Dominik Balogh

Getting lost in perception in a B2C market

We build the biggest things, we engineer, we can captivate and eat any animal. Humans are the most important beings. The most intelligent, most capable.

But according to what? Well, humans are the most capable according to… humans. There’s seemingly no jury to evaluate us, so it made sense to evaluate ourselves.

So we measured the importance and intelligence based on the range of factors that matter most to us in the range of a given environment surrounding us.

This perception is, of course, very relative and very human. 

When you zoom out to a distance far enough, there’s not a big difference in capabilities between ants and people. The significance of each on a large-scale interactions is negligible. The features or capabilities to achieve anything is very close to zero for both.

Ask a dolphin who is the most capable and intelligent — he’d say it’s dolphins, because they can survive water-only conditions for billions of years and visualize communication using long-distance sound waves. These are the metrics of ultimate importance, at least for them.

An ant would say ants, because their unconditional ability to cooperate in coherence is the most intelligent way for life to not collapse on itself.

Not so long ago it seemed very clever and important to build hardware and software with lots of choices. “People love choices. Let’s include a lot of features. Many buttons. Let people build their own system. Offer them 76 different variations.”

Dell has failed in the B2C market for getting lost in perception, Microsoft is hard in the recovering process. It just turned out people don’t want complexity and choices in software and hardware. Features seemingly important were not important at all for most of the market. Only Apple and a few others came and made the decisions by ignoring the “general knowledge” perspective. Facebook guessed we don’t want to share with options in a new window. We want to like with no options in the existing window.

Zoom out to a large scale. Don’t get lost in perception of what is important by asking dolphins or ants. Don’t ask humans too much either.

Women, startups and yellow elephants

“We need more women to start a business.”

- Why?

“They offer fresh thinking and disrupt different segments.”

- So…?

“So we can make more money.”

- Why do you need more money?

“To make more money.”

…

Oh, right… so it’s not about women. We might as well say we need yellow elephants. Imagine how many people would travel around the world and pay you to see a yellow-born elephant.

My understanding is that in the economy, if you can multiply an investment, it doesn’t matter what or who you are. Although these factors are tightly related, we don’t really need anyone, we really only need money.

Why McDonald’s is so successful

Stop in the restaurant area on an international airport and look around.

What you mostly see is 5 or 6 restaurants each positioned just by the other one. But the long lines are only at McDonald’s.

Children, tourists, pilots, stewards, asian people, indian people, white people, black people, airport staff, terrorists, whatever.

How is it possible that everybody likes McDonald’s food? Now if course it’s not the food itself. It’s the consistency.

If you’re hungry and you know you have a certain amount of time before you need to leave, the only thing that matters is no surprises now, please.

You’re just not in a situation to try an unknown restaurant if you 1) don’t know how much time you’ll need to spend there, 2) don’t know how the food is going to taste and 3) don’t want to risk leaving dissatisfied with unfilled expectations.

You’ll rather eat something totally generic. Not as tasty, but in 20 minutes, and with no surprises. McDonald’s has built a network of exactly same restaurant branches with exactly the same generic food all over the world, and you know it best, because no franchise is as widespread as theirs.

I’m curious to find out how “no surprises” analogy can be applied to other businesses as well.

The contrast (of stock cultures)

There is no stock culture in Europe. In contrast, for United States, incorporating is the only way to go for a startup. The reasons are obvious. Selling equity quickly and easily to the right people can be a key part for a startup to be successful. From what I understand:

• You need to motivate early employees so they do their best to make their (yours) equity grow in value
• You need to raise funds by selling stock to accelerate quickly and again, grow in value

Obviously, in a limited liable company, none of this is possible. Here’s what’s happening in Europe:

• Universities do not educate and governments do not provide a good stock environment
• The result is that general public have very limited knowledge about it
• Then very few lawyers, bookkeepers and accountants understand stocks
• Then startups choose to form limited-liable companies
• Then they can’t motivate employees by offering stock
• Then investment market is complicated and fewer people/angels invest

See the chicken-egg pattern? Nobody is interested in stock because nobody is interested in stock. Even if you form a stock-based entity in Europe, how much is your lawyers, contracts and accountants going to cost you? Who are you going to sell your stock to? How can you motivate your employees? Employees don’t even realize why stock is valuable, since there is no acquisition knowledge in the first place.

Motivated employee @ Google parking lot, Mountain View.

A system which works so well in US is almost non-existent in most of the EU countries. The technology culture is different. I’m not sure whether this is one of the primary reasons why US has a better startup track record, but I suspect it is.

Cyprus or Luxemburg aren’t changing the culture, they just provide a stock-friendly land. I think EU badly needs a stock enlightenment as a whole. Until this contrast between two largest markets is smoothened out, EU will always play the second league. Only the investors have the power to blur out the edges and enforce a new culture.

Paperwork

I’ve been in the belief for quite some time that legal business paperwork is minimized in California to provide a less “hostile” business environment. I have recently found that this is not the case. No matter if you use a mediator or not, the amount of paperwork and energy required to fill a basic request is about the same as in European Union, if not more. Surprisingly, most of the forms are actually very similar to those in EU, and also similar to those in other states across the country, such as NV or DE. Processing times in CA are currently from about 20 to 100 times higher than anywhere else. The legal/stock advantages still prevail, though. On the fast route of moving a lot of cash across Atlantic to USA, I guess european lawyers and businessmen didn’t have enough time to tweak-out everything as they would prefer to nowadays.

Open source vs. closed source

It often falls down to a very colorful discussion when the open-source versus closed-source topic appears. Which one is better?

Without Unix and Apache, there would probably be no cheap internet. But without Microsoft or Oracle, there would probably be no online finance management.

And so there’s no simple answer to questions such as open vs. closed, wireless vs. wired, or diesel vs. petrol.

You can get a diesel engine with a 1,5x higher torque than on a comparable petrol one, but you can’t ignore that it’s also 400 pounds heavier. With the additional weight on the axle, you need to hack a problem. Yet providing the hack brings even another new problem.

With any additional benefit added to the system, there almost always comes at least one drawback. The world of economy, engineering and inventions is not perfect. There is no ideal product. We make tradeoffs every day and just prefer to use those which suck less in the given conditions.

So the next time you’re deciding between solutions, don’t ask which one is better. Ask which sucks less for the target use. Sticking to one just for the sake of belief is blindly risky.

The importance of small business

Operating a small business is very important for the big future of an entrepreneur. Even if the business only generates about the same profit in the early days or years as you would get in a normal job, it’s still worth all the risks and challenges. You’re forced to think, learn and expand your horizons infinitely. By not having enough money, you are feared. You have to be effective and do a lot of things on your own, which means you need to learn many new methods over a period of short time. I call it a “Benefit of the business doubt”, which always forces you to do better. Thanks to it, you can evolve 10 times faster in the first 2-5 years of your SB compared to all of the previous years. You also meet established business people, you learn how they think and what they expect, which you mostly can’t when being just an employee. Though there are some executive job positions which make perfect business sense and provide a comparable level of doubt or stock benefits, let’s skip it for now.

Some years back, I had to learn European accounting very quickly to manage it on my own. It was a nightmare at the time and I’m luckily not involved in accounting operative anymore, but thanks to the real experience, I’ve learned and understood some optimization tricks and other tweaks on a worldwide level, while fresh economy graduates are usually still hardly able to construct in their head, say, how VAT works and what it affects - and it’s unfortunately not so much of their fault, but the flawed HR and education system. It then struck you when a manager with MBA and 10+ years of job experience asks you about the elementary invoicing “issue”. But it also helps you realize that all the work was worth it even if you didn’t make much more money than in a so called “safe” job.

After my media, advertising and consulting business ramblings on my own, we’ve formed PoweryBase (now incorporated in CA) with my partner in crime, and we accepted a more difficult route of storing user data in the “cloud”. We started to find out what the mobile platform has to offer. We’ve made some incorrect decisions, some great decisions, didn’t prepare the best exit strategy from the beginning and found many drawbacks. We also didn’t market much due to focusing on development heavily. However, our products are great and have an interesting potential. Last but not least, users love them and use them almost every day. Thanks to the data we own, there are still many opportunities to push the business models further.

But the more important fact is, we’ve learned so much from our solution in just a year, and we’ll also use that experience in more complex projects. Server side services, databases, geo-data, syncing multiple mobile devices live, notification systems and users’ feedback on syncing experience is a valuable knowledge you need today to build interesting products. You can hire many kinds of skilled people, but you can’t hire your own real life solution experience. You see more options, you learn technological limits, various approaches, and you can make better decisions in the near future. What sounds very easy is really not, because small details and new features in the service may highly affect the software + hardware operating costs overall. Even with today’s very cheap highly scalable storage solutions. Managing or reading technical support requests of your customers for a period of time also teaches you what customers really need.

There’s always the benefit of business doubt, no matter who you are and how far you are. Sometimes it’s even smart to do stupid decisions and jump into the waters in which you have no knowledge of, because it’s going to force you to learn about it and you’ll be more smarter next time. There’s always much more to learn, and I’m often wrong in many things, but experience from managing a small business always proved itself to be a very valuable experience in life.

Set long term goals to stay motivated

Enthusiasm is the best tool to make great things happen. Enthusiasm is a form of very high motivation, because without motivation, there are not many reasons to do anything in the first place.

I believe only 2 kinds of motivations exist:

1. to receive currency or other trade value unit
2. to achieve a personal growth (a peace of mind)

Anything else is just an indirect path to the same finish, and these two mentioned actually almost always overlap. Like working 3 jobs to save money for your children’s study, for them to be achieve a growth and receive easy money, and for you to finally achieve a peace of mind. And so, we can nail the motivation types to just one, because receiving money is, in fact, just a way to reach the personal growth or the peace of mind.

Everybody should have a long term goal, a goal that keeps him or her motivated. People without motivations are often sad and may feel worthless. Set a long term goal, start working on it today and stick to it. Want to become a master in economy? The best UI designer, programmer, analyst, teacher, or maybe a great family supporter? There’s no reason to not make the first step today.

Plans may change overtime, but always having at least one will ensure that you’re motivated. Ikea started as a teenager selling matches on the street. High motivation was what made it the largest furniture maker in the world.

Ping sucks because it’s popular to say it sucks

Following some tweets in the recent days, it doesn’t take long to find out that industry critics don’t like Ping all. It quickly became popular to say it sucks, because everybody says it sucks.

What surprises me though, is that some investors and social music network founders share the same view too, while their field of view should be a little wider.

We all know that in the process of growing, iTunes became a very slow over-bloated software — but iTunes is also the world’s largest monetization music platform and Apple obviously wants to strengthen its position for everybody’s sake. Currently, they went for a restrictive approach (intentionally, or just not enough time to develop better?) with Ping and it may eventually fail as a social tool alone if it’s not going to be more available. But in this analogy, you could bash Facebook that it was only open to university students at the time. If we’re going to bash a social network, why drawing conclusions today? If it’s meant to be social network, then it needs time. I don’t think it’s great, and it probably also doesn’t work like everybody would expect.

However “restricted”, what would one expect from a multi-billion music (among other areas) company with an audience of 160M registered users? A new last.fm? Maybe the internet doesn’t need a new last.fm in Apple’s design. Most of the people don’t want to listen to radio. They just want to buy their favorite music 1-click. I think the world primarily needs a place to buy mainstream music quickly and discover it too, whatever software it’s tied to. iTunes continuously forces major labels to wake up. The sooner it goes worldwide and breaches all legal barriers, the better for the whole industry. Even if it establishes a monopoly, the current situation is worse anyway. Discovery as Ping is suggesting helps establishing iTunes as the best place to buy music. Current social music networks do not sell music in the terms of how iTunes does.

Maybe Ping really does suck and Apple doesn’t understand the social network game at all. Maybe Facebook execs have been money hungry and couldn’t close a deal (or vice versa). Still, industry insiders should extend their views and not play the childish social network terminology game — just because they can’t invest in it or just because they like last.fm approach more. It needs time. If time is not going to help, I will join all the critics. But not today.

Rework: 15 hours a day to become a hero

Like almost all technology entrepreneurs, I’ve spent most of my life sitting in front of a computer, often until late nights. The irony is that in fact, our future goals are to spend as little time with computers as possible, but we mostly feel comfortable with them, we don’t regret the past and don’t feel like we’re missing anything important.

The reason why we’ve devoted a section of our being to technology is very clear: we’ve chosen one field and we want to be the best in it. It’s not possible to focus on more than one thing. But is it good or wrong to work 12 hours a day? Do people tell you that you work too much? What does “too much” mean? Where’s the line between work and a hobby? If you spend half of that time just reading and educating yourself or emailing on a smartphone, is that considered as work too?

Rework says:

“Workaholics aren’t heroes. They don’t save the day, they just use it up. The real hero is already home because she figured out a faster way to get things done.”

As much as I believe this is true, I also believe there are times and certain fields where there’s just no other choice. Sometimes it’s necessary to work “too much” to accomplish a goal with great results. You can easily find already rich people working very hard, or even Steve Jobs replying to random people on a late Saturday night. With thousands of employees, enough money and so much experience, can’t they just delegate or figure out a faster way to get things done? Maybe they really aren’t able to, but instead of figuring this question out, maybe we should rather ask: Would Apple exist today if Steve Wozniak didn’t work hard back in the days? Would Microsoft exist if Bill Gates went partying at 9 PM every day in his teen years instead of working?

There’s a certain goal threshold which you need to cross before you can stop working or start delegating heavily. Sometimes there are more thresholds depending on your actual goals and strategies.

However, I haven’t heard of a single entrepreneur who’d like to die with hands on a keyboard. Neither myself - I enjoy not working and I’ve developed my own system. But I sure know that the real hero is not finished at 5 PM. The real hero does what he wants, what he likes, with who he likes, anywhere, no matter the time. And if dying trying to stay on or reach that threshold one day is his goal, then who is entitled to judge whether the methods are too much or not?