On Fast and Slow Failure and Success

I knew only the most basic business strategy of Tech Pro. This was a company that my parens started in 1983 that much later I owned with them and my cousin. The reason I knew so little was that I was only 9 years old. The reason I knew any at all was that I didn’t have to go far that year to learn about Tech Pro. The room, formally a playroom of sorts, had become the “Tech Pro Room”, as it was home to a new dedicated telephone line,  a computer with 64k of RAM and surprisingly a modem to order parts. Our garage was a workshop where my father took in the first of a series of old instruments from shuttered factories, with the purpose of restoring and computerizing them. The kitchen table was not only where I ate my breakfast, but where I worked on my first start-up job, doing Quality Control testing of Tech Pro instruments. The company was financed through seed money from my parents and a small loan from my grandfather. My parents have pointed out that while this seed money was not a lot of money, it was all of the money they had. This money went directly to buy these old instruments. Within the first year of business the company was modestly profitable. Within the first 5 years, the business was comfortably supporting my family, and had managed to computerize a small industry.  Tech Pro was never large, but Tech Pro was international. It employed a great group of talented engineers, many who did not have college degrees but did have creativity and dedication. Tech Pro took me and my family around the world, and introduced us to most of our friends for 25 years. We then sold the company in 2008.

All of this is likely of little interest to you, as Tech Pro is not Hewlett Packer, Apple or Google. It was just a family business that was able to see technological trends early, and create a thriving business based on them. What is interesting to me is to try to understand why this model is not a particularly common one anymore, and where it falls in the spectrum of “expert” advice from tech industry gurus. My friend and fellow board director of our new company (Nanotronics Imaging) Gerry Ohrstrom,  trying to describe our new business and me in particular said  something like “Matthew is a bottom up guy mostly, but also kind of a top down guy too”, which he of course knows. By bottom up he meant that the company was funded initially by us and through revenue like Tech Pro was.  My father is again my partner. We did follow a bit of the Tech Pro example, but this time I felt that we should bring in outside investors (Gerry included), hence being  top down too. It is too early to tell, but this seems to be a nice mix, though not as clear as the one my parents used with Tech Pro. The goals for the new venture are much larger, and therefore the perceived risk and the cost are greater. At least this story provides me with a good justification for being bottom up and top down. I have though been wondering if this is at all common anymore. It used to be. HP, GE, Intel and most early Silicon Valley companies worked in somewhat this fashion. I told the story of BF Goodrich here, where a man with an idea, some patents, a little money and some helpful investors started a 19^th Century business that would become global and very large. The corporate histories of DuPont, Monsanto and countless others of that era are very similar. Despite the overwhelming odds, these companies are still in existence. So why is this model now not considered normal?

I was recently invited to a lunch to discuss an idea a friend has for a science business. I wasn’t the only one invited, but it was clear why I was, since I am the CEO of a science business, not too dissimilar from what the friend wanted to start. The problem with these kinds of meetings that involve any form of advice  is that I am in the middle of the process myself and therefore it is very difficult to have a prospective from the outside, even if it is about someone else’s idea. I have extreme myopia, which I break best from when I am talking about businesses that are completely unrelated to mine. That said, I tried to remember common wisdom about launching a business, which isn’t terribly difficult to do at this moment as I am in the midst of this myself.  I consider my bottom up  and top down approach somehow very old fashioned, and yet very uncommon at the same time. It is not documented as neatly as other models by most contemporary start-up strategists that I have read (though I don’t read all for sure.).  I first assume the things everyone assumes. That is the validity of the disruptive idea (yes, despite saying that I don’t get my advice from gurus, I did read and liked very much the Clayton Christiansen books), the inventions themselves, the basic competitive landscape and all else that seems common sense now.

There is though a view exemplified by the almost cliché concept that since it is not as expensive to start a business as it used to be, due mainly to cloud servers and rapid open source development platforms, everyone should do it. (As a bit of a side note, this is really only true for certain companies. It is still expensive to start companies that make complicated "stuff" rather than those that rely on internet resources only). As the risk is small, the thought is that there is very little downside to trying. Also, because of this a young person can try many ideas in one lifetime, as failure is less risky. Though he may not have been the first to say it, the blogger and prolific book author Seth Godin famously wrote “fail fast and fail cheap. Fail in a way that doesn’t kill you.” This advice was repeated in a recent conversation between Nassim Taleb and Daniel Kahneman, where Taleb stresses this as a fundamental strength of Silicon Valley start-up culture. He was, I believe, thinking of this as a risk mitigation plan. From the Taleb perspective this makes perfect sense. It is true that most businesses fail, and even if the odds were better it would be unlikely that the odds would be so good as to eliminate luck playing a critical role in the success or failure of a business. He is right in this very rational way, and if I wasn’t looking at this from a lifetime on the inside of start-ups, I would take the same rational view. The problem though is not one of expectations from the outside but the one from the inside. It is that position my parents were in in 1983 and that I am in now. It is also the position that more young people ever in technology are in, and from that perspective, every day that we wake up and think about failing fast, or even failing cheap we are failing in a much more profound way than Godin or even Taleb are suggesting. We are failing to risk what we should be risking. For every customer who buys a product that might become obsolete from our failures our failure as a business is a failure to them. This is true for every employee, no matter how much the employee knows she is taking a risk by working for a start-up. We are also failing the investors, even if those investors expect that they may lose the money.

When I think about the cheap part of Godin’s statement, I am reminded by the how little Tech Pro cost to start. Still, it never felt to me like failure was even a mildly uncomfortable option. It seemed dire. Even though my father had excellent career opportunities if Tech Pro did fail, it is hard for me to imagine him thinking about this much as he installed instruments that his customers were relying on. The stakes were too high. Though this is a very personal thing to recall, and may very well have lead me to large enough psychotherapy bills over the years to finance a start-up itself, I remember my mother’s panic the Christmas that Tech Pro was started. They gave me my dream present, an Atari 2600 video console, but not without instilling a feeling of dread which hung over the machine. Mom said “I hope you enjoy this, because Dad just quit his job to start Tech Pro. We may not be able to buy you such a nice gift again.” This comment was not a joke, as her tears were not tears of laughter, but rather it was a statement of commitment. She wasn’t saying this because she felt that Tech Pro would fail. If Tech Pro failed fast and failed cheaply my father would have gotten another job right away, and the following Christmas I would have had another nice gift. Instead the passion became an innovation, the innovation became a company, the company became a responsibility and ultimately that responsibility became success and created far more for far more people than just more Christmas presents for me.

So as I write this I wonder if there is any point of disagreement with contemporary common wisdom. What I come up with is that failure is of course a strong possibility, and that possibility should not stop someone from starting a business. That same failure though, no matter how cheap it appears can never be thought of in those terms. There is a ripple effect in all of the lives we touch when starting a business. That ripple can capsize boats, or guide them like an explorer’s ship to new lands. There is nothing more exciting, but if done right it is both slow and expensive. It is a lifetime that we are lucky enough to likely fail at.

Looking for Love in All the Wrong Places

Rates for international use of cell phones are generally not good. Being in Europe for a month I am trying a mix of ideas to solve this including Skype on my phone and computer, and a new small Alcatel smartish phone I bought in Paris this morning. Consumer electronics generally fall into two categories; the ones we use because we have to and they work, like laptops, and the ones we fall in love with, like IPODS. Nearly all tech can fit into one of these camps, and when companies who make electronics start to realize what you love, the others may tend to fade away. It is not impossible to imagine a world with IPADS , but no netbooks for instance. I don’t know anyone who says that they love their netbooks, yet I must confess that I would rather do a lot of things, like write this blog, or an e-mail for that matter from one rather than from an IPAD, and my guess is that a lot of other people would also. This means that it is possible for a technology to die which we all would like better, but that we don’t love as much. This is a confusing point, but one that is on my mind a lot when considering my own business, my political ideas and what to pack for these long trips. A good example of this came during my packing. I have a Kindle (and many of these other bloody devices I mention) and it seemed that my dream of finally being able to travel without physical books had arrived. I (thought) could access everything I wanted. Yet as I was packing I looked up on my shelf and saw a biography of Antonin Artaud that I have been wanting to read for years. My first response was to take it to the curb and give it away. I figured that I could either get the book on Kindle, or if not there were 800,000 books that I could read on Kindle, so I could live without Artaud. But the desire to read the book was too big, and since the book was small I threw it in the luggage and am enjoying it tonight. So, this brings up a a key question for me about choice. If this book would have been a hard cover and large, I wouldn't have brought it, and I believe that my trip would have been less fulfilling for not having read the book, even though my suitcase would have been lighter. The printing press, the publisher and Amazon have given me a choice, but in some ways I feel that the choice will disappear, and while I am celebrating the new, cool and light, I will have missed something more important which long preceded the cool technologies.

There is one more key component to this, which is even harder to come to terms with than the general market economy of the possibility of a winner taking all. There is a human aspect in when and how we use items, not on what we use them for, which is often confused, and can dull our sensitivities if we are not careful. I was reminded of this with the Alcatel phone purchase. I really like this light little red phone with a keypad, but have only made one call with it, and certainly know that it is not in league with my I-Phone. I had a similar experience though almost 6 years ago when abandoning my Blackberry in the states for a less expensive, not so intelligent  Erickson flip phone for use in Germany. My wife had just had a baby and I slept with that phone, ready for her to call when she was feeding my new baby daughter,or just wanting to tell me how they were both doing. The ring tone made me happy. Somehow I wish I had that old phone and ring tone back, even though the phone did only the most boring of things; make calls. I may have had the same experience with a Blackberry in Germany as I did with this phone, but maybe not. The Blackberry was a compilation of my work, my friendships, my anxieties and appointments. The Erickson was the potential of a word from my wife, or a sound from my baby. It didn’t carry the baggage of my entire life with it.

So far my Alcatel is baggage free, and my Artaud bio is a single book that is transporting me to another time and place. I am not sure I can say that for all of my smart devices, even the ones I love.

Lack of Hyperactivity Disorder

It occurred to me recently that my family has ADHD (Attention Deficit Hyperactivity Disorder). This came as a surprise to me, because my wife is very focused and calm, and my little girl is normal enough,(my baby just born) but we live in an ADHD city. So much seems different in our of lives in 2011 than it did even 10 years ago. I notice this as I drive through Brooklyn, using my GPS to navigate streets, and traffic warnings, while my wife searches houses that are for sale on an interactive Zillow app on her Android phone, and my five year old daughter plays “Angry Birds” on my I-Phone from the back seat. My lap top from this year has an Intel processor with 3 more cores than my wife's from last year. These are all big changes, but can ultimately be looked at as incremental improvements over previous technologies. (Though I am not sure about “Angry Birds”, as I don't see why it is actually more advanced than “Frogger” which I was playing in 1984, but that is not the point). Technology has benefited from both continued creative mania, and incremental progress both. Technologists, and the technology they developed, going as far back as Edison, have been rather like cases of children learning about gravity and physiology, and eventually being able to walk. It has been messy at times. Edison tried thousands of filaments before finding the right one for the Incandescent bulb. Google was founded, and according to now CEO founder Larry Page, continues to run like the Montessori schooling that both founders grew up in; that is building upon knowledge through a trial and error way, which embraces the distracted nature of children rather than suppresses it. New studies about the creativity that comes from daydreaming (and REM sleep where actual dreaming occurs) and creativity suggest that the attention deficit may at times be a benefit rather than a hindrance.So we see Google with 10% of engineers time being devoted to trying whatever they want. We see App developers making as diverse things as heart rate monitors to bar code scanners for the I-Phone. This is true for many technologies, but not all. The big exception, is pharmaceuticals, where every year less new drugs are released, there are more failures and there are higher costs to do business. I was lucky enough to hear about this from three of the most qualified people to talk on the subject at a Rockefeller University conference this week. The prognosis was not good, as trend from the 1996 until now show the downward path I described, these former executives explained some possible reasons including  excessive FDA intervention, new technologies, such as bio markers, not being utilized, too much consolidation and more. At one point one of these former CEO’s pointed out something that I recognized as a key difference in pharmaceutical advances and other technologies, when he explained how incremental growth is no longer possible. He used past experience as a gage for today's stagnation, through the example of hyper tension medication. He explained that hypertension medication had improved significantly in 20 years from the time he started in the drug industry in the 1970’s, but that it was incremental innovation. No one clear moment saw a drug that was significantly better than the previous. He feels that this is no longer possible due to government and insurance company risk aversion. I have no experience in the drug business, so he may or may not be right about the causes, but the result of no incremental change is a huge contrast to other technologies. Nearly every year new Intel and AMD processors will be released for instance. They are not huge departures from the previous years processors, but over 3 to 5 years the old processors seem like an artifact from ancient Egypt. The same of course can be said for memory, where my usb hard drive drive of 2 years ago is 4 times as big, with half the memory of the one I bought last week. Yet for my meds? My meds do what the industry admits. They work great in some areas, and those areas were perfected 15 years ago. For cancer drugs, much of the treatment has not changed. There are areas of great progress, and I have been helped by some those drugs (as well as the old but still useful cancer treatments), and that is in anxiety, depression and yes, ADHD medication. In essence the successes of the pharmaceutical industry have been in drugs that seem to address the same frenetic energy of technologies successes. This is likely a coincidence, but is one the industry may want to consider. While drug development has become calmed of hyperactivity, and anxiety, it has lost it’s edge, and the ability to innovate. Maybe the problem is as much in those labs and corporate offices as at the FDA.