Archive for January, 2011

Kaspar Hauser - Question of Logic

Entrepreneurial Puzzles

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The standard narrative about the American economy in the late twentieth century typically runs as follows: after four decades of quasi-statist capitalism (the 1940s through the 1970s) that brought the United States to the brink of economic ruin, the economy experienced an entrepreneurial explosion around 1980. The economy moved from the dull bureaucratic capitalism of the "Organization Man" to the exciting entrepreneurial capitalism of high-technology and, accordingly, more robust growth and productivity. Without questioning the importance of entrepreneurship to economic growth, I’m beginning to wonder about this.

For starters, let’s take recent technological history. The information technology revolution that is associated with the 1980s and 1990s was born in the 1950s and 1960s, emerging out of government-funded research performed at universities and large company laboratories. We could probably mark the start of the IT revolution at the founding of Fairchild Semiconductor 1957 or, perhaps, the founding of Intel in 1968; Microsoft and Apple followed in the mid-1970s. Other companies typically associated with this entrepreneurial rebirth include FedEx and Southwest Airlines, which were also started in the late 1960s and early 1970s. Even within the confines of the conventional narrative outlined above, we can trace the roots of entrepreneurial capitalism to the final stages of bureaucratic capitalism, a pattern that aligns withAother models of technological revolutions and transitions. In his wonderful book,AThe Age of Abundance, Brink Lindsey (who is now a Senior Fellow at the Kauffman Foundation), connects theAcounter-culturalAethos of the 1960s with the subsequent entrepreneurial revolution in business.

The typical narrative of entrepreneurial capitalism is also usually supported by reference to either changing rates of overall entrepreneurship or the high number of initial public offerings (IPOs) in the 1980s and 1990s, as well as the explosion of alternative forms of financing, from junk bonds to venture capital. And, indeed,Aaccording to at least one strand of Census Bureau data, the absolute number of new incorporations did increase dramatically from the 1960s to the 1970s and again to the 1980s and 1990s.ANew company listings, moreover, rose from an average of 156 per year from 1973 to 1979, to 549 per year from 1980 to 2001. From 1980 to 2001, in fact, newly listed firms comprised 10 percent of all listed firms in any given year. Venture capital, too, increased by several factors from the end of the 1970s and despite reverting from its astronomical heights in the late 1990s, VC remains at historically elevated levels.

.:growthology.org->

I love the feeling of getting to understand a seemingly abstract concept in intuitive, real-world terms. It means you can comfortably and freely use it in your head to analyse and understand things and to make predictions. No formulas, no paper, no Greek letters. It's the basis for effective analytical thinking. The best measure of whether you've "got it" is how easily you can explain it to someone and have them understand it to the same extent. I think I recently reached that point with understanding standard deviation, so I thought I'd share those insights with you.

A bra that holds booze?? My ninja, please!

… no seriously, I mean, please, sir…

Why Johnny Can't Be Agile

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But agile techniques were a hard sell. Even simple, non-controversial practices such as version control weren't yet universally adopted. I used to ask audiences at talks how many people did not use any version control on their project. Typically somewhere between 10% and 30% of the audience raised their hands. It wasn't that folks were dead set against using version control on religious grounds, they either just didn't know any better or just didn't bother.

So surely this was just a matter of education; of spreading the word. Agile methods made sense. Agile ideas are grounded in reality, and even some actual science. Surely the world would see the logic in it? You'd expect some amount of resistance to any new way of developing softwareaespecially one where continuing toAEmbrace ChangeAwas part and parcel of the new method. Folks don't like change in general, and here we were advocating riding the wave of constant change. But somehow it seemed that resistance to agile ways went deeper than that.

We are not rational or logical creatures. We'd like to think we are, but the biological, psychological truth of the matter is that we're predictably irrational. How irrational? Take a look at Wikipedia's list ofAcommon cognitive biases for starters. This dauntingly long list begins to describe the many ways that we humans aren't as logical or reliable as you might think. While you might encounter many of these in your daily life or work, a few stand out as significant barriers to agile adoption. These cognitive biases are why Johnny Can't Be Agile.

: Continue reading the article :

The mistake my VC friends make is they think it’s either/or. Either you support the open web and are a charity, or you build a silo, monetize it, and get rich. What really happens is that the silos are eventually undermined by the open web. This happens when the market is choked with startups with nothing to lose. Some of them are going to successfully differentiate by offering users freedom. We’re coming up to the part of the cycle where the users value it.

Munger’s Worldly Wisdom

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I’m going to play a minor trick on you today a because the subject of my talk is the art of stock picking as a subdivision of the art of worldly wisdom.AAThat enables me to start talking about worldly wisdom a a much broader topic that interests me because I think all too little of it is delivered by modern educational systems, at least in an effective way.

And therefore, the talk is sort of along the lines that some behaviorist psychologists call Grandma’s rule after the wisdom of Grandma when she said that you have to eat the carrots before you get the dessert.

The carrot part of this talk is about the general subject of worldly wisdom which is a pretty good way to start.AAAfter all, the theory of modern education is that you need aAgeneral education before youAspecialize. And I think to some extent, before you’re going to be a great stock picker, you need some general education.

So, emphasizing what I sometimes waggishly callAremedial worldly wisdom, I’m going to start by waltzing you through a few basic notions.

What is elementary, worldly wisdom?AAWell, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’emAback.AAIf the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

.:paladinvest.com->

My generation will be at something of a loss when this new world comes about. In my life, I've been rewarded for communicating effectively online via text. I'm a reasonably effective verbal communicator, but not nearly as good as I'll need to be to compete with the telepresence-native adults that the children of today will grow up to be.

From time immemorial, we've had middlemen taking cuts of what they're selling, but even the merchants of the ancient world were responsible a at the very least a for transporting and protecting the goods they were selling. They often did so along hazardous routes teeming with bandits lying in wait.