Amazing teams and great teams

The Golden State Warriors won the NBA finals yesterday by beating the Cleveland Cavaliers 4 games to 1. I had a feeling that the Warriors might close the series when it returned back to California so I woke up at 4 in the morning in Turkey to watch the final game.

The Warriors and Cavs faced each other in the NBA finals for each of the past 3 years. The Warriors won in 2015 as their team effort overcame the star effort of LeBron James. The Cavs won in 2016 as the combination of LeBron James’ increased humility and the resulting increase in his teammates’ output was just enough to overcome the Warriors in 7 games.

LeBron James was once again humble and the Cavs played a great team game in this year’s series. Six Cavs scored more than 9 points at least once during the series. Although not as good as last year’s performance where six Cavs scored more than 10 points at least once during the series, it was pretty close.

The difference wasn’t in the Cavs’ performance but in that of the Warriors. Specifically, Kevin Durant joined the Warriors this year and immediately gelled with the team. Kevin Durant isn’t LeBron James but he’s pretty close. And that turned a great Warriors team into an amazing Warriors team.

In 2015, the great Warriors team beat the best player in the world.

In 2016, the great Cavs team led by the best player in the world beat the great Warriors team.

In 2017, the amazing Warriors team beat the great Cavs team led by the best player in the world.

Congratulations to the Warriors.

Providing ranges in a negotiation

In a negotiation, it’s important to develop a view on the range of outcomes which your counterpart will accept. You can either do so indirectly, by building up a view based on a combination of placing yourself in your counterpart’s shoes and interpreting the signals that they’re sending you, or do so directly by asking them. This post is a short observation on the latter approach.

For the sake of simplicity, let’s assume a single variable negotiation where that variable is the deal value. When directly asked for the value at which they’re ready to do a deal, many people respond by giving a range.

The problem with this answer is as follows:

If you’re a buyer, the upper limit of your range indicates what you’re willing to pay and your counterpart can ignore the lower figures. It’s then up to them to try to get you to pay more.

Similarly, if you’re a seller, the lower limit of your stated range reveals what you’re willing to sell at. Your counterpart can then try to get you to sell at a lower figure.

As a result, if you’re asked for the terms at which you’re ready to do a deal, and you feel comfortable sharing this information, it’s better to simply share a specific figure.

If you’re not, you might want to ask the same question directly to your counterpart. Maybe they’ll respond with a range.

Laptops, the internet, and education

Back when I was in Elementary, Middle, and High school, we went to the school’s computer lab whenever we had something to do on a computer. In the 13 years since I exited the K through 12 school system, things have changed. Today, many schools give their students laptops which they carry from class to class and to their homes.

According to this New York Times article, Google has emerged as the clear leader in serving this market. The reason for Google’s success is the company’s strategy of providing low cost Chromebook laptops manufactured by third parties which run Google’s Chrome operating system and serve up Google’s cloud-based app ecosystem. This lets students access their apps from any laptop while promoting in-app collaboration with their classmates and teachers.

This has propelled the company ahead of Apple’s hardware-driven and Microsoft’s on-device software-driven approaches. Although Google was virtually non-existent in the market in 2012, it shipped nearly 8 million devices in 2016. Apple and Microsoft have remained flat at between 2 and 3 million annual device shipments from 2012 to 2016.

I would always look forward to going to the computer lab when I was a kid. Many of today’s students have access to the same learning opportunities made possible by computers whenever and wherever they want. It’s a great time to be a kid.

Motherhood

Think of a job where you can’t get an uninterrupted stretch of sleep, you get screamed at constantly by the person you’re working with, you spend most of your day repeating the same few tasks over and over again, and you don’t get paid.

My wife and I had a son about two months ago and what I described has been my wife’s job for the last two months. Although I help out when and where I can, it’s nothing compared to what my wife does. Watching her take care of our son is a humbling experience. It helps put the challenges of my work in perspective.

And what’s amazing is that my wife doesn’t see what she’s doing as a job. A job isn’t an activity that’s challenging but one where the motivation to do the work is less than the challenge.

In other words, most jobs are jobs not because of how challenging they are to do but because of how little motivation you have to do them. When your motivation is high enough, a job ceases to be a job no matter how big the challenge.

The excellent motherhood my wife is showing our son is a great example.

Hasan on BloombergHT

My partner Hasan recently gave an interview on BloombergHT.

In the interview in Turkish, Hasan talks about the startups we’ve invested in, his intercity trucking managed marketplace Webnak, and the current state of tech startup investments across the world.

I couldn’t embed the video in this post but you can watch it in the first 14 minutes and final 3 minutes of the 23 minute video at this link.

Meditating

I recently started meditating using the Headspace app.

I knew that I wanted to try meditating, but I didn’t know where to get started. What I did know is that I wanted a guided journey rather than to be my own guide. This would make it easier to get started and stay motivated.

However, I also didn’t want to pay for offline meditation classes. I wanted a low cost way of trying meditation at the location of my choice during the day. As a result, I searched for meditation apps and, sure enough, there are several. I picked Headspace because it had the highest ratings among meditation apps on the Google Play store.

Headspace starts you off with 10 free lessons each consisting of 10 minutes of guided meditation. You can then pay if you want additional lessons.

I’ve completed the first 4 lessons over the last 4 days and am very happy with the results. Although I was initially skeptical about whether you could use a smartphone to meditate (I associate meditation with putting technology aside to focus on your inner self), the smartphone essentially serves as a speaker. Once you push the play button to begin a particular lesson, you just listen to the guided meditation without any further interactions with your smartphone.

My mind is much clearer after the meditation lessons. And it requires just 10 minutes per day at no financial cost for the first 10 lessons, and about $10 per month (or less than $100 for an annual plan) thereafter.

If you’d also like to think more clearly and be more peaceful throughout the day, meditating definitely helps. And Headspace is a great way to get started.

The investment memo

An investment memo is a very useful tool to help collect your thoughts in advance of an investment decision. It’s basically a document that summarizes the important factors which help inform an investment decision.

In the context of a startup, these factors include a minimum of the team, the market, traction (if the company has it), and the investment terms. It can also include case-specific factors like likely future expansion areas and regulation.

Rather than invest solely based on consuming the information presented by the company you’re evaluating, the advantage of investing based on an investment memo that you prepare is that it forces you to articulate your understanding of the company. Doing so may help you identify weaknesses in the argument you’re trying to make which may lead you to reconsider your conviction in the investment, holes in your knowledge which you need to go back and address, or alternative approaches to areas like the team, market, and investment terms which you may want to discuss with the company.

In terms of format, investment memos tend to come in the form of Word documents or Powerpoint presentations. I prefer written text because it promotes substance over style and forces you to articulate your thoughts at the level of depth enabled by sentences rather than the more superficial level which results from using bullet points.

And an investment memo doesn’t need to be long. If you’ve done your research and thought about the startup at length, 2 to 3 pages of crisp text written in half a day is all it takes.

The resulting improvement in the rigor of your thinking and the quality of your investment decision makes the time investment well worth it.

KPI’s, company before investor

After an initial meeting with a founder, if an investor decides to dive deeper into the startup’s performance, there are two ways to go about it. You can either request specific KPI’s and analyses that you’d like to use to evaluate the business, or request that the founder share the company’s KPI dashboard.

While the former approach may make you feel better because of the sense of control that it provides over the process, I prefer the latter. The reason is that the company’s KPI dashboard shares how the founder evaluates and seeks to improve his business. Whether you agree with it or not, since the founder will be driving the business forward, understanding how he thinks about and measures the company’s performance is more important than how you would do it.

That said, after initially getting the company’s KPI dashboard, you should certainly ask for the additional KPI’s and analyses that you believe are necessary to evaluate the business. If these are different than what the founder presents, the ensuing debate might help you uncover the reasons for the differences.

The founder might convince you as to why his approach is better, you might end up helping the founder, or you might realize that your views are too far apart to partner.

An order of magnitude difference in performance

I was recently comparing the metrics of two companies which were founded at similar dates and operating in the same space.

Despite this similarity, there was a 15-fold difference in the companies’ core performance metric. This order of magnitude difference was the result of just two key choices which differentiated the approaches of the two companies.

Very often we look for operational improvements to gain a few percentage points here and there. And these are indeed important.

However, they only become important after you have made the right choice in those areas that create an order of magnitude difference in performance. Such areas often exist. And given the large payoff they offer, it’s worth spending time to think about what they are for your business.

Use case-specific natural interaction limits

Based on the use case which a company serves, there’s a natural limit to the number of interactions which it can have with the vast majority of its users or customers. For example, most people will check their social media profile once to a few times a day, go grocery shopping once or twice a week, and buy clothes somewhere between once a month and once a year.

These use case-specific natural limits should inform the frequency with which the companies serving these use cases attempt to attract users or customers to their service through private mediums like notifications and messages (I’m excluding email from this analysis because email lists have abused the medium to such an extent that email is fast approaching a public communication channel). While one attempt a day is reasonable for a social media site, it’s too frequent for the vast majority of grocery and clothing sites.

Despite these use-case specific natural interaction limits, many companies attempt to engage their users or customers far more frequently than suggested by their use case. Unless you’re part of the 1% of customers who shop for clothing each day, this is irritating. Such companies lose more from the 99% they irritate than the 1% which accept their attempted engagement frequency.

The ideal solution is to segment your users or customers to deliver relevant messages tailored to their personal usage or purchase frequency. If you can’t do that, it’s best to respect the natural limit to the number of interactions inherent in the use case you’re serving.

Companies that fail to do this likely incentivize their marketing team based on short-term usage or purchase metrics without taking into account the long-term user or customer churn that these actions cause. So this is the problem that needs to be addressed.