do. Remember: This thing is only a few years old. It might be 10 years before we really figure it out. That’s not an iPad failure, though; that’s a market failure. There’s a lot of creativity yet to do.

It’s that market failure - which I feel keenly every time I pick up my iPad - that really closes it for me. The iPad has an amazing future because there are fifty million people who pick up an iPad with hope in their hopes, dreaming of the awesome things this can help them do. Today, too many of them are disappointed with the answer. But tomorrow, they’ll pick it right back up again, with hope in their eyes once more. In the mean time, Apple will continue to sell a ton of iPads. Maybe it will only cough be twenty million a quarter or whatever, but that’s still a big market.

I am very confident that that market opportunity will push people to invent new ways to excite those users. Yeah, everyone’s currently trying the obvious, stupid stuff: “Hey, let’s just make a crappy html5 version of our web app” or “Hey, let’s just upscale our iphone app”. That’s not really working. Something, however, will work. Imagine the iphone if Loren Brichter hadn’t gotten ahold of it and invented and created as much as he did. You can’t force that, but with enough people trying, and enough clear demand, it’ll happen, and it’ll change the way you use your iPad.

I hear a lot of people say the big barrier is cross-application communication, but I think a lot of that is trying to copy the strengths of the laptop to the iPad, which might not be how the iPad comes into its own. You don’t use your phone to do things you used to do on your laptop (at least, not primarily); why would you use your iPad for that?

I’m not sure what strengths of the iPad will come to the fore in a way that makes it its own device, but I have some ideas.

As an example, people totally undervalue the fact that it doesn’t go to sleep. Just comparing email on an iPad to a laptop, there isn’t a great email client for the iPad yet that I have found (and trust me, I’ve looked; I’ve got at least seven mail apps installed on my phone), but I like a lot of the core email experience on the iPad dramatically more.

Most of the time I check my email I’ve got about 15-30 minutes. My goal is to delete, send to my task list, or reply to as many emails as possible. With my laptop, I either need to leave it at my desk all day, or when I open it I have to give it some time to find wifi (or get an IP from ethernet), then download all of my mail. This could take 30 seconds, but with Mail.app (don’t ask), it could also take 15 minutes. Yes, it would be better with gmail, but it wouldn’t be instantaneous.

Let’s compare that to the iPad. It’s always on. It’s always online, because I’ve got an LTE chip in mine (I’ve had every version of the iPad since the very first, and every one with a mobile modem since they supported them). So, I open my iPad, boom, all the mail is right there. No wait, no IP acquisition, not downloading mail. Done.

Let’s take this to the extreme case: I often travel with just the iPad, and I use it in ways I couldn’t use a laptop. I get on a plane, put my iPad into airplane mode, and when I’m aloft I start processing email (with a keyboard). The email is right there, already downloaded, ready to go. When I land, I turn off airplane mode, and the email just sends; no work for me.

The same work on my laptop requires that I sit down at the terminal, pull out the laptop, pair it with my phone or iPad (or gamble on the airport wifi), wait the who-knows-how-long until Mail.app syncs with gmail, then put everything away. When I land (having probably done slightly more work in the 1.5 hr flight I usually take), I have to do the same thing: Find a chair, open the laptop, pair with device, wait until the 20-50 emails I wrote on the flight get sent. I’ve spent a long time on the freeway with my laptop open and connected to my phone, trying to upload mail.

Total iPad win. The laptop might support this at some point, but it’s just not built to literally be online 100% of the time. This plays to the strengths of the iPad, and will be hard to import anywhere else.

What else plays to this strength? I think there are tons and tons of areas that could benefit from being online 100% of the time, and you can see most of Apple’s development work is in improving this so apps can stay open more, download more often, be more up to date, etc. If my iPad evolves so that every app on it always has its content up to date, but I can never build a mixed-media blog post, well, I would take that trade.

Just think about the iPad-specific interfaces and experiences that have built. Hmm. There aren’t a lot. I know of some that have tried, like iPhoto, but many of them have been not so great. The only ones I can think of that really work are the app-switching moves: Four finger swipe for app switching (which works poorly because I can never figure out how the device orders the apps), and the five-finger app close gesture. For a completely new device and form factor, that’s not much real innovation in interaction.

The point, though, is I don’t need to know what happens next. I just have to be confident that the market opportunity of tens of millions of underutilized iPads in the hands of excited people who have proven they’ll spend money on technology will draw enough experimentation that we’ll get to see the true innovation. This is a young product, and it’s a product that’s sufficiently similar to others that people haven’t really let it grow into its own. There’s enough money and interest in the system, and enough truly awesome parts of the iPad experience, that I’m absolutely confident it will.

Too many people are saying the iPad is a dud because they’re a computer user and their usage doesn’t translate well to the iPad. They’re not approaching the experience with a beginner’s mind, and are instead saying, “I know it’s a new device, but it should do exactly what the old one does.” One of the commentators on the Accidental Tech podcast seems to have set “create a mixed media blog post” as the critical success criteria, but I bet less than 1 in 10000 computer users, if that, ever actually need to do that. Even when I blog, I just do straight text. Hell, I probably include more code snippets (well, used to) in my posts than pictures, but I’d be crazy to make that a requirement, because I understand the iPad’s market isn’t me.

To that commentator, I would recommend they go read Innovator’s Dilemma. Disruptive technology is rarely used by the users of the old technology. The laptop, or desktop, or whatever, makes you happy. Great. The iPad’s not for you. It’s for people who don’t need what you need, and are satisfied with a much simpler solution with some kinds of power that are greater, and the reduced complexity is a critical part of its success. (Really, read Innovator’s Dilemma.)

And seriously, if you’re getting an iPad, and you can afford it, get it with an LTE chip. It dramatically changes the experience. I couldn’t live without it. And don’t say I can tether it. Not at all the same.

My recommendation is, don’t ask what it would take to cause you to switch to an iPad. Ask what you aren’t doing today that you’d like to be able to do. Ask who isn’t using a computer and could be. Ask how the world will change when every device and every app is online all the time. Wonder what kind of gestures will dramatically increase the power and intuitiveness of the iPad. And see if you can’t come up with an app that will make those fallow iPads just that bit more sexy.