How to Get Lucky

The House that Jack Built... with MONEY — The House that Jack Built… with LUCK (and money)

Last month, Howard Marks of Oaktree Capital gave Jack Dorsey a good load of crap for claiming that there was no luck involved in his path to success.

Success is never accidental. No accidents, just planning; no luck, only strategy; no randomness, just perfect logic. –@jack

Marks points out that Dorsey would have been unlikely to found Twitter had he been born in Bangladesh. But clearly it was Jack’s awesome strategic planning skills that arranged for him to be born in the United States.

Aside from the circumstances of birth, there is an easy test to determine if success in an activity should be attributed to luck or skill: Ask if you can lose on purpose. If you can lose on purpose, then there is skill involved [1]. It would be hard to intentionally lose at a craps table (betting strategy notwithstanding).

Can a person intentionally fail at building a billion-dollar company? Of course. And that is because luck is a skill.

Given the role that luck plays in startup success, it should be considered the most formidable skill of all. Here’s how to improve on it [2]:

1. Maximize Your Chance Opportunities.

2. Listen to Your Intuition. It’s usually right, and shortens your deliberation time.

3. Expect Good Fortune. Having positive expectations makes you attempt more things and persevere more. And if you act positively, the world reacts positively. That’s one of Newton’s laws.

4. Turn Your Bad Luck Into Good. Because luck is a skill, any bad luck that arises is a result of something you did. Learn from it and move on. Time spent feeling bad is time spent being unlucky.

Just like Jack Dorsey, I had the incredible foresight to be born in the United States. That makes me luckier than 98% of the other humans on the planet. I managed to not come out mentally retarded or disfigured. Not excessively so, anyway. I think that puts me in the top 1%. This is a very good bet.

I am also clearly very stupid, so it is another testament to my luck that I haven’t ended up dead. I’ll list this alongside my credentials in the team’s executive summary.

What am I doing sitting at home writing code, anyway? I should go to Vegas and get lucky.

2. Richard Wiseman. The Luck Factor. 2004.

February 13, 2014

I am an Uber Driver

I’m an Uber driver now! I activated my account at the Uber office this afternoon.

I was expecting to find a cadre of Aryan gods dressed in designer suits at the office, just like the ones pictured on Uber’s home page. What I encountered was most disappointing.

About a dozen and a half other Uber drivers came and went during my visit. Except for two middle-aged females and myself, every driver in the waiting area was an older immigrant male.

I spent a good 45 minutes waiting my turn, during which time a potato-shaped driver sat next to me and introduced himself as Dario. Dario had been driving for Uber for 4 years, and before that spent over a decade driving taxis. He lived in Redwood City, and made very little as a taxi driver.

He had come to Uber today to register his new Toyota Prius as a driving vehicle. Uber drivers can switch between multiple personal cars for providing rides.

During Dario’s Uber career, he bought three Toyota Priuses and registered them all as Uber vehicles. He couldn’t drive three cars at once, of course. He rented two of the cars to friends who did not have California licenses, and let them drive using his account. Uber didn’t know, or maybe didn’t care. They simply assumed that Dario was putting in 24-hour workdays in three different cars.

Dario actually no longer spent much time as an Uber driver. Rather, he managed the cars that his friends drove for him.

In a city where transportation is in short supply, it is difficult to find fault with Uber drivers’ solutions to an inefficient market. But somehow, it’s venturing back to an antiquated and much-maligned transportation model.

As I was leaving the city, Uber sent me a text message reminding me that I could stop by to pick up flowers to put in my car for Valentine’s day. I considered swinging by, not because I plan on picking up any Valentine’s Day riders, but to maybe make the boys jealous.

So, anybody want an Uber ride from me?

February 9, 2014

Don’t Rush the Cash Flow

TWTR crashed 20% last week after Twitter’s earnings report indicated a slowdown of user growth.

The income statement, at first glance, would appear to be a winner – TWTR beat analysts’ revenue expectations by 12%, with reported earnings of 2 cents per share as opposed to the 2 cent loss that was expected.

Silly Twitter. You’re an internet stock, which means shareholders care about user growth, not cash flow. Every last cent should go towards making the fire burn hotter.

Remember, Facebook was founded in 2004 and did not become cash-flow positive until the end of 2009. Google was founded in 1998 and turned profitable in 2001, with the invention of Adwords. LinkedIn was founded in 2003 and probably didn’t become profitable until 2010.

Check out these gross margins:

Quarterly Gross Profit Margins, Dec 2013. Source: ycharts.com

Twitter, you have lower profit margins than Facebook, Google, or LinkedIn. If you are coming back with positive net income, you’re doing something wrong. Your cash flow is too strong. Get back out there and lose more money for your shareholders!

But only in the name of user growth, of course.

See Also:
Which Internet Stock is the Most Overvalued? –New Yorker

February 9, 2014

Supplying Demand

Once upon a time, Americans lived in a world of scarcity. Demand outstripped supply. We had to work hard to produce necessities like food and clothing and shelter.

Now we have become too productive. We live in a world of abundance, where there exists more crap for sale than there exists human need.

Demand is so scarce that advertising is a $172B industry in the US. Yeah, US businesses spent $172B last year trying to make people want to buy stuff.

It works. People buy stuff. But in order to buy stuff, they have to create other stuff that nobody needs. Then they have to pay advertisers yet more money to create demand.

It’s a self-inflating cycle. As a result, we live in a world of excess consumption and consumerism and morbid obesity.

There’s a little bakery in Southwest Yonkers, New York, that makes brownies. How useless, right? A business that exists for the sole purpose of enabling gluttony. Gross.

Ben & Jerry’s gets its chocolate fudge brownies from this bakery. Greyston Bakery trains and employs the formerly homeless, incarcerated, or drug-addicted, to help them out of poverty. The bakery’s motto: “We don’t hire people to bake brownies. We bake brownies to hire people.”

Our industrious society has gotten great at meeting physical needs, but we do little to address higher-level needs. In this world of abundance, there are some things that are still scarce.

February 1, 2014

Investing Revenue: The Business Model of Amazon and Nonprofit Startups

Big tech companies like Apple, Microsoft, and Google are hoarding big cash piles. There are speculative reasons why these companies are not investing more in R&D or future technology, but as long as the cash goes unspent, shareholders will make noise to have the profits returned via dividends or share buybacks.

Amazon doesn’t have this problem, because Amazon doesn’t turn a profit.

It is terribly inefficient for a company to collect revenue, pay taxes, and then distribute the net income towards hiring or R&D. Amazon cuts out the intermediate steps by investing the revenue directly.

By charging customers a price that’s barely above break-even, Amazon is effectively spending revenue to gain customer loyalty instead of channeling profits towards a marketing budget.

Amazon Fresh is operating at a loss. The profit margins on door-to-door grocery delivery are miniscule, but Amazon isn’t operating in the home grocer space to make money. It’s operating in this space to subsidize infrastructure development. Sure, Amazon Fresh could charge a huge premium, turn a profit, and then invest in building out infrastructure… but why not just barely break even, and gain both an infrastructure and customer loyalty?

UPS currently handles most of Amazon’s last-mile deliveries, but UPS does not have ostensible grocery customers subsidizing its local infrastructure development.

Amazon may be a non-profit company on paper, but only because it already invested hypothetical profits into customer commitment.

See Also:

The Prophet of No Profit –Slate

Elaine's Idle Mind

and Devil's Workshop

How to Get Lucky

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I am an Uber Driver

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Don’t Rush the Cash Flow

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Supplying Demand

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Investing Revenue: The Business Model of Amazon and Nonprofit Startups

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