(click for larger image)

FrozenRails was a great Ruby on Rails event in Helsinki, Finland. Great hosts, great speakers and participants. Thanks to all. Here are my pictures (and here are the rest of my pictures from around Helsinki).

Things might be quiet around here for a little while, as we’re pretty busy with BuzzPal and other projects, plus doing some consulting for select pre-funded, seed/angel-funded, and VC-funded founders and web startups. What kinds of consulting and advising? Everything that you see listed in the “Specialties” section of my LinkedIn profile.

If you’re raising outside investment (angel or VC) and you’re thinking of contacting me, it might be good to do it before the cows leave the barn (i.e., before you get too far down the road, and certainly before you negotiate or sign any investment-related documents). Why? See the “Bootstrap or Die” case study for one example.

My background, in a nutshell:

• Debt and equity venture finance, from the late ’90s Internet bubble, through its crash, restructurings, and recovery.
• Specialist in subscription-based business models (often with advertising and ancillary product/service components).
• Been through an IPO and sold stock for a decent profit.
• Been invited to participate in, and cover, various startup and Web 2.0 events around Europe.
• Founder and seed investor in two seed-stage projects.
• Assembled an international distributed team of professionals.
• Growing that team: Currently looking for an expert web app interface designer and front-end developer for layout, typography, color, HTML, CSS, Javascript, internationalization, speed/performance best practices, working with A/B testing, multivariate testing, and more. Ideally 1-2 people covering that and working with us, our prototypes, and developers to create great user experiences and value.
• Started a new blog — Bootstrappy.com — in February 2010. It’s first post made CenterNetworks’ “Weekend Entrepreneurial Reading” list and got over 2000 views in its first week.
• See my LinkedIn profile and personal blog, pics, and personal Twitter account for more. See here for the TMI version.
• Get in touch here.

Some good points in here:

Startup School 2009:
37 Signals has some lessons for European startups
By Ciara Byrne
2009-10-29
TechCrunch (comments thread there)

Y combinator’s annual startup school event was held in Berkeley last Saturday… and Jason Fried of 37signals gave one of the talks which seemed most relevant to European startups. His business partner is actually from Copenhagen and they worked together for two years before meeting in person. Here’s a summary of his presentation and a chat I had with him afterwards.

* Bootstrap your startup because it teaches you how to make money. Funded companies are focused on spending it.
* Charging for something forces you to be good. People care about something they have to pay for so you will get very good and honest feedback.
* Useful is more important than innovative. “Cool” wears off, useful doesn’t.
* Software has no edges. This makes it more difficult to stop it from expanding beyond where it should. Think of your product as a museum and the features as the pieces of art you select. Only the most important pieces should make it into the museum.
* You can’t make just one thing. Every product has a byproduct. Again this is harder to see in software than with physical products. In the case of 37signals, books and conferences have been byproducts of the software products.
* Say sorry in the right way. Don’t say “we apologise for any inconvenience which may have been caused” when you should just say “I’m really sorry”. Talk to your customers as you would to any other human being.
* The best are everywhere, not just in the golden California Valley. So live somewhere you love. Don’t feel you have to move just to make your company work.
* Failure is not a pre-requisite for success or a rite of passage. Unfavourable comparisons are often made between the tolerance of business failure in the US and in Europe. Maybe we should worry about that less. Jason advises replicating what succeeded as opposed to learning from your mistakes – the results are much more predictable.
* Europe can be a less risky place than the US to start a company because of the social security system here. You are never going to starve or have to do without medical care even if it all goes pear-shaped.
* In some European countries it may be more frowned upon to succeed spectacularly than to fail. In countries like Denmark or the Netherlands, standing out is often not considered to be a good thing.

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• Albert Einstein said it in 14 words: “It’s not that I’m so smart, it’s just that I stay with problems longer.”
• Paul Graham said it in 1,400: “Here, in sum, is how determination seems to work: it consists of willfulness balanced with discipline, aimed by ambition.” (click through to read the rest of it… if you have time)

2009-10 Update: Einstein also said “We are most productive when we focus on a very small number of projects on which we can devote a large amount of attention.”  Think about that, friends

Determination
By Paul Graham
September 2009

Like all investors, we spend a lot of time trying to learn how to predict which startups will succeed. We probably spend more time thinking about it than most, because we invest the earliest. Prediction is usually all we have to rely on.

We learned quickly that the most important predictor of success is determination. At first we thought it might be intelligence. Everyone likes to believe that’s what makes startups succeed. It makes a better story that a company won because its founders were so smart. The PR people and reporters who spread such stories probably believe them themselves. But while it certainly helps to be smart, it’s not the deciding factor. There are plenty of people as smart as Bill Gates who achieve nothing.

In most domains, talent is overrated compared to determination—partly because it makes a better story, partly because it gives onlookers an excuse for being lazy, and partly because after a while determination starts to look like talent.

I can’t think of any field in which determination is overrated, but the relative importance of determination and talent probably do vary somewhat. Talent probably matters more in types of work that are purer, in the sense that one is solving mostly a single type of problem instead of many different types. I suspect determination would not take you as far in math as it would in, say, organized crime.

I don’t mean to suggest by this comparison that types of work that depend more on talent are always more admirable. Most people would agree it’s more admirable to be good at math than memorizing long strings of digits, even though the latter depends more on natural ability.

Perhaps one reason people believe startup founders win by being smarter is that intelligence does matter more in technology startups than it used to in earlier types of companies. You probably do need to be a bit smarter to dominate Internet search than you had to be to dominate railroads or hotels or newspapers. And that’s probably an ongoing trend. But even in the highest of high tech industries, success still depends more on determination than brains.

If determination is so important, can we isolate its components? Are some more important than others? Are there some you can cultivate?

The simplest form of determination is sheer willfulness. When you want something, you must have it, no matter what.

A good deal of willfulness must be inborn, because it’s common to see families where one sibling has much more of it than another. Circumstances can alter it, but at the high end of the scale, nature seems to be more important than nurture. Bad circumstances can break the spirit of a strong-willed person, but I don’t think there’s much you can do to make a weak-willed person stronger-willed.

Being strong-willed is not enough, however. You also have to be hard on yourself. Someone who was strong-willed but self-indulgent would not be called determined. Determination implies your willfulness is balanced by discipline.

That word balance is a significant one. The more willful you are, the more disciplined you have to be. The stronger your will, the less anyone will be able to argue with you except yourself. And someone has to argue with you, because everyone has base impulses, and if you have more will than discipline you’ll just give into them and end up on a local maximum like drug addiction.

We can imagine will and discipline as two fingers squeezing a slippery melon seed. The harder they squeeze, the further the seed flies, but they must both squeeze equally or the seed spins off sideways.

If this is true it has interesting implications, because discipline can be cultivated, and in fact does tend to vary quite a lot in the course of an individual’s life. If determination is effectively the product of will and discipline, then you can become more determined by being more disciplined. [1]

Another consequence of the melon seed model is that the more willful you are, the more dangerous it is to be undisciplined. There seem to be plenty of examples to confirm that. In some very energetic people’s lives you see something like wing flutter, where they alternate between doing great work and doing absolutely nothing. Externally this would look a lot like bipolar disorder.

The melon seed model is inaccurate in at least one respect, however: it’s static. In fact the dangers of indiscipline increase with temptation. Which means, interestingly, that determination tends to erode itself. If you’re sufficiently determined to achieve great things, this will probably increase the number of temptations around you. Unless you become proportionally more disciplined, willfulness will then get the upper hand, and your achievement will revert to the mean.

That’s why Julius Caesar thought thin men so dangerous. They weren’t tempted by the minor perquisites of power.

The melon seed model implies it’s possible to be too disciplined. Is it? I think there probably are people whose willfulness is crushed down by excessive discipline, and who would achieve more if they weren’t so hard on themselves. One reason the young sometimes succeed where the old fail is that they don’t realize how incompetent they are. This lets them do a kind of deficit spending. When they first start working on something, they overrate their achievements. But that gives them confidence to keep working, and their performance improves. Whereas someone clearer-eyed would see their initial incompetence for what it was, and perhaps be discouraged from continuing.

There’s one other major component of determination: ambition. If willfulness and discipline are what get you to your destination, ambition is how you choose it.

I don’t know if it’s exactly right to say that ambition is a component of determination, but they’re not entirely orthogonal. It would seem a misnomer if someone said they were very determined to do something trivially easy.

And fortunately ambition seems to be quite malleable; there’s a lot you can do to increase it. Most people don’t know how ambitious to be, especially when they’re young. They don’t know what’s hard, or what they’re capable of. And this problem is exacerbated by having few peers. Ambitious people are rare, so if everyone is mixed together randomly, as they tend to be early in people’s lives, then the ambitious ones won’t have many ambitious peers. When you take people like this and put them together with other ambitious people, they bloom like dying plants given water. Probably most ambitious people are starved for the sort of encouragement they’d get from ambitious peers, whatever their age. [2]

Achievements also tend to increase your ambition. With each step you gain confidence to stretch further next time.

So here in sum is how determination seems to work: it consists of willfulness balanced with discipline, aimed by ambition. And fortunately at least two of these three qualities can be cultivated. You may be able to increase your strength of will somewhat; you can definitely learn self-discipline; and almost everyone is practically malnourished when it comes to ambition.

I feel like I understand determination a bit better now. But only a bit: willfulness, discipline, and ambition are all concepts almost as complicated as determination. [3]

Note too that determination and talent are not the whole story. There’s a third factor in achievement: how much you like the work. If you really love working on something, you don’t need determination to drive you; it’s what you’d do anyway. But most types of work have aspects one doesn’t like, because most types of work consist of doing things for other people, and it’s very unlikely that the tasks imposed by their needs will happen to align exactly with what you want to do.

Indeed, if you want to create the most wealth, the way to do it is to focus more on their needs than your interests, and make up the difference with determination.

Notes

[1] Loosely speaking. What I’m claiming with the melon seed model is more like determination is proportionate to wd^m – k|w – d|^n, where w is will and d discipline.

[2] Which means one of the best ways to help a society generally is to create events and institutions that bring ambitious people together. It’s like pulling the control rods out of a reactor: the energy they emit encourages other ambitious people, instead of being absorbed by the normal people they’re usually surrounded with.

Conversely, it’s probably a mistake to do as some European countries have done and try to ensure none of your universities is significantly better than the others.

[3] For example, willfulness clearly has two subcomponents, stubbornness and energy. The first alone yields someone who’s stubbornly inert. The second alone yields someone flighty. As willful people get older or otherwise lose their energy, they tend to become merely stubborn.

Thanks to Sam Altman, Jessica Livingston, and Robert Morris for reading drafts of this.

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If you are (or are interested in becoming) a startup founder, early team member or investor, check out Yokum's blog.

A lot’s been going on over at BuzzPal these past couple of months. Besides design and development work, we’re growing the team, forming a new company, negotiating terms, drafting documents, and generally working through all the administrative stuff you gotta do to get a clean start.

One of the questions everybody goes through at this point is: “Who should get how much equity and under what terms and conditions and vesting”? Yokum’s article (below) is about that “vesting” part (other parts to be discussed some below).

Yokum suggests standard 4-year vesting with a 1-year cliff, then equal monthly vesting. It’s hard to argue with that.  Indeed, it’s what I got at MCG (I got options that where converted to restricted stock before our IPO in 2001) and it’s most people get if and when they get equity.

That said, Basil Peters, whose blog, angelblog.net, should also be on your list, makes a strong case that, for founders and co-founders at least:

“[T]he most fair and equitable structure, and the one that maximizes the alignment between the founders and the investors, is to vest like this:

• 50% of the shares daily over a three year period; and
• the other 50% when there is a sale of the Company.
• All vesting for senior employees accelerates on a sale of the Company”

That last point, and items related to it, is especially important in light of the fact that founders can, and often are, forced out after institutional investors come in. Steve Blank and others covers that issue thoroughly (just do some poking around).

Along those lines, Adeo Ressi (TheFunded.com) and Yokum came together to draft a set of model documents and sample term sheet for The Funded Founder Institute.  See the TechCrunch article.  Also see Basil Peter’s One Page Term Sheet for Angel Investors and his description of Exchangeable Shares (vs. a convertible note).

Those documents contain many founder-friendly clauses, such as super-voting stock, that may ultimately be bargaining chips for future negotiations, but that is valuable in and of itself.  Put it in and let ’em (the VCs) negotiate it out later, if they have “hand” (Sienfeld video clip).  If you have hand, it stays in.  If hand is split evenly, then you trade with your chips.  In any case, check out all those documents and links.

While I’m on a link roll, here are a few more of interest.  These links, and their links, will take you to great slides, videos, podcasts, and more:

• “Open Source Series AA Equity Financing Documents From Combinator“: Yokum, I believe, also worked on these.
• Steve Blank’s Blog: Steve wrote this excellent book, The Four Steps to Epiphany, which is getting a lot of press these days (most recently today on TechCrunch UK).
• “What is customer development?“: By Eric Ries.  Eric is one of Steve’s disciples, you could say.  Another is Sean Ellis.
• “How to develop your customers like you develop your product“: This is the one with the Easter Eggs for you (follow the links there).
• “Early Exits“: Basil Peters’ new book.  Note: He covers most of the stuff in that book on his blog.
• Pivotal Tracker: The word of the day from July 8th.

There’s a lot more to say on all these subjects, but I must close for tonight.  Before I close, however, let me quickly tell you where I come out on the vesting question:

• Vesting over 3-4 years, with a 6-month cliff for the first 1-2 team members and a 1-year cliff for those who come later.
• Vesting ramps up from a smaller amount per unit of time in the beginning to larger amounts per unit as time passes.  In other words, you vest at an accelerating rate instead of a flat rate, like you do with a normal vesting schedule (4-year with 1-year cliff then equal monthly).
• I like Basil’s idea about a 50% holdback until the sale of the company (see his blog post for the reasoning on that).
• Some vesting acceleration for change in control (if there is a termination involved).
• No other acceleration.

Cheers,
Chris (BuzzPal founder)
On Twitter: @chrisco (personal) and @buzzpal (project)

Now on to Yokum’s article:

What should the vesting terms of founder stock be before a venture financing?

July 19, 2007

I think that founders stock before a venture financing should be subject to the same general vesting terms as one would expect after a venture financing. A typical vesting schedule is four year vesting with a one year cliff. This means that 25% of the shares will vest one year from the vesting commencement date, with 1/48 of the total shares vesting every month thereafter, until the shares are completely vested after four years. The vesting commencement date can be the date of issuance of the shares, or an earlier date, in order to give the founder vesting credit for time spent working on the company prior to incorporation and/or issuance of the shares.

Some founders want to accelerate vesting upon a termination without cause or a constructive termination. (I will get around to defining these terms in future posts.) I’m not sure that this is really in the best interest of the founders. It is extremely difficult to terminate someone for cause, so termination of a founder will generally result in his/her shares being vested. For founders that have never worked with each other, I would generally counsel against acceleration of vesting upon a termination without cause or a constructive termination. If personalities clash or things don’t work out and a founder needs to be forced out, the remaining founder(s) will kick themselves for allowing the departing founder to leave with a significant equity stake.

If there is acceleration upon a termination without cause or constructive termination, I think the amount of acceleration should be similar to the amount of severance that a person may receive in the same situation. If six to 12 months of severance might be justified if a person is terminated without cause, then six to 12 months vesting acceleration seems reasonable. Of course, the typical norm in technology companies is that there is no severance in any situation.

In addition, some founders may want to accelerate vesting upon a change of control. Single trigger change of control vesting means that the shares accelerate upon a change of control. This isn’t in the best interest of investors because the fully vested founders have little incentive to continue to work for an acquiror after a change of control. In order to incentivize these people, additional options may need to be granted, which increases the cost of the acquisition to the acquiror, potentially to the detriment of the investors. Double trigger change of control vesting means that the shares accelerate upon a change of control AND the founder is terminated without cause or a constructive termination occurs within 12 months of the change of control.

The amount of shares that accelerates upon these events can be 100%, or written as a certain number of months of vesting, such as twelve. I’ve had one VC express a strong opinion that the amount of vesting upon one of these events should not be 100%, but rather 12 to 24 months of vesting acceleration, due to the fact that it is extremely difficult to terminate someone without cause. I think that double trigger 100% acceleration for founders or certain executives is fairly accepted among investors. However, extending that protection to rank and file employees is not common.

In any event, VCs are likely to impose their own vesting terms and acceleration upon a Series A financing, so it may not matter what terms are implemented when the initial founders shares are issued. However, reasonable vesting and acceleration terms may survive the Series A financing, especially if it would be difficult to renegotiate with a critical founder in a team with multiple founders.

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(click to watch the video)

Just time for a quick post to mark the end of another great Reboot. This year’s theme was Action (last year was Free).

Below are some links (and pics). Check back over time, as new and updated content will be posted. Update: http://video.reboot.dk is live.

• Andrew Turner: OpenStreetMapping Party!
• Bruce Sterling: Closing keynote (video). Post-closing interview (video).
• Leisa Reichelt: Bare Naked (open source) Design
• David Weinberger: Cyberutopianism + Activism
• Flemming Funch: The art of not-doing: Being in sync with what wants to happen (link to slides)
• Flickr: reboot11 tag
• HashTags.org: #reboot11 hashtag
• Heidi Harman: User-driven Innovation – a means for Social Innovation
• Martin Källström: Reboot11 participants jumping in slow-motion
• Niels Hartvig: How to start an open source project… with or without code
• Sebastian Deterding: Persuasive Design
• Tor Nørretranders: Evening talk
• Vimeo: BuzzPal’s Reboot photo/music/video
• Vimeo: reboot11 tag
• YouTube: reboot11 tag

Regarding the BuzzPal t-shirt promo mentioned here, we gave away two t-shirts at Reboot (via this tweet) and are giving away one more right now to someone on the sign-up list.  The winner is Jesse V, whom we are emailing now.  Jesse has one week to claim the t-shirt, otherwise we’ll draw a different winner from the list.  We’ll do more promos in the future, too, of course.

2009-7-2 UPDATE: @jmvanderpol just claimed his free BuzzPal t-shirt!  Congrats, Jesse!  We’ll be giving away more freebies soon.

ANNOUNCEMENT: Want win a free BuzzPal t-shirt?   Find out how at end of this blog post.

Reboot11

Just time for a quick post, as fully half of the BuzzPal team gears up for another great event (and party!) in Copenhagen, Denmark.

Last year was our first time at Reboot, thanks to this chain of events (that all took place via email and Twitter):

Turned on to Reboot by @Marston, who we met (and stayed with) in Amsterdam, at @guidoz‘s place (actually his girl’s place) who we met thanks to @patrick, who launched BuzzPal onto the European scene last April, at his (and his partners’) super smoken’ The Next Web Conference in Amsterdam.

Ever since Amsterdam, we’ve been lucky enough to be a part of many other great events, thanks to our super awesome friends. Thank you, super awesome friends!

BTW, for anyone who was waiting for the last minute before deciding if you’re going to attend this year… it’s now officially the last minute.  Buy your fucking ticket!

Here’s a message I received this morning from @mygdal: “If you haven’t all ready registered there’s 25 tickets left, so absolutely last chance to register if you or a friend wants to participate: http://register.reboot.dk.”

Ok, I gotta wrap up for now, too much shit to do, too little time (what else is new).  See you next week!

–@chrisco

SPECIAL BUZZPAL PROMO

For a chance to win a BuzzPal t-shirt, including free shipping, just enter your email address here.

After we get back from Reboot, we’ll randomly pick (and email) winners off that list. People emailed will have a week to claim their prize by replying back with their size and shipping info. If they don’t, they’ll forfeit and we’ll randomly pick someone else.  We’ll wash, rinse, and repeat until the allotted t-shirts are out the door.

BTW, if you can’t wait and/or just want to support a bootstrapping team of persistent mo-fos (us), please just go ahead and buy a shirt direct from our shop.  Thank you.

PS: Just found that @vesterinen, @PaulaMarttila and their other partners in crime over at ArcticStartup.com are putting ArcticEvening Goes Copenhagen on the eve of Reboot.  Read about it and Get Your Free Ticket here.

Just time to post a few pics from the excellent TechCrunchTalk Nordic in Stockholm last week. Coverage and videos here: TechCrunch and ArcticStartup. Lot of fun and interesting people at the event, including a strong showing from the Gothenburg crew!

This is the second TechCrunchTalk that BuzzPal has attended, the first was TechCrunchTalk London, which BuzzPal co-sponsored (comments and pics).

Ever since the London event last year, Mike, Petra, and Rassami have been traveling Europe organizing these gatherings, which are “must attend” events if you’re a startup looking to connect with other startups, media, bloggers, and investors. Plus they’re lots of fun — not just the events themselves, but also the outings and parties, such as the one you see below, thrown by Burt and it’s founder, Gustav von Sydow.

BuzzPal’s next event is Reboot11 in Copenhagen later this month (blog and pics from last year’s event).  See you there!

The following pics are from John Sjölander’s Flickr album.  John is a friend from Gothenburg and the CTO of Burt.  The reason the TV was on for 90 minutes of the party was the European Champions League final game, Barcelona vs. Manchester United.

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The Gift-Card Economy
By Virginia Postrel
2009-05
The Atlantic

Great reminders for startups and fun for everyone else, especially if you’re into behavioral studies, paradoxes, and marketing.

Mother’s Day is coming up. Which do you think Mom would enjoy more—a day-spa gift certificate that expires at the end of June, or an otherwise identical gift certificate that expires a year from now?

The answer is obvious. Longer is better, of course. Mom will have a higher chance of making it to the spa if she has a whole year to find a convenient time.

Perfectly logical—and probably wrong

Mom might actually be happier with a shorter-lived gift card, new social-science research suggests, because she’d be more likely to use it. Paradoxically, people don’t put off only unpleasant tasks like doing taxes or cleaning out the garage. They also procrastinate on enjoyable experiences like going to the spa. Tight deadlines can force people not only to get work done (or to make that Mother’s Day phone call) but to have fun as well.

“While individuals given a longer time frame are more positive about and expect to be more likely to complete an enjoyable task, they are actually less likely to do so,” the behavioral economists Suzanne B. Shu and Ayelet Gneezy write in an article under review at the Journal of Marketing Research.

Their research belongs to a relatively new application of behavioral economics: looking at situations in which people seem to exercise too much self-control, rather than too little. In an economic environment where shopping seems like a sin, this research provides clues that could help businesses attract customers. It even suggests that some of the manipulations designed to lure our dollars may redound to our own good.

Behavioral economists, whose work combines the techniques and ideas of economics and psychology, have long focused on what Thomas Schelling, the 2005 Nobel laureate, called the “intimate contest for self-command”—the all-too-familiar inner conflict between the would-be disciplined self who wants to get up early, exercise, and lose weight and the pleasure-seeking self who prefers to sleep in, watch TV, and eat chocolate. These two selves, Schelling noted, don’t necessarily exist at the same time. The disciplined self imagines future virtues, while the pleasure-seeking self succumbs to present urges. “If the person could make the final decision about that action at the earlier time, precluding a later change in mind,” Schelling wrote in 1983, “he would make a different choice from what he knows will be his choice on that later occasion.” (See “First Person Plural,” by Paul Bloom, in the November 2008 Atlantic.)

To force our future selves to do the right thing, we look for ways to commit to that behavior in advance—by putting the alarm clock on the other side of the bedroom, making an appointment with a personal trainer, or throwing out the leftover Halloween candy. As the economy turned down, more than half of the female shoppers (and nearly half of all the shoppers) surveyed by WSL Strategic Retail said they’d begun to avoid even entering stores where they might be tempted to overspend. (A third of all the female shoppers, however, said they’re staying home so much they “feel like a hermit.”)

The intimate contest for self-command can apply to pleasures as well, and for similar reasons. In the here and now, we want to behave one way in the future, only to change our minds as that future nears and the immediate costs of our plans become more real. Yet, looking back from the still-farther future, we wish we’d indulged—just as, looking back on our lazy morning in bed, we wish we’d gotten up and worked. If our future self and our past self could gang up on our present self, we’d behave differently.

Take those gift-certificate deadlines. In an experiment, Shu and Gneezy first surveyed 80 undergraduates, asking how they would feel about a gift certificate for a slice of cake and a beverage at a local café and how likely they were to use it. Forty-two survey participants were asked to consider a certificate good for three weeks, and 38 were asked about a two-month certificate. More than two-thirds of the group with the longer deadline said they would use such a coupon; only half of the group with the shorter deadline said they would.

Shu and Gneezy then ran the experiment in real life, with a different group of 64 undergraduates. Half the participants got certificates good for three weeks and half for two months. Both groups were far less likely to cash in their cake coupons than predicted. And contrary to predictions, the shorter deadline encouraged more indulgence. Ten out of 32 people redeemed the three-week certificate; only two of 32 used the two-month pass. Those who redeemed their certificates said they’d enjoyed themselves, while those who didn’t said they regretted letting the deadline slip. They gave reasons like “I was too busy and ran out of time” or “I kept thinking I could do it later.” The pressure of a shorter deadline encouraged people to stop procrastinating and enjoy themselves.

Similarly, Shu and Gneezy found in surveys (as we all know from our own experiences) that tourists with limited time are more likely to visit local attractions than are residents, who presumably can go whenever they want. In fact, residents tend to make their tourist-like visits when they have out-of-town guests or when they’re about to move away. With no immediate reason to hit nearby landmarks, locals put off for tomorrow what they might enjoy today.

“What I think is happening,” Shu told me, “is that when people think about the future, they’re very focused on the gains and the positive outcomes. The benefits are really appealing when they’re far off in the future, and people just don’t see the costs at all. Whereas if it’s tomorrow, the benefits are similar but the costs are huge and in their face.” A Saturday at the museum sounds great until you have to leave your errands undone and find a place to park. You wind up sticking to your routine, even though you’d be happier breaking it.

Ran Kivetz, a marketing professor at the Columbia Graduate School of Business, calls this pattern “hyperopia,” in contrast to the “myopia” that behavioral economists traditionally investigate. Myopia includes shortsighted behaviors like overeating or failing to save for retirement; hyperopia entails, as Kivetz put it in the Journal of Consumer Research, “excessive far­sightedness and future-biased preferences, consistently delaying pleasure and overweighing necessity and virtue in local decisions.” Hyperopic people weight imagined future benefits so heavily that they don’t enjoy themselves today and later regret hoarding their time or money. Just as deadlines and precommitment can fight the inertia of myopia, they can also help beat hyperopia.

To lure customers, Shu says businesses need to provide “a justification and a deadline,” citing Disneyland as an example. The park promotes a visit as “a special occasion” for creating lasting memories—exactly the sort of experience that Kivetz’s work suggests people value in retrospect—and it also gives visitors a free pass on their birthday. “They’ve convinced people to take advantage of that special occasion, and bring other people along,” notes Shu.

Like Disneyland, luxury retailers have long had to figure out how to overcome customers’ natural inertia. Unlike less pricey stores, they tend not to attract idle browsers who make impulse purchases. “You may only see customers a couple of times a season,” says Michael Calman, a luxury-retailing consultant and former senior vice president for marketing at Bergdorf Goodman. “You’re looking for ways to increase that visit rate.”

Special events, such as charity benefits or trunk shows, are time-honored ways for high-end stores to give customers justifications and deadlines. Another technique, which could be adapted by other businesses, is a short-term promotion in which customers earn quickly expiring gift cards. For every $500 spent, a customer might get a $50 gift card good for a two-week window starting a week later. Alternatively, customers who regularly buy clothes but not accessories might be offered gift cards good only for purses or shoes, or buyers in the women’s department might get cards for the men’s department. Two local businesses could even cooperate by, for instance, offering restaurant diners a $10 gift card at a wine store for every $100 they spend on meals.

The deadlines get shoppers into stores, the tiered promotions encourage them to stretch their spending a bit, and the incentive system provides a justification. Calman, who pioneered this program at Bergdorf’s, says, “The customer feels that through shopping this type of promotion, they have actually earned the gift card.” With the card’s use-it-or-lose-it deadline fast approaching, customers tend to come back quickly.

During the stimulus debate, some economists, including Edward Leamer of UCLA, suggested that quickly expiring gift cards might boost the economy more effectively than temporary tax cuts, which people tend to put toward savings. Although you could use a government-issued gift card for groceries you’d buy anyway and bank the savings, people tend to treat gift cards differently. When you get a gift card, Leamer noted, you not only tend to spend it on something you wouldn’t otherwise buy, but often wind up spending a bit extra—the perfect prescription for Keynesian stimulus.

Whether designed to boost a sagging economy or just generate sales, these promotions naturally raise the question of whether consumers should succumb to such lures. Which is the real you: the present self who wants to stay in bed rather than exercise and who runs errands instead of visiting a museum, or the future you who wants to be fit and have happy memories? The you who avoids temptation by staying out of the mall, or the you who wishes you hadn’t been such a hermit?

They are both real, of course. The intimate contest for self-command never ends, and lifetime happiness requires finding the right balance between present impulses and future well-being. We know we need bosses and deadlines to help us get work done. But sometimes we can also use an external push to make us have a good time. In both cases, our future self will appreciate the help.

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This is an important article for for just about anyone who has (or is creating) branded products and services.

Here at BuzzPal, we went through a very similar trademark case in 2006 and 2007 (cleared by the US Patent and Trademark Office in 2008). We stood up for ourselves against the $30-million-VC-funded California company (and their NYC lawyers) and won (it was a respectful, friendly, and fair negotiation).

It will be interesting to see how the Sector Labs vs. Apple Computer case turns out (follow it live here on the USPTO website). I suspect a settlement will be reached that will either (A) allow Sector to use its VIDEO POD trademark, but in a narrowed scope, or (B) result in Apple making a payment to Sector in exchange for Sector agreeing to abandon the VIDEO POD mark and re-brand their product.

Now on to the article:

Apple Aggressively Pursues ‘Pod’ Trademarks
By Brian X. Chen
2009-3-23
blog.wired.com

What’s in a name? A rose by any other name would smell as sweet, but if its name ended in “pod,” it might attract the ire of Apple’s shark-like legal team.

Apple’s obsession with the blockbuster success of its iPod has driven the corporation to chase down many companies attempting to use the media player’s three-letter suffix in their product or business names. Names that have come under fire include MyPodder, TightPod, PodShow, and even Podium. On Monday, Sector Labs, a small business whose Video Pod trademark has been blocked by Apple, took legal action to fight back.

“It appears that Apple is not only trying to put an iPod in everybody’s hands and white earbuds in everyone’s ears but to control the use of our language and most particularly the word ‘Pod,'” Sector Labs’ lawyers wrote in a 239-page response to Apple’s trademark opposition, which has blocked Video Pod’s development. “If we are not careful, in Apple’s quest for dominance, they will soon attempt to take over the words ‘Phone’ and ‘Tunes’ — let us hope they do not attempt a coup over the exclusive rights to the letter ‘i’.”

Apple’s trademark scuffle with Sector Labs is not unique. The corporation began cracking down on businesses attempting to use the word “pod” as far back as 2006. One of the earliest examples involved Podcast Ready, which developed a podcast-downloading application called MyPodder. Apple sent a cease-and-desist to Podcast Ready, claiming that “pod” has become commonly associated with Apple’s famous iPod, and using the three-letter word could cause consumer confusion. Apple subsequently took the same action against several other companies, including TightPod, an independent business that sold protective covers for notebooks, which later renamed itself to TightJacket.

A low-profile example involved a start-up called PodShow, a social networking web site for video podcasters. Though the start-up later renamed itself to Mevio to coincide with a site redesign, it’s worth noting that Apple in June 2008 filed an opposition to the company’s usage of PodShow. Seven months later, Apple withdrew that opposition [pdf].

A Hoovers search query turns up about 600 companies that use the word “pod” in their name, including Peapod and PODS International. But clearly, Apple hasn’t given up on the battle for this word. Just last week, Apple sent a cease-and-desist letter to Pivotal, a company marketing an iPhone stand called Podium. In that letter, Apple cited the same reasons — consumer confusion and protecting its intellectual property. Pivotal told Wired.com that it plans to file a formal response to Apple on Wednesday.

“I absolutely understand a company protecting their intellectual property,” said Scott Baumann, president of Pivotal, in a phone interview. “But to start taking ownership of the letters P-O-D — a word that’s in the dictionary — certainly seems far-reaching to me. It certainly seems like a stretch.”

Though Sector Labs’ response to Apple was published only Monday, the start-up’s trademark scuffle with Apple over Video Pod began March 6, 2007, when Apple filed an opposition to the registration of the Video Pod trademark. In the face of that opposition, Sector Labs halted development and funding of the product. Apple then filed a motion for summary judgment — asking for a ruling to be made without going to trial.

But rather than throw in the towel, Sector Labs owner Daniel Kokin filed a response to Apple’s motion for summary judgment, continuing the fight. In its response, Sector Labs claims the Video Pod, a video projector designed to work with a DVD player and other input devices (not the iPod), has been in development since 2000 — a year before Apple launched its first iPod. Sector Labs’ legal team added that Apple has the burden to prove that a probability of consumer confusion exists.

“The ordinary reasonable consumer must be confused about the source of the Video Pod itself,” Sector Labs’ response reads [pdf]. “Apple’s opposition falls far short of establishing that it is probable that consumers would actually be confused.”

Pinnacle Law Group principal Eric Farber, who is representing Sector Labs, said Apple’s intention is clearly to intimidate smaller companies who would more easily fold under the pressure of a corporation as large as Apple.

“Apple is using their power and strength to attempt to knock out very legitimate marks at a stage for start-ups that is very critical, where a great many of them don’t have the money to fight a behemoth like Apple,” Farber said in a phone interview.

Apple’s lawyer did not respond to requests for comment on this story.

Apple’s fans typically leap to defend the corporation, but Wired.com readers commenting on last week’s story about Podium unanimously disapproved of Apple’s actions.

“Apple’s got a good point about such flagrant use of the syllable ‘pod,'” commented Max Beta. “Why, just last week I was tricked into going into the office of someone who claimed to be some kind of ‘doctor.’ The guy didn’t know anything about music or iPods®, and he had some kind of weird foot fetish. You shouldn’t be able to call yourself a podiatrist unless you are associated with Apple in some way!”

Apple must file a response to Sector Labs by April 1, and then Sector Labs will have the opportunity to respond as well.

Photo: Gaetan Lee/Flickr

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Overall a great list of reminders Daniel Tenner’s blog, Inter-Sections.net blog.

13 Tips for Creating a Successful New Online Product
By Daniel Tenner
2008-5-7
inter-sections.net

There is much talk these days about building a product for a niche and making a lifestyle business out of it. Much of the online literature about starting up is focused on how to create some fantastic product which will gather millions of visitors and make you a billionaire, and the “new wave”, so to speak, proposes that rather than taking a 1 in 10’000 bet that you can make billions, it is better to take a 1 in 10 bet that you can make millions.

Since I have started two such businesses already, here are thirteen tips from my own experience:

Target a niche — What to build

1. Build for someone specific

It’s very tempting to create a product for the widest audience. “Everyone can use our product, therefore if even a tiny proportion use it, we’ll be rich!” Beware the generalised product. If your product is not built for anyone in particular, it will not be good for anyone in particular. The worst possible market for a product is “small businesses on the web”.

On the other hand, if you build something that is directly useful for even just one real human being, chances are there will be others like that user and your product will have some success.

2. Don’t be afraid of targeting a narrow niche

Niches have numerous advantages. There’s less competition in niches, which means that your marketing dollars will go further to get you new customers. It’ll be easier to target likely buyers since there are probably already channels (blogs, magazines, trade shows) targeting that niche, that you can make use of.

Niches also tend to be very badly served in today’s world. If you look into almost any niche you will find a plethora of awful products that are just begging to be replaced by something better suited. Being able to build great products cheaply is a fairly recent development, and most pre-existing businesses have had to make do with duct-taped, poorly conceived solutions that are begging to be replaced. The smaller the niche, the lower the bar to success.

3. Solve a real problem that costs money

As DHH pointed out, the way to realistic profitability is not through gathering an outrageous number of eyeballs, but through creating a product that people are willing to pay for. The easiest way to get someone to loosen their purse strings is to convince them that using your product will pay for itself.

This can be either by enabling them to do something new to earn money or by saving them time and effort (and hence money).

Evolution — How to build it

4. Test the market with a working prototype as soon as possible

To win in this game, you need to build a great product. The problem is, no one on your team can tell you what the best product is — only your users can do that. You need a vision to get started on a product, but that vision is critically flawed in ways that you can’t see. User feedback is the most powerful force to point out those flaws, and until you have users (whether free or paying), you cannot use that force.

For this reason, it is important that you release something, anything, as embryonic as it might be, to people who can start to use it and let you know what you’re doing wrong. Listen to your users — and, to do this, give them a chance to tell you.

5. Develop iteratively

Your product is ambitious. It will solve many great problems for your users. However, if your product never gets finished, it will solve nothing. Be ambitious in your dreams, but conservative if your immediate goals. Aim for the result of each iteration to be useful in and of itself, but keep each iteration as tiny as possible.

Developing something small does not mean giving up your dreams, only delaying them. Cut every feature and every part of a feature that you can cut, but keep it on a list to work on later. If there is any way you can do it later, do so. Often, features that you thought were essential turn out to be unimportant when you have more user feedback.

6. Get things right, and be decisive in correcting the wrongs

As your product takes off (if it does), you will have less and less time to make up for earlier mistakes. As users pile on, it will become more and more difficult to make big, drastic changes. However you make your bed, that’s how you’ll sleep. As much as possible, take hard decisions early rather than letting problems fester. Don’t delay necessary change just because you’re already committed into a different direction.

7. Don’t spend the time correcting until you know what you’re aiming for

At the same time, it’s easy to end up spending all your time refactoring the codebase every time a new feature is brought in. Refactorings must be done to maintain development speed and build a scalable, clean product. However, a refactoring effort should consist of two parts: 1) figuring out what to refactor to, 2) doing it. The first part can take weeks, the second part is often a mere few days long. The first part should never be an excuse to stop work completely.

This applies to design changes too. If you realise that you need to change the direction of the product significantly, figure out your new goals for before implementing the change.

8. Don’t let your programmers design the user interface

I’m a programmer, among other things. Like many in this profession. I suck at designing UIs (though sometimes I believe I don’t). When you let programming-focused people like me build your user interface, you will get things like this.

Some people are naturally gifted at user interface design. They feel physically sick about adding a button that clutters the interface or messes up the user’s workflow. Make sure you have a gifted UI designer on your team (whether or not he or she doubles up as a different role — including programmer). It will make a world of difference when you get your first users — the difference between a lukewarm response and “Wow, it’s great! I love it!”

Who to build it with

9. Make sure every member of the development team is passionate about the product

Your development team is to your product like parents are to a child. If they do not care about your product, it might turn out well anyway — but the overwhelming likelihood is it won’t. Anyone who’s not passionate about building your product should not be involved in building your product.

For this reason, it is very unlikely that outsourcing your product development will be successful. Build your product in-house, and make sure the team is fully bought into the concept and committed to make it a success. It is better to give up 50% of your equity for a great product team than to give up 5% for a poor product team. 95% of nothing is still nothing.

In yesterday’s world, this was very hard to achieve, since even a relatively simple web application required a fairly large team to implement, and the larger the team, the harder it is to remain passionate. With today’s web development technologies, it is possible for a team of 2 or 3 to build an entire business within 3-6 months, but those 2 to 3 must be passionate and dedicated.

It is very hard to make up for your team’s lack of passion through your own passion.

10. Be sickeningly elitist about your development team and sickeningly inclusive about your users

No one should be considered too stupid to use your product. For each person who you know had trouble using your product, there will be many more who had the same trouble but never told you. It’s never the user’s fault, it’s always your product’s fault for not being clear and intuitive enough.

At the same time, your development team needs to be the best. You cannot create greatness out of mediocrity. These days, elitism is regarded almost as a flaw. Actually, it is the only way to greatness. If you want to create the best product, you need the best people.

11. The best hiring strategy is to hire no one

Hiring employees is a nightmare. There are a lot of legalities to be considered, and it is a lengthy, time-consuming, and expensive process. Fortunately, you don’t need to hire employees. You need to recruit a development team to work with you, not for you.

Your development team is like the heart and lungs and brain of your business. They should be as committed and passionate as you are. For this to happen, you need to treat them as equals, not as subordinates.

You don’t need job adverts, you don’t need resumes, and you don’t need contract negotiations. What you need is to network in the right communities, whether online or offline, to recognise the people you need, and to bring them in not as employees but as partners in your vision.

12. Include at least one target user on the development team

By development team, I mean the team involved in the day-to-day or week-to-week iteration meetings. If you fail to do this, it will cost you a lot to readjust when a real user finally approaches your application and, inevitably, finds it lacking. If you’re a small startup on a tight budget, this extra cost can kill you. Survival is worth giving up equity to get a target user on your development team.

13. Ensure everyone on your development team understands the problem they’re solving

Immerse your development team in the users’ environment for a short period of time and let them see for themselves just how bad the current systems and processes are. Presumably, you have some contacts who work in the niche that you are targeting (if you don’t, then it’s probably not the right niche for you). Convince them to let one or more of your development team sit in their office and experience the pain points for themselves.

This is the opposite of embedding an end-user in the development team. Embed your development team into the end-users’ environment — at least for a time.

Conclusion and Bonus Tip:

Break any and all of these rules rather than do something stupid

Creating a new, successful product is like writing a book, creating a movie, or raising a child. It’s a fiendishly complicated task that requires great adaptability and creativity. Rules can only get you so far. No amount of advice can guarantee you success. Sometimes, the rules fail, and you need to adapt to those situations and do what needs to be done, even if it flies in the face of accepted wisdom. For every rule of product development, there is a dozen examples of teams which did it differently and still succeeded.

COMMENTS (from on original post): Click here.

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Some key takeaways and links from Chris Heilmann’s excellent and fun talk, mostly on front-end design and optimization, but also touching on many other fun, interesting, creative, and playful subjects. Thanks to him, Robert, Creuna, and all the people who made this event possible, including the participants, of course.  This was my second Geek Meet (first one here).

Background information, Chris’ slides, and my notes are below.  Please add whatever you like to the comments, such names and links to your favorite resources, tools, etc.

Background:

• What/Where: Geek Meet Stockholm
• Featuring: Chris Heilmann (his blog)
• When: December 4, 2008
• Organizer: Robert Nyman (his blog)
• Sponsor: Creuna

Chris’s Slides (on SlideShare.net)

• Playing With the Web
• Shifting Gears

Some Highlights
(in somewhat chronological order)

• cURL: Command line tool for transferring files with URL syntax.
• Yahoo Pipes: Aggregate, manipulate, and mashup content from around the web.
• Yahoo Query Language: The guide is here.
• GreaseMonkey: Customize the way a webpage displays using JavaScript.
• FireBug Firefox Add-on: See all FireBug extensions here on mozilla.org.
• YSlow: Analyzes web pages and tells you why they’re slow based on these rules for high performance web sites.
• Prime Number Shitting Bear: Like it says (really).
• SteveSouders.com: Steve is a high-performance dude and this is his site.
• Hammerhead: This is one of Steve’s tools. It adds a tab to Firebug for measuring the load time of web pages.
• “Delayed Script Execution” in Opera: Techniques for loading scripts without blocking other downloads and rendering.
• Non-blocking JavaScript Downloads: From the YUI blog.
• CSS Sprite Generator: Like it says!  From website-performance.org.
• Smush it: Image optimization tool.
• ImageLoader Utility: allows you as an implementer to delay the loading of images on your web page until such a time as the your user is likely to see them (as seen on shine.yahoo.com).
• SWFObject: An easy-to-use and standards-friendly method to embed Flash content, which utilizes one small JavaScript file.

Some of my random notes (CH’s images)
(might not make sense to you unless you were at the Geek Meet and/or have already gone through Chris’s slides)

Some JavaScript up top, the rest at the bottom. First script set class js on the body of the document. Lets you define two styles: one for scripting version and one for dynamic. In the dynamic one, you hide all the problematic elements that could be activated prematurely. Once the functionality has been added, add another element that undoes this:

Chunk JS into several includes:

Don’t need all as single includes. Can write a backend script that does that for you:

Fun things to do with this:

Run it through JSLint, Minify, replace all strings with an array object to stop IE from creating a string object for each string. Instead of doing this every time the page is loaded, make it part of a build process. Don’t forget to cache the result! Get a script that does most of this at Adding JSMin to my CSS/JS merging script.

Other option is lazy loading: Only load things if and when needed. Your base.js could test for all the things that should work. And if they do, create script nodes automatically to the other, chunkier parts. Creates problems because don’t know what is loading when and can have dependency problems. See Keeping JavaScript Dependencies At Bay.

Images: Cut down on them. Best way is with CSS Sprite Generator. Upload a zip of images and it creates the sprite and CSS for you.

See this presentation for the rest of it:
http://www.slideshare.net/cheilmann/shifting-gears-presentation

Update

I know this is going to look like a Yahoo! love fest, but here are some links for you:

Intro Links:

• Introducing YUI – The Rising Giant: From smashingmagazine.com
• The YUI Library (Yahoo! Course @NCU): From slideshare.net

Yahoo! Links:

• The Yahoo! User Interface Library (YUI)
• The YUI Blog
• Building Your Own Widget Library with YUI (a YUI Blog post)
• Yahoo! Developer Network Forum
• Yahoo! UI Library: YUI Theater
• Yahoo YUI Design Pattern Library
• Yahoo Gallery
• Page Inlink Analyzer: Yahoo Gallery Editor’s Pick (SEO tool)
• Yahoo Gallery: YUI
• Yahoo! Query Language
• Yahoo!’s Social APIs
• Yahoo! Application Platform
  
• Yahoo! Stencil Kit
• Yahoo! Welcome to the Ruby Developer Center
• Yahoo! Groups: YUI and Dreamweaver CS4

Off-Yahoo! Links:

• Yahoo! UI Library (YUI) Plugin: From grails.org
• How To Work With The YUI: From rubyonrails.org
• Design Patterns Collection (of screenshots): From Chris Messina (aka FactoryJoe)
• Using Yahoo’s User Interface Library Treeview in Rails: From buildingwebapps.com
• Ten Useful Techniques To Improve Your User Interface Designs: From smashingmagazine.com

Mahalo Answers Q&A

Best tools for designing web: 1) sitemaps, 2) wireframes, 3) flow charts (for interaction & software design)? That is my Mahalo question and there’s some good info and links there, including the following:

• Paper Prototyping: A List Apart article
• Comapping: An online mind mapping tool
• Violet: A free, easy, cross-platform UML editor
• Axure: tool for wireframes, prototypes and specifications
• OmniOutliner: A program for creating, collecting, and organizing information
• OmniGraffle: If you are a designer with a Mac, you know already have this

Adobe Fireworks Links

• Adobe Fireworks Development Center
• Adobe TV
  • Learn Fireworks CS4: Creating Interactive Prototypes for Reviews
  • Fireworks Tips and Tricks
    • The Complete Design Process
    • Fireworks Tips and Tricks: Information and Interaction Design
    • Fireworks Tips and Tricks: Rapid Prototyping
• FireworksZone.com: All kinda Fireworks stuff!

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An excerpt from Jason Calacanis’ excellent email list (subscribe):

The 120% Solution
By Jason Calcanis
2008-12-4
tinyurl.com/jasonslist

If we’re going to have any chance of bringing America back to greatness, we’re all going to have to work 20% more than we have been.

I’m suggesting that, until America takes care of its debt, untangles the housing mess and gets unemployment under control, we all commit to working six days a week. Yep, move the standard 35-40 hour work week right up to 48 hours.

For me and my team, this is a non-issue, since we only hire folks who are looking to absolutely kill it, love what they do and don’t consider it a job.

Of course, positions at a startup company, where stock options make for a great reward if we hit a home run, have certain advantages over normal day jobs. In the technology industry, a 48 hour work week would be, for most, a vacation.

It was our collective sloth, consumption and sense of entitlement that got us into this mess, and the only thing that will get us out of will be lots of hard work.

If you’ve got a good job, you should bust your butt to make your company as successful and profitable as possible. That way, salaries can increase, jobs can be created and your products and services become so world class, the phrase “Made in America” will come to mean something other than “not worth buying.”

If you’re working at a government job, you should be putting in extra hours to reduce government spending. Come in this weekend and make the government more efficient. (Yes, I just told a government worker to
come in on Saturday.)

If you’ve got credit card debt, pay it down if you can.

If you’ve got a mortgage, pay it off if you can.

If you work in the service industry, try to work 20% faster and come up with ideas to make your team more efficient. (Side note: I was in Japan recently and was amazed at the personal productivity of each individual when compared to the U.S. workers.)

If you’re a rich person looking to take a couple of years off, don’t. Instead, start a company that creates an amazingly innovative product that the world–not just the United States–needs. Set the goal of trying to employ 100 Americans.

Seriously, the affluent folks in this country should start businesses now. Drag your ass out of bed and try to make this country great again. It’s this country that made you affluent. Yeah, you’re rich and you don’t need to work, we know. Who cares? Your country needs you right now! Sell your second or third home and start a company!

If you’re affluent and you can’t start a company then angel invest in a bunch of smart, hard working folks at the very least.

If you’re a college student thinking of getting trashed this weekend, or taking a year off, don’t. Instead, take an extra class or two, do an internship at a company or get a graduate degree in Engineering.

If you’re in high school, go work at your parents office or start an online business. (You would be surprised at how many high school students email me every week to share with me their online businesses that make $2-3k a month.)

If you’re a lazy and bitter worker who has been screwed by the system, swallow your pride and stop trying to stick it to everyone. Double down and take pride in your work effort, even if your boss is a complete jerk.

If you’re the complete jerk of boss, check yourself and realize that the folks working for you need the job, and that if everyone doesn’t get their act together, we’re all going to be out of work. (This is directed specifically at the dysfunctional automakers and airlines, which seem to spend more effort fighting their customers and each other than they do taking on their global competitors!)

Everyone must step up, and we’ve got to do it now. I’ve been traveling around the world the past two years, and I can tell you that the work ethic, attitude and productivity of American workers–white and blue
collar–is half of what I’ve seen in countries like Japan, China, and Korea.

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A great reminder for us here at BuzzPal
(and for anyone looking to join us!):

The ABCDEF’s of Conducting a Technical Interview
By Eric Ries
Lessons Learned

I am incredibly proud of the people I have hired over the course of my career. Finding great engineers is hard; figuring out who’s good is even harder. The most important step in evaluating a candidate is conducting a good technical interview. If done right, a programming interview serves two purposes simultaneously. On the one hand, it gives you insight into what kind of employee the candidate might be. But it also is your first exercise in impressing them with the values your company holds. This second objective plays no small part in allowing you to hire the best.

Balancing competing objectives is a recurring theme on this blog – it’s the central challenge of all management decisions. Hiring decisions are among the most difficult, and the most critical. The technical interview is at the heart of these challenges when building a product development team, and so I thought it deserved an entire post on its own.

In this post I’ll follow what seems to be a pattern for me: lay out a theory of what characterizes a good interview, and then talk practically about how to conduct one.

When I train someone to participate in a technical interview, the primary topic is what we’re looking for in a good candidate. I have spent so much time trying to explain these attributes, that I even have a gimmicky mnemonic for remembering them. The six key attributes spell ABCDEF:

* Agility. By far the most important thing you want to hire for in a startup is the ability to handle the unexpected. Most normal people have a fairly narrow comfort zone, where they excel in their trained specialty. Those people also tend to go crazy in a startup. Now, we’re not looking for people who thrive on chaos or, worse, causes chaos. We want someone who is a strong lateral thinker, who can apply what they’ve learned to new situations, and who can un-learn skills that were useful in a different context but are lethal in a new one. When talking about their past experience, candidates with agility will know why they did what they did in a given situation. Beware anyone who talks too much about “best practices” – if they believe that there are practices that are ideally suited to all situations, they may lack adaptability.

To probe for agility, you have to ask the candidate questions involving something that they know little about.

* Brains. There’s no getting around the fact that at least part of what you should screen for is raw intelligence. Smart people tend to want to work with smart people, so it’s become almost a cliche that you want to keep the bar as high as you can for as long as you can. Microsoft famously uses brainteasers and puzzles as a sort of quasi-IQ test, but I find this technique difficult to train people in and apply consistently. I much prefer a hands-on problem-solving excercise, in a related discipline to the job they are applying for. For software engineers, I think this absolutely has to be a programming problem solved on a whiteboard. You learn so much about how someone thinks by looking at code you know they’ve written, that it’s worth all the inconvenience of having to write, analyze and debug it by hand.

I prefer to test this with a question about the fundamentals. The best candidates have managed to teach me something about a topic I thought I already knew a lot about.

* Communication. The “lone wolf” superstar is usually a disaster in a team context, and startups are all about teams. We have to find candidates that can engage in dialog, learning from the people around them and helping find solutions to tricky problems.

Everything you do in an interview will tell you something about how the candidate communicates. To probe this deeply, ask them a question in their area of expertise. See if they can explain complex concepts to a novice. If they can’t, how is the company going to benefit from their brilliance?

* Drive. I have most been burned by hiring candidates that had incredible talents, but lacked the passion to actually bring them to work every day. You need to ask: 1) does the person care about what they work on? and 2) can they get excited about what your company does? For a marketing job, for example, it’s reasonable to expect that a candidate will have done their homework and used your product (maybe even talked to your customers) before coming in. I have found this quite rare in engineers. At IMVU, most of them thought our product was ridiculous at best; hopeless at worst. That’s fine for the start of their interview process. But if we haven’t managed to get them fired up about our company mission by the end of the day, it’s unlikely they are going to make a meaningful contribution.

To test for drive, ask about something extreme, like a past failure or a peak experience. They should be able to tell a good story about what went wrong and why.

Alternately, ask about something controversial. I remember once being asked in a Microsoft group interview (and dinner) about the ActiveX security model. At the time, I was a die-heard Java zealot. I remember answering “What security model?” and going into a long diatribe about how insecure the ActiveX architecture was compared to Java’s pristine sandbox. At first, I thought I was doing well. Later, the other candidates at the table were aghast – didn’t I know who I was talking to?! Turns out, I had been lecturing the creator of the ActiveX security model. He was perfectly polite, not defensive at all, which was why I had no idea what was going on. Then I thought I was toast. Later, I got the job. Turns out, he didn’t care that I disagreed with him, only that I had an opinion and wasn’t afraid to defend it. Much later, I realized another thing. He wasn’t defensive because, as it turns out, he was right and I was completely wrong (Java’s sandbox model looked good on paper but its restrictions greatly retarded its adoption by actual developers).

* Empathy. Just as you need to know a candidates IQ, you also have to know their EQ. Many of us engineers are strong introverts, without fantastic people skills. That’s OK, we’re not trying to hire a therapist. Still, a startup product development team is a service organization. We’re there to serve customers direclty, as well as all of the other functions of the company. This is impossible if our technologists consider the other types of people in the company idiots, and treat them that way. I have sometimes seen technical teams that have their own “cave” that others are afraid to enter. That makes cross-functiona teamwork nearly impossible.

To test for empathy, I always make sure that engineers have one or two interviews with people of wildly different background, like a member of our production art department. If they can treat them with respect, it’s that much less likely we’ll wind up with a silo’d organization.

* Fit. The last and most elusive quality is how well the candidate fits in with the team you’re hiring them into. I hear a lot of talk about fit, but also a lot of misunderstandings. Fit can wind up being an excuse for homogeneity, which is lethal. When everyone in the room thinks the same way and has the same background, teams tend to drink the proverbial Kool-Aid. The best teams have just the right balance of common background and diverse opinions, which I have found true in my experience and repeatedly validated in social science research (you can read a decent summary in The Wisdom of Crowds).

This responsibility falls squarely to the hiring manager. You need to have a point of view about how to put together a coherent team, and how a potential candidate fits into that plan. Does the candidate have enough of a common language with the existing team (and with you) that you’ll be able to learn from each other? Do they have a background that provides some novel approaches? Does their personality bring something new?

It’s nearly impossible to get a good read on all six attributes in a single interview, so it’s important to design an interview process that will give you a good sampling of data to look at. Exactly how to structure that process is a topic for another day, however, because I want to focus on the interview itself.

My technique is to structure a technical interview around an in-depth programming and problem-solving exercise. If it doesn’t require a whiteboard, it doesn’t count. You can use a new question each time, but I prefer to stick with a small number of questions that you can really get to know well. Over time, it becomes easier to calibrate a good answer if you’ve seen many people attempt it.

For the past couple of years I’ve used a question that I once was asked in an interview, in which you have the candidate produce an algorithm for drawing a circle on a pixel grid. As they optimize their solution, they eventually wind up deriving Bresenham’s circle algorithm. I don’t mind revealing that this is the question I ask, because knowing that ahead of time, or knowing the algorithm itself, confers no advantage to potential candidates.

That’s because I’m not interviewing for the right answer to the questions I ask. Instead, I want to see how the candidate thinks on their feet, and whether they can engage in collaborative problem solving with me. So I always frame interview questions as if we were solving a real-life problem, even if the rules are a little far-fetched. For circle-drawing, I’ll sometimes ask candidates to imagine that we are building a portable circle-drawing device with a black and white screen and low-power CPU. Then I’ll act as their “product manager” who can answer questions about what customers think, as well as their combined compiler, interactive debugger, and QA tester.

You learn a lot from how interested a candidate is in why they are being asked to solve a particular problem. How do they know when they’re done? What kind of solution is good enough? Do they get regular feedback as they go, or do they prefer to think, think, think and then dazzle with the big reveal?

My experience is that candidates who “know” the right answer do substantially worse than candidates who know nothing of the field. That’s because they spend so much time trying to remember the final solution, instead of working on the problem together. Those candidates have a tendency to tell others that they know the answer when they only suspect that they do. In a real-world situation, they tend to wind up without credibility or forced to resort to bullying.

No matter what question you’re asking, make sure it has sufficient depth that you can ask a lot of follow-ups, but that it has a first iteration that’s very simple. An amazing number of candidates cannot follow the instruction to Do the Simplest Thing That Could Possibly Work. Some questions have a natural escalation path (like working through the standard operations on a linked-list) and others require some more creativity.

For example, I would often ask a candidate to explain to me how the C code they are writing on the whiteboard would be rendered into assembly by the compiler. There is almost no earthly reason that someone should know about this already, so candidates answer in a wide variety of ways: some have no idea, others make something up; some have the insight to ask questions like “what kind of processor does this run on?” or “what compiler are we using?” And some just write the assembly down like it’s a perfectly normal question. Any of these answers can work, and depending on what they choose, it usually makes sense to keep probing along these lines: which operations are the most expensive? what happens if we have a pipelined architecture?

Eventually, either the candidate just doesn’t know, or they wind up teaching you something new. Either way, you’ll learn something important. There are varying degrees of not-knowing, too.

1. Doesn’t know, but can figure it out. When you start to probe the edges of someone’s real skills, they will start to say “I don’t know” and then proceed to reason out the answer, if you give them time. This is usually what you get when you as about big-O notation, for instance. They learned about it some time ago, don’t remember all the specifics, but have a decent intuition that n-squared is worse than log-n.

2. Doesn’t know, but can deduce it given the key principles. Most people, for example, don’t know exactly how your typical C++ compiler lays out objects in memory. But that’s usually because most people don’t know anything about how compilers work, or how objects work in C++. If you fill them in on the basic rules, can they reason with them? Can those insights change the code you’re trying to get them to write?

3. Doesn’t understand the question. Most questions require a surprising amount of context to answer. It doesn’t do you any good to beat someone up by forcing them through terrain that’s too far afield from their actual area of expertise. For example, I wold often work the circle-drawing question with candidates who only had ever programmed in a web-based scripting language like PHP. Some of them could roll with the punches and still figure out the algorithmic aspects of the answer. But it was normally useless to probe into the inner workings of the CPU, because it wasn’t something they knew about, and it can’t really be taught in less than a few hours. You might decide that this knowledge is critical for the job you’re hiring for, and that’s fine. But it’s disrepectful and inefficnet to waste the candidate’s time. Move on.

My purpose in elaborating these degrees of not-knowingness is to emphasize this essential point: you want to keep as much of the interview split between boxes one and two. In other words, you want to keep asking questions on the boundaries of what they know. That’s the only way to probe for agility, brains, and the best way to probe for communication. In the real world, the vast majority of time (especially in startups) is spent encountering novel situations without a clear answer. What matters is how good your thinking is at times like those, and how well you can communicate it. (It’s kind of like playing Fischer Random Chess, where memorizing openings is useless).

Let me return to my topic at the top of the post: using the interview to emphasize values as well as evaluate. The best interviews involve both the interviewer and the canddiate learning something they didn’t know before. Making clear that your startup doesn’t have all the answers, but that your whole team pushes their abilities to their limits to find them is a pretty compelling pitch. Best of all, it’s something you just can’t fake. If you go into an interview with the intention of lording your knowledge over a candidate, showing them how smart you are, they can tell. And if you ask questions but don’t really listen to the answers, it’s all-too-obvious. Instead, dive deep into a problem and, together, wrestle the solution to the ground.

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A great Web 2.0 Summit 2008 presentation by Tony Hsieh, CEO of Zappos (Tony’s bio and Zappos home page). Video.

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