z on life

Great thought experiment: how would you sell water*? This is much like one of the stereotypical Microsoft interview questions of “how would you sell ice to an eskimo?” and is a cool exercise to go through just for fun.

Here’s how I would do it. Put the water in an interesting bottle. This bottle has 5 different openings from which to drink. Maybe one on the top, one on the bottom, and three on the sides at different angles. At this point, ergonomists, environmentalists, and production managers alike are probably freaking out at how user-unfriendly, plastic-heavy, and expensive this product would be, but just bare with me.

Now, let’s include a marketing spin on the consumption of the water. Not only is this a ‘premium’, ‘hot’, and ‘blinged out’ product, but we will push the idea that the opening you drink out of ’says something about you’. For instance, those who drink from the top are traditional, those who drink from the bottom are rebellious, and those who drink from each of the side openings are wild, cool, and bad-ass respectively.

What’s the goal of this? It’s to get people to self-identify with one of the methods. If you can successfully pull it off, you’ll have created an interesting dynamic between the product users where they argue over the best way to drink. Soon you’ll have trash-talk dialogues going about how “top-drinkers are un-cool” or “left-side-drinkers are the $&!^”. This is exactly what you want. Not only do you have to put thought into which way you drink as an image statement, the choice of buying another brand of water will become a huge social detriment. If you buy a different brand, you lose the ability to express yourself. You become a generic person. Yuck! Who wants to be generic? No one does. And that’s the beauty of it.

Take this a step further. Let’s get 50-cent to have the water in his video. Maybe he can even throw in a line like “The realest playaz drink from the right. Damn this water is tight.” Next thing you know, hardcore 50 followers everywhere are buying up bottles like crazy, eager to show off their loyalty and get some street cred. Things only get better when Kanye raps about “I only drink from the top, cause it gets me goin and I just can’t stop”. Kanye fans rush to grab some bottles and drink from the top to show how he’s the man and Fifty is uncool. Now you’re golden**. Everyone who chimes into the debate further boosts the sales numbers. The more controversy you can raise, the stronger the dedication will be, the more water will move off of the shelves.

Now in all reality, pulling something like this off is far-fetched. There’s a number of serious problems with this strategy above and beyond the less-than-serious issue that Fifty was an equity holder in Vitamin Water and thus has a conflict of interest. Joking aside, we see similar things in the consumer world every day. It’s like wearing the Yankees hat with a perfectly flat brim and the sticker still on. Surely it’s not more comfortable, and it’s not as if the sticker has utility value. It’s really an image thing. How about paying 5 times more for something because it has Gucci tags? At the end of the day it just makes the wearer ‘feel’ good. How about shooting out T-shirts into the crowd at a baseball game? You don’t pay for an expensive ticket to catch t-shirts, you pay to watch baseball, but fans love the t-shirt toss and often remember it more than the game nonetheless. How many people wear Tag Heuer because Tiger Woods does? How many people bought a LiveStrong bracelet, not for charity, but because it was the ‘cool’ thing to do?

The learning lesson here is that you shouldn’t always just think about the actual product you’re working with as the thing you’re selling. You could be better of selling an image, a feeling, a status symbol, supplementary activities, or personal meaning. If you can surround the most boring of products, ie: water, with a really super-cool context and get people riled up about it, then almost any other product should give you way more leeway. Instead of getting caught up on the idea of creating the perfect product, settle for an okay one. Instead think about all the little things you can do to get people feeling excited to use your product, either directly or indirectly. Sometimes its the subtle mini-emotions evoked by products that make the difference, not the shear utilitarian value. The more you can get people to use your product because of what it means or how it makes them feel and not because of what it is, the better. If you get to this point, you’ve created personal value for the user, and you have created an arbitrage. Personal value is free to you as the product creator, but worth lots to the customer. And when you’ve made some, it’s like you have a license to print money because what makes you money costs you none.

So, how would you sell a teenage girl MySpace? Would you talk about social networking features and news updates and friend lists? No, of course not. This is like selling water “because it hydrates you”. The magic isn’t in the utility, it’s in the soft experience. The sell for MySpace is in the ‘wow’ moment when she is done customizing her profile with glitter, blinking text, a custom sunrise background, 4 YouTube embeds, 3 celebrity photos, a blog post, a music player bumping, and an ‘about me’ where she answers 100 personal questions. The sell is when she takes a step back and says, “yes, that’s me, and I love it!”. Again, it’s not about utility. It’s about what it means.

How would you sell water? How do you plan to sell your web 2.0 idea to users? If it’s just great features or great technology, you’re probably still leaving something on the table.

* - Credit for this great hypothetical goes to Andrew Chen.

** - If you’re not familiar, Kanye and Fifty have had a bitter on-going rap battle for a long time and fans of each side usually take vary strong stances and are never hesitant to show support.

In the world of startups, everyone seems to have a different definition of ‘winning the game’ or ‘being successful’. With that said, I wanted to write about what I think winning is and is not.

To start, let’s talk about some popular ways to viewpoints on what it means to win that you hear in and around the startup crowd all the time:

1. Making something that millions of people use every day
2. Working with your friends, being comfortable, and having fun
3. Becoming Internet famous
4. Getting to a liquidity event
5. Being massively rich

To different extents, I disagree with every item above. Some of those are merely stepping-stones to real success, and some just have no place in the same sentence with the word ‘winning’.

Making something awesome that a lot of people use everyday is sometimes necessary but never sufficient in building a real business. Unless you can truly extract money from those users in a significant and sustainable way, I don’t see the point. Maybe the purpose of your work life is to just provide cool goods and services to the world. In that scenario, you’re really just running a charity event, in which case you need to acknowledge to yourself and others really what your true intentions are. But if the purpose of your work life is to build big companies, then focus on economic value by thinking about distribution, retention, monetization, strategy, relationships, and market before anything involving the word ‘cool’.

Getting to work with your friends with flexible hours and a low key work environment is great if you want to be a lifestyle business. If you are a disciple of the work-to-live philosophy, then that’s all fine and dandy. By all means, emulate the four-hour workweek. But if you want to build empires like Gates, Jobs, Ellison, Brin and Page, Dell, Bezos, etc, you will never get there if you maintain this type of philosophy. If you want to be funded by Sequoia, KP, Accel and that elite crowd, you’ll never get there in this mindset. When you’re in the office, the more blurry the line between friends and coworkers, between fun and business, between goals and leisure, the worse off you will be.

Becoming Internet famous is a really funny goal that many people have but few will admit. At the end of the day, famousness stands for very little expect maybe a fulfilling feeling inside to someone who needs that. Can you imagine coming to your board and saying “Well we missed earnings and we’re going to have to liquidate at a loss on all of your investments, but at least now people know who I am when I walk down the street.” That sounds absurd and is absurd. If fame comes with the process of being a successful businessperson, then that is what it is. But if you seek out fame for the purpose of fame itself, you actually stand to have less of a chance of succeeding because you will make irrational decisions and spend too much time and effort worrying about the wrong things.

Getting to a liquidity event can be a huge win, but the concept of ‘exiting’ in and of itself is not. Many times startups push forth and push forth and push forth because they just don’t want to die. Amen to not dying, but what is the goal of what you’re doing? Is the point to not fail? Is the point to prove that you were right after all and that “this can work”? Do you need to see the company ‘exit’, even if it is a tiny sum of money with years of handcuffs, just so you can think you “didn’t waste that time” in your life? Does exiting make it somehow worthwhile, even if you could have made more money over those few years working at Google or building new and better startups? Hey, if you’re going to hit it huge and explode with a 10-figure market cap, by all means exit and buy a Ferrari. But if you’re on the other end of the spectrum, are you really being rational, or are you hanging on to the concept of ‘not failing’ instead of focusing effort on a new massive success that could be up for the taking?

Being massively rich, in a self-made way, has correlation with “having won” but does not for sure indicate causality. After all people do get lucky, are benefited by serendipitous events, or find themselves in the right place at the right time. But in the end, most of these people still earned it. In my mind, though, these people have won a battle, not the war. I feel like the key to winning the war is in a process and not in any one result. It’s those people who have built up a methodology, a framework, and a desire to do it again and again and to do it huge. These are the Marc Andreessens of the world. The other side of this coin involves all the people I mentioned earlier Gates, Jobs, etc who have really focused on one company and taken it all the way for many, many years. Instead of doing it again and again, these people are all about extending it further and further. It’s the not the money, it’s the push to always be looking up even after you have the ability to be comfortable for the rest of your life.

So then what is ‘winning’ to me? Here’s a couple definitions or elements that seem much closer to what I would be comfortable with:

• Going from 0 to multi-billion dollar IPOs and beyond
• Putting yourself in a position to work with the best people
• Doing in aggregate what the fewest other people have been able to do

IPOs and huge exits are a good, tangible way to look at things. Money as a scorecard is fine, because virtually everyone who’s at the very top of that scorecard has earned it, either via sustained hard work or a huge string of success after success. Analogously in the non-startup world, you could argue that running a key division of a company or managing a huge fund and growing the earnings or worth by a large multiplier is just as good. I completely agree. There are lots of tangible ways to win.

Being able to work with the best people is an indicator of success. It means that every day, you get to experience the joy of pushing out the most creative, strategic, business-savvy ideas at the fastest possible rate. You get to solve problems that other teams can’t possibly imagine solving. If you think of life in terms of how many interesting experiences you get to have, working with great people can make that number explode. Every minute of every day can be incredible. While others can pay to go anywhere in the world, drive fast cars, and even go to the moon, you can’t pay to work with the best. Sure you can sometimes just set up the economics so that they make sense, but if really good people don’t respect you and see you as a winner, they won’t want to bet some portion of their career on you. If you can get to this point where the best want to be around you, you are on your way to a win.

The last is my personal favorite: measuring the size of your win by how many people have been able to carry out what it is that you did. We as people naturally seek to be different and new things excite us. We love to do what others can’t, not to evoke jealously, but because it is has core appeal. Professional athletes are one a million, same with movie stars, senators, and the like. Being a top of the top businessperson is more on the order of one in a hundred million. Striving for that is exciting, not because you get famous, but because getting there means you solved the most difficult and dynamic problems the world has to offer. Think about your aggregate level of accomplishment and what percentage of the world is at or above it? Chances are, that number is large. How can you get it down an order of magnitude, or how about five orders of magnitude?

Notice I have left out anything besides work. Nothing was stated in here about life, family, friends, fun, none of it, except how it was bad to mix lifestyle and work. The enjoyment of life outside of work as completely and wholly necessary, but it is an even more macro question of balance between the career-facing facts stated here and the elements of fun, happiness, and personal enjoyment elsewhere. What do I mean? You will be on some trajectory to win at some magnitude in the professional sense, and depending on what that is, you will have some portion of time to spend on the rest. The end goal of life on the whole might still be happiness, but the key is deciding how big you will win professionally, how much happiness that generates for you, and how much you will need to seek from other sources such as personal enjoyment of friends, family, leisure, and so forth.

So what should all of this mean to you? Really, it should mean nothing. This is how I look at things, but everyone is different. Winning as defined here isn’t for everyone, and I think it is awesome that not everyone goes down that path. I will say, though, that when I meet people, I am always curious how much they really want to win and win big. The ones who want it bad are the kind of people I enjoy working with.

So I am thinking about writing a series on what I’ve learned over the past 3 years of doing startups. That said, I wanted to give you guys a bit of an idea of what I’ve done in case you’re curious where I got this perspective, or if you’re deciding whether or not to listen to me.

Alright, here we go. Rewind to 2005. I am in school at Carnegie Mellon, 17 years old, finishing up my CS degree, and about to start my MBA the coming year. Even with the MBA, I thought it was pretty likely I would go to some sort of CS grad school, that is, until the entrepreneurial bug bit. It all started when a friend from CMU, Kyle Langworthy, approached me with an idea. We took it, ran with it, and I have never looked back. It’s been startups ever since.

Really quickly, in the 3 years since, I’ve done the following:

• Envivial - 3D virtual retail stores for interactive online shopping
• Eivod - P2P click-to-play on-demand video in the browser
• SlapVid - an innovative online video previewing experience
• Cloudant - super-fast multi-streaming home routers
• My Current Gig - going big in consumer internet (company TBA)

Envivial was my entry point with Kyle and Joe Damato where we learned the ropes, won some business plan competitions, and really ground out our first real startup experience. After that, Joe and I continued on to found Eivod with Wei An Wang and Bob DiMaggio where we built our first really technically hard product, one that got us into Y-Combinator. SlapVid was our product we launched in YC as a test platform for this P2P stuff and a great user experience on top of YouTube. When that didn’t quite work out, we turned P2P on its head, and used our networking expertise to make multi-streaming routers in Cloudant and pitched this at the YC demo day. After demo day, we decided it was best not to continue and it was back to the MBA, but only for a short time. Only 2 months later, I was swept out to the west coast into the current gig with Andrew Chen, Matt Rubens, and very soon thereafter Aman Gupta. Now we’re just cranking away.

Anyway, it’s been a dense few years of learning. In this time, I finished my CS degree and will get my MBA in a few weeks (assuming I pass, knock on wood). I’ve iterated on the startup experience, and learned an enormous amount about technology, building companies, and life in general. In the posts to come, I will discuss some of that learning.

PS: In hindsight, I realize the need to give mad props to Kyle for getting this ball rolling.