I just finished reading The PayPal Wars by Eric M. Jackson who was the former head of marketing at PayPal. This book is a must read for anyone who is thinking about starting a company or has started a company.
It tells the inside story of PayPal from when it was startup called Confinity all the way to its sale to Ebay.
There were three main themes that I really enjoyed from the book.
PayPal did not hesitate to hire smart people, even if they did not have a job in mind. During the author’s first two days on the job, he has to find a place for himself to work in the company. PayPal’s management team did not mind moving smart people around the company, even if they had no previous experience in the area.
PayPal also had a philosophy of meeting its customers’ needs. Whenever there was a problem on the business side, the management team looked for solutions that were product driven. For example, when PayPal was loosing millions of dollars per month on free transactions, instead of forcing users into paying accounts, risking user loyalty, they designed new features to funnel users into paying accounts.
The most important aspect of the book, not to mention PayPal’s success, was its open, entrepreneurial culture. This meant that anyone in the organization could bring ideas to the table and have them taken seriously. If they were good ideas, they would be implemented. It did not matter if the idea came from a recent hire or the CEO. By empowering everyone in the company to think about all issues, it forced everyone to always be thinking about the big picture and way to improve the company.
Its also amazing how many of the people who worked on PayPal started new, incredibly successful companies. The PayPal Mafia has founded YouTube, Yelp, LinkedIN, Slide, WorldNetDaily, Digg and others and has funded Facebook.
There are some great stories of obstacles that the PayPal team had to overcome, along with power struggles and disagreements. This book is a must read.
Creative Destruction and Congress
A company invents a lotion that absorbs and neutralizes chemical weapons “seven times better” than the current solution. The military wants to buy it to help save lives, instead of continuing to buy the inferior product. Makes sense, right?
Well, in the real world, what really happens after the military decides that it wants to buy the better product?
Companies who make the inferior solution make campaign contributions to Senators who represent the states that produce the inferior product and tell them to issue earmarks forcing the military to buy the inferior product, of course.
That’s what really happened over the last two years when Senators Clinton D(NY), Schumer D(NY)and Spector R(PA) sought out $7.6 million in earmarks, forcing the military to buy the inferior product. They also received a total of just under 100k in campaign contributions.
This type of government intervention is not only sleazy because it risks American lives, but also prevents the creative destruction that is vital to US competitiveness and creating an entrepreneurial culture.
Why Watch Blowouts?
If you are like me and DVR sports from time to time, you know how tempting it can be to fast forward to the good parts.
Evan Schumacher’s ShouldIWatch.com is a website that will help people decide if they want to watch their DVR’ed games, without knowing the final score or who won. It only lets you see if one team got blown out, the other team got blown out or if the game overall was a blowout.
I would love to see a site like this for English Premier League and other soccer games that includes other readily accessible data like total goals, shots, yellow cards, red cards and fouls. This would tell me if a game was worth watching. I could create an “excitement formula” to give a score to tell me whether a game was worth watching.
I am sure this would be easy to do and people could change the weight of the data to fit their preferences for exciting matches. This way, I could decide if I wanted to spend 90 valuable minutes of my free time watching a boring 0-0 draw without knowing the outcome beforehand.
Are Big Ideas Really Rare?
I just finished reading a May 12th article from the New Yorker by Malcolm Gladwell called In the Air: Who Says Big Ideas are Rare?
Gladwell profiled a couple of guys who started a company called Intellectual Ventures, a company devoted to the “belief that combining capitalism and invention will benefit the world with more and better innovations as well as create financial rewards for investors.”
They basically get the smartest people they know, send them reading materials a few weeks prior and just get them all in a room to talk about a topic. When they first started these brainstorm sessions, they thought that they might get 6-8 good ideas per event. They found that they were getting hundreds.
Since 2000, IV has developed 3,000+ ideas that they feel have the ability to change the world. They found that they could create “geniuses” by bring all of the parts of a genius together in a room and that big ideas were really a dime a dozen.
Gladwell argues that their works also helps prove multiples:
“This phenomenon of simultaneous discovery—what science historians call “multiples”—turns out to be extremely common. One of the first comprehensive lists of multiples was put together by William Ogburn and Dorothy Thomas, in 1922, and they found a hundred and forty-eight major scientific discoveries that fit the multiple pattern. Newton and Leibniz both discovered calculus. Charles Darwin and Alfred Russel Wallace both discovered evolution. Three mathematicians “invented” decimal fractions.
Oxygen was discovered by Joseph Priestley, in Wiltshire, in 1774, and by Carl Wilhelm Scheele, in Uppsala, a year earlier. Color photography was invented at the same time by Charles Cros and by Louis Ducos du Hauron, in France. Logarithms were invented by John Napier and Henry Briggs in Britain, and by Joost Bürgi in Switzerland.
“There were four independent discoveries of sunspots, all in 1611; namely, by Galileo in Italy, Scheiner in Germany, Fabricius in Holland and Harriott in England.”
If Gladwell is correct, and I think he is, it has big implications on how startups and even large companies should do business. The previous method of bring ideas to market was someone thinking of an idea, pursuing it, then possibly getting it funded by a VC.
Should VCs or others simply fund smart people to come up with ideas instead of waiting to see if they pan out at all? This would give VCs better valuations as they are able to get in on the ground floor, before more value is created.
What also interested me is that a fellow UW entrepreneur has used this approach to help large companies solve problems. Anand Chhatpar, a UW alum, founded a company called Brainreactions. Its purpose was to bring smart college students together to create “fresh, actionable, innovative ideas” for companies who needed solutions to problems.
I was one of the initial brainstormers at Wisconsin back in 2006 and had a great time at the two sessions I attended. They would get 4-6 smart college kids together in a room and present them with a problem. The brainstormers would then try to come up with any solution to the problem that they could think of. Much like IV in Gladwell’s article, these sessions were wide ranging, as we touched on just about any subject we could think of. The amount of ideas we generated in a two hour period was astounding.
Brainreactions has been pretty successful so far at generating some great ideas for companies. It will be interesting to see if this method of idea generation catches on beyond IV and Brainreactions.
I, for one, am hoping it does.