The Goal Is Antifragile

Some of you may remember the book, “The Black Swan,” that I have written quite a few blogs on in the past. The reason I have shared from Nassim Taleb often is his philosophical thinking about the world and investing is so insightful and unique that it makes for serious contemplation about the world in which we live.antifragile_the_book

Well, Taleb has done it again. He has written a new book that is just starting to sink in and open my eyes to the implications of his thinking. The book is “Antifragile: Things That Gain from Disorder.” Here Taleb presents to us that things will get more stable and stronger when they have ongoing shock and turmoil, compared to things that are breakable or fragile. That the antifragility of some comes at the expense of the fragility of others.

This happens in the biological world where some parts of the inside, like within a cell, may need to be fragile for the large structure to be antifragile. Taleb uses the example of restaurants in the book, saying that each one is fragile in that they come and go – they compete and go out of business regularly. The local restaurant collective is antifragile with its system providing quality, whereas central control, Soviet-style cafeteria food would be the alternative.

Fragile type systems depend on everything be exact and a planned course. If you have deviations, they are more harmful, so this needs to be more predictive in its approach. The opposite holds true for antifragile, where you don’t worry about deviations and the possible different outcomes that may occur as you move forward.

When you see the world through this lens, it helps put perspective on what works and doesn’t work. This would mean not bailing out on the things that don’t work, and not relying on permanent administrations and forecasting departments that think they can predict the future.

How do you help yourself to become more antifragile? You learn to love mistakes. When you make them a lot, but at a level that is small and reversible instead of large and destructive, you put yourself in a situation to evolve and stay alive. What you may consider is the random aspect of trial and error, is not so random if it is carried out in a rational approach, because the error is used as information.

For the entrepreneur out there, Taleb’s work has a lot of implications for your strategy and thinking in how you approach your competitors, market place and the world in which you live. I will get into that more in future blogs.

As I’m sure you have noticed, we have changed the blog over to a new format, so it will look a little different to you. Thanks for reading.

Our Instincts Are Social

As discussed in the X-Factor Blog, I attended and spoke at the Nerve Conference in Atlanta just over a week ago and had a great time! We listened to some interesting speakers and had a fun spending time with our EO friends and meeting some young aspiring entrepreneurs. The breakout went well! The X-Factor content leads to such powerful discussions and opens us up to the possibilities of creating breakthrough opportunities for our businesses.

The conference theme “Dream, Challenge, and Lead” was inspiring. They kicked it off with video of Martin Luther King, Jr. Then a gentleman came up on stage looking like a young Dr. King and orated the “I Have a Dream” speech. What a powerful experience!

We later listened to the three young international workers that had been captured and held hostage for over a year because they had been hiking near Iran. It was seriously challenging to listen to them share their stories, let alone be in their situation for that amount of time. They spent much of the time in solitary confinement, and they spoke in depth about how incredibly difficult that was for them. Their stories on this hit me hard and reinforced how social a species we really are. When we don’t have human contact, we are driven to a psychological breaking point.

The natural instincts we have to be social would explain the success of social networking and the intrigue we have around the success of Facebook. So when we were told the Winklevoss Brothers were speaking, we packed the conference room. They came up with the idea of a social website and asked Mark Zuckerburg to try and build it, and then he went off and built one himself. The twins talked about their work habits and the challenges of being Olympic caliber rowers. They did a great job comparing Olympic sport to the business world and what they are doing today.

They didn’t really break out into the issue we all wanted to hear about and what really happened with the Facebook before Q&A. However, we jumped right in and asked when they took questions. They shared that they felt it was pure fraud, and they were very disturbed by his actions. I would say they don’t have much to complain about with Facebook stock getting ready to go public, and they also got rich while training for the Olympics. They have new ideas (shhh it’s a secret) that they are exploring with all that money they have now.

I find it very beneficial to be at these conferences (being social) and to gain exposure to the experiences of proven and successful people, whether they are the speakers or the members attending. I was excited to meet a couple of young entrepreneurs with that look in their eyes that says they’re ready to go after something big and create something from nothing. Quinn and Michelle go out and make the world a better place with your budding entrepreneurial spirit!

What are you doing to let that inner entrepreneur to come out?

A Grassroots Strategy

grow money 01Many people look at growing a business as a task of how to reach the largest audience and make the most sales as quickly as possible.  From my perspective, it takes time to grow a business and get a product or service out into the market.  You can start big with lots of capital, or you can grassroots your product to a small group and let it manifest from there.

If you have capital, and can spend it, go for it.  Venture capitalists and other investor types tend to introduce a lot of control and other issues if it’s something they take an interest in.  Grassroots is the way most of us will either make it or break it in the marketplace.

Back in 1995 when I started the mutual fund, I didn’t have a huge amount of capital or a vast array of clients with a ton of money.  In fact, when we started the fund we required $100,000 of seed money, according to SEC rules at that time.  Between my firm and my clients, we didn’t have enough to drop into a new fund.  What we did have was a history of financial planning and money management clients that trusted us, so 6 of us came together to seed the fund.

With a little bit of time, we added other clients that helped to build our assets via monthly investment programs set up through the University.  Usually this came in increments of $50 to $500 per month, and moved over small $5,000 and $10,000 amounts from other accounts as the trust grew.  We hit $2M the first year, then $5M the second.  This grassroots process lead to a fund that went to almost $700M in assets in 5 years, and took the firm to $1B in assets.  Now that was a one-step-at-a-time, true grassroots process.

Now I have focused my efforts on a new one.  We are launching a new product that helps companies with the process of gathering requirements for projects.  To do this, we have to expose a beta version of this product to companies that could potentially be core clientele, would find the product useful and most of all be interested in what we’re doing in order to provide us valuable feedback.  If they like it, they will share it.  

One way to take a grassroots approach to the next level is to attach it to another product or service that has already gone through it.  We have opened up our requirements gathering tool Sluice for users to integrate with Basecamp, which is a project management software tool.  After requirements gathering, project management is the next step, making this a mutually beneficial relationship.   Basecamp  has successfully grown to having  over 5 million users today.

I remember reading this blog post some time ago from Seth Godin where he said:

“Find ten people. Ten people who trust you/respect you/need you/listen to you…

Those ten people need what you have to sell, or want it. And if they love it, you win. If they love it, they’ll each find you ten more people (or a hundred or a thousand or, perhaps, just three). Repeat.”

A Connection Worthwhile

Facebook is. This valuation comes from the power of connecting…not just people, but things. When connectivity is increased, value goes up exponentially.

Out of Control, and then in 1999 came the book New Rules for the New Economy both by Kevin Kelly. From Out of Control came the understanding that networks with high degrees of feedback create collective intelligence (more on this subject soon). This is what led me to the crazy idea of starting a mutual fund run by the shareholders called the iFund. We started in 2001, right at the beginning of that nasty down turn in the market and it never took off. An idea before its time, I believe, and we closed down when we sold off IPS Funds.

Amazon, Ebay, Facebook, Google, and the many other beneficiaries of the network effect.

So going back to the beginning, the valuation of Facebook is based on the power of the network effect. Are you creating a network that is increasing the value of you, your business, and your community? You have a network with the people in your company and all of your suppliers, vendors, and clients. How are you connecting them to build value?

Will Your Foundation Support Your Growth?

Some really great things have been happening on our visit to our India office.  In addition to hiring 2 new developers, 1 tester and a designer, we shared a lot on improving our projects and engaged our R&D team in some awesome discussion on new products. Outside of the office, we broke off into 2 teams and Chris and I enjoyed our first game of Cricket.

A few days ago we had the pleasure of visiting a very unique community called AurovilleAuroville came to be in February of 1968 when some 5,000 people representing 124 nations came to India and participated in a ceremony.   They each contributed soil from their homeland as a symbol of unity, that Auroville would be a place where people “of all countries are able to live in peace and progressive harmony above all creeds, all politics and all nationalities.”  The place where they joined to perform this ceremony is in the picture below…and it is one of the most amazing things I’ve seen yet.

india matrimandir tree big resized 600

What do you see?  It looks like a bunch of trees…beautifully and carefully placed to grow together, but looks can be deceiving.  This is a Banyan Tree…and it’s all ONE TREE. How it works is that the tree’s branches grow out, but as they continue to grow out laterally, along the way new roots grow out from the branches and down to the earth to support additional growth.  The new roots can be so thick that they appear to be separate trees.  It’s simply a beautiful sight to behold, and a perfect location for the unity ceremony.

The growth of the Banyan Tree occurred to me as a great analogy to business.  Building anything, whether it’s a business or a house, requires a foundation.  What many companies experience, however, is that their foundation cannot support their growth, causing them to fall.  The reason the Banyan Tree doesn’t fall is because it continues to add to its foundation as it grows. 

Good businesses are built with several layers of support that push information up and down the hierarchy.  Without a good foundation to support those layers, the flow is disrupted and bad information can be shared, usually resulting in bad decisions.  If you’re in the business world, you have probably experience this in some form or fashion.  Small issues can usually be corrected, but bigger issues can easily lead to business failure.  For this reason, having the right people and the right processes in place is vital to creating a strong foundation.  As your business grows, so do your people and your processes. 

After writing the first part of this blog I decided to do a little more research on the Banyan Tree, and what I discovered was pretty interesting.  I found that in the ancient language Gujarati, the word “Banya” translates to “Grocer or Merchant”.  This stems from when long ago, Hindu merchants would conduct business under Banyan Trees because of the shade they provided.

Can your business grow outward and upward like the Banyan Tree?  Does your foundation have layers of support…people and processes…to handle your growth?