Friday, May 18, 2012

10 Books I've Read, and Thoughts on How They Apply to Entrepreneurs

(still a draft blog post - 5/18/2012)

Thinking, Fast and Slow - Wow, a really dense book, but well written.  So many concepts mostly centered around behavioral economics. Many concepts apply to startups, but one of my personal favorites is that people make up causal stories to explain things.  Overall framework of three main concepts: System 1 vs System 2, Econs vs. People; Experiencing Self vs. Remembering Self. Concepts include: Anchors, Availability Bias, Regression to the Mean, Errors with Small Sample Sizes, Prospect Theory, Endowment Effect, Broad Framing vs. Narrow framing, Fallibility of Intution. 

Entrepreneur Takeaway: It seems to me this is the kind of book an entrepreneur (or any person) could read multiple times, at different times of their lives, and draw big (and different) insights from with each reading.  The right concept, at the right time, could lead to an important insight that is relevant to your own business.

Steve Jobs - Commited to what he loved.  He saw the future, including the rise of tablet computers, well in advance.  He was very contrarian for his focus on simplicity.  I wonder if he would have won the PC wars had he been able to price the Apple as he wanted (instead of the $500 more for marketing budget that the CEO wanted).

Entrepreneur Takeaway:  I hope the takeaway is not "I can act like Steve Jobs and succeed (sometimes he didn't treat people that well)" but rather focused more on the commitment to simplicity ("Simplicity is the ultimate sophistication") and being tenacious. 

Einstein: His World and Universe - Amazing what he did by 24 years old.  Reminds me that geniuses can be very effective early in life.  He didn't view being an entrepreneur favorably. Didn't want to be focused on "the pursuit of capital".

Entrepreneur Takeaway: He was so tenacious (like Jobs) about finding truth, finding a unified theory.  He was still scribbling possible unified theories while on his deathbed. He was also willing (again like Jobs) to come up with his own way of thinking about things, and forego the conventional wisdom. 

Nudge - Introduces the concept of Choice Architecture and Libertarian Paternalism.  The basic idea is that, design matters.  Reminds me a bit of user interface design and Edward Tufte.  For example, a default option can make a huge difference, like in the number of donors in a country. One country defaulted "Yes, I'm a donor" and had x% sign up as donors.  Another country defaulted "No, I'm not a donor" and had y% sign up as donors.  What a difference! Entrepreneurs should know about this to know that their design decisions can make huge impact.  It's not just "yeah, the customers will click the box on the sign-up form for receiving email updates".  But rather, the default makes a really big difference.  Talks about Medicare Part D, which illustrates so much of why government initiatives fail (no competition for designing the system). Like, imagine if Facebook were a government initiative - painful, slow, obtuse, rarely updated. 

Entrepreneur Takeaway: So many possible takeaways, but the concept of Choice Architecture and it's influence on the results you achieve, is important.  I think Choice Architecture is an important toolkit to use while designing your products, but also one to look at when you are trying to figure out what's going wrong.

Benjamin Franklin: An American Life - A newspaper entrepreneur (and writer and publisher), then, after a partnership deal that provided income but relieve him of day-to-day duties, an experimenter (what color cloth makes snow melt? What is electricity?). Then, later in life a statesman.  Then, much later in life a key figure and voice in the founding of our country.  And finally, a wise voice the creation of the constitution.

Entrepreneur Takeaway: He secured early success in newspapers and parlayed that into publishing (Almanac).  I think the economics concept of "complementary capabilities" and "absorptive capacity" were evident in his ability to write, his understanding of the publishing business, and his ability to take advantage of needs in the marketplace.   He parlayed that success into "retiring" and then transitioned into "politics". 

Talent is Overrated - You can do it! As long as you deliberately practice for 10,000 hours! Interesting thesis that may explain some of Einstein's success (focus on understanding the world that started at a young age, and a relentless focus on continuing to focus); Steve Jobs (years and years running companies, working in technology); and Franklin (years of analyzing how people worked, how to run a newspaper.

Drunkard's Walk - Randomness is everywhere.  And people make up causal stories to explain it (See Thinking, Fast and Slow above). But really, so much is just random.  Like the movie producer who has a string of hits ("what skill!"), followed by a string of failures ("out of touch!"), and then after being fired, the movies that he selected end up being successful ("maybe he knew what he was doing after all?").   So, I think about how that applies to entrepreneurs. The entrepreneur succeeds ("what a genius!"), and then fails ("out of touch").  We assign causality, but what if it's just a coin flip?  The book ends with "Appreciate the absence of bad luck", and that message resonates with me.

SuperCrunchers - Data!  Lots of data!  Expert opinions can be outperformed by supercrunching lots of data. We don't want to admit it, but our experts may be fallible. In the future, data will provide a ton of insight.  There is power in data, and the ability to analyze it for insights.

Entrepreneurs will be wise to recognize the tidal waves that supercrunching will probably produce for insights.  And the advantage it gives to incumbent companies with a lot of data like Facebook, Google, Twitter, and Square.

Genius: The Life and Science of Richard Feynman - Richard Feynman was an independent thinker and a deep insightful thinker.  He didn't care about doing things the "right way", like math problems.  Instead, he figure out his own way to come up with the solution.  He crushed his high school math competition. He could fix radios just by thinking through the problems. As part of the Manhattan project, he made early parallel computers out of people, working in teams, figuring out problems on color coded cards, passing them around.  He challenged a NASA computer to figure out where a rocket would land (Atlantic Ocean) and did it faster than the computer.   Rather than just read the solution to problems and accept that as "the way to solve this", he would read just enough about how someone solved a problem to know, generally, what they did, then try to solve the problem on his own, in order to truly understand how to solve the problem. 

The Lean Startup - Eric Ries is about putting in a process and culture of doing experiments and learning from those experiments ("Build, Measure, Learn", "Validated Learning").   The book attempts to validate itself for a broad audience (not just entrepreneurs) with examples of large corporations (Intuit) and government using it (gives a nice example of how it could work in government, but a stark contrast to Nudge's Medicare Part D rollout).   [still finishing this book as of 5/18/2012]

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