Have you ever had guys hit on you? I have. But not in the normal sense. Go to any startup event, let people know you’re a developer — you’ll soon find yourself speaking to some wannabe CEO who “just needs a technical co-founder” to realise their world-changing vision. Let’s swap numbers. Are you free this weekend? Sorry for the crude analogy, but the hidden desperation in their voice makes them sound exactly like guys trying to get laid on a Friday night.

You know that scene in the social network where Zuckerberg meets the Winklevoss twins and they try and persuade him to join their project? Back in university, I found myself in that exact situation approximately once a week. Then there’s the endless Facebook messages: “I noticed you were a developer” (translation: “Hey, your profile picture looked hot”), or “helpful” introductions: “my friend is looking for a developer” (“my friend is single”).

Are you willing to pay? Do you have any sales/marketing/design experience? (“Do you have a car? Are you hot?”). “Well, no, but I’ll give you equity!” (“Well, no, but I’m a really nice guy!”). Sorry, not interested. “Aw, that’s so unfair! Just gimme a chance! I’m sure we’ll be amazing together!” Hmm, pardon me, but I’m going to question the value you claim to bring to our potential relationship when you’re so desperate to co-found/hookup with someone you just met.

There’s more. Compare articles on “how to find a tech co-founder” with articles on “how to get laid”. Coder friends have told me they wish there were developer events (“just for us girls”) without horny management consultants trying to recruit them. eLance is an online dating site. Hackathons are orgies.

The analogy works on a deeper level. It’s a marketplace. Both sides benefit from forming partnerships — the human race depends on it — but their incentives are not perfectly aligned. Techies need biz guys just as badly as biz guys need techies. But business guys, like males in general, are redundant. Teams of one business guy/multiple coders are far more common than multiple biz guys/one coder. Polygyny (having multiple wives) is observed in many cultures, whereas polyandry (multiple husbands) is almost unknown.

I think it’s this dynamic which explains the similarities between sex and startups: one side’s contribution is larger than the other. One side commits nine months of pregnancy (or 10,000 hours learning to code); the other side is only required to donate an idea (or a sperm cell). Yet, paradoxically, this makes the greatest members of the lesser side much more valued.

In a world full of deadbeat business guys that just want to get their shitty app idea coded and then disappear, most technical co-founders are looking for a big, strong salesman to take care of them and provide for their family (translation: find customers for their startup). Biz guys, on the other hand, while they prefer to score with perfect 10s (or 10x engineers), are really looking for quantity over quality; the more coders the better. So the best biz guys get all the coders (Tim Cook has a harem), whereas those at the bottom of the pile are left roaming conferences and hitting on random developers.

So, what’s a lonely business guy to do? First, lose the mindset that you deserve a coder — that you’d be the next Steve Jobs if only you could persuade some first year CS student to work for free. That mix of entitlement and desperation isn’t attractive. Instead, focus on what you can actually bring to a co-founder relationship. Learn how to hustle: can you pound the pavements, work the phones, or master the dark arts of online marketing?

Work on some non-technical projects that generate cash: the knack for making money is always sexy. And in the same way that girls show more interest in guys that already have girlfriends, coders are more interested in business guys that don’t need a coder. Find a cheap guy on oDesk to write your MVP, or bash it together yourself out of WordPress plugins and copy-pasted code (it worked for Groupon).

And when you do meet someone you want to work with, don’t just randomly message them asking them to start a startup with you. That’s like proposing marriage to someone you’ve just met. Date them first. Take them out for coffee, get to know them. Try a few romantic weekend projects together. Only then should you start thinking about tying the knot.

Whatever you do, stay protected: always, always use a condom/limited liability company.

Recently I’ve come across a few people, online and offline, who’ve raised the idea of new startups outsourcing development to freelancers or agencies, and paying them in equity. For some reason, a lot of people, especially in the student enterprise community, think this is a good idea. I think this is a really dumb idea, and that’s not just because as a developer I’m biased towards people actually paying programmers. My opinion is that if someone receives equity and not cash, they should be considered a co-founder, someone expected to stay for the long haul; paying freelancers with equity is a lose-lose proposition for both sides. How so?

Why is it a lose for freelancers or agencies? Because you’re basically asking them to invest in your startup. The business model of your typical web agency/”body shop” is simple; sell the employees’ time at a profit. Therefore, they need a steady pipeline of work, otherwise they’re paying people for nothing. Likewise for a solo freelancer, though the need to maintain a pipeline of work is more important (and more difficult), since they need to eat and pay the rent.

This model is not suited to making risky moves. But if an agency or freelancer is working for equity, that’s what they’re doing; they’re essentially making a seed investment of whatever is the cash value of their billable hours. It’s going to take a long time for them to see a return on their investment; these are not professional angels or VCs with a few million to invest in a portfolio and several years to wait for an exit. And that’s assuming your startup is any good, which is a big assumption.

I’m going to be honest; when I hear the combination of can’t find a developer and doesn’t have any money my brain quickly does a pattern match, and the output is NOT awesome hustler with a great startup idea. Almost invariably I’m dealing with some “ideas guy”, who’s likely already recruited 4 or 5 of his business student friends, one to focus on finance, one to focus on “strategy”, one to focus on “branding”, etc. There will never be a salesman or anyone with other practical startup skills, such as online marketing or design.

The weird thing is that whenever I meet a bona fide hustler, someone I’d actually want to work with, they almost always:

a) have a track record of hustlin’, and so have money to spend or the ability to get hold of it, somehow; and

b) they’ve tried to teach themselves programming (even if that’s just mashing together WordPress plugins until they’ve built what they need), or they’ve trawled outsourcing sites, or they’ve cultivated coder friends and persuaded them to work with them, or – you get the picture.

IE, a good sign of a business guy/gal you want to work with is that they don’t desperately need a developer. Someone who pines helplessly about the difficulty of finding programmers lacks the problem-solving approach necessary for building a startup. A true hustler, when faced with an obstacle, follows the advice of Hannibal of Carthage: “find a way, or make one”. I bet Hannibal did not spend time handing out business cards at conferences, hoping to find a “Rome Conquering Expert” that would work for free. No. He just marched some fucking elephants across the Alps.

Anyway, after reading that, you might say “but I’ve found a developer who’s willing to spend 3 months building my app for a 10% stake, I don’t care that I’m screwing him over, mwahhahhah”. OK, let’s say you’re my best friend, the developer is my worst enemy, and I have no ethics. My advice to you would still be not to do it. It’s still a loss for you.

Why? Several reasons. The obvious one is you’re giving away a chunk of equity to someone who’ll only be around for a few months. What happens after they finish your app, leave, and you then realise you need to make a bunch of changes for version 2.0? Find another developer and give away yet more equity? Before long you’ll have given away control of your company.

In my opinion there are four groups of people who should get equity:

• founders (a big chunk)
• investors (a big chunk)
• employees (a small chunk)
• advisors/mentors/etc (a small chunk)

Basically, people with a long-term commitment to the success of your startup. Random freelancers and agencies have no such commitment, and so should be paid in cash.

The other reason is that paying with equity gives the freelancer little motivation to actually finish the project. The cold truth of most freelance arrangements is that since the freelancer is desperate to get paid, the client holds most of the power; if the client is sleazy they can leverage this with tactics like ratcheting, refusing to pay until extra work is done. (See here for examples). Sucks for the freelancer, but good for the client, who has some guarantee that the developer will finish the job. But if you’re a client that’s paying with equity, suddenly you’ve become powerless, and the freelancer/agency will quickly stop caring about a project with no payday in sight.

I know of one entrepreneur, someone fairly well-known in the UK startup community, who gave away a huge chunk of his new company to a web agency to build his website. Long story short, they dropped the ball, strung him along for several months, and in the end he had to buy back their stake in the company, after having wasted almost a year. Not what you want to happen to you.

In conclusion: if you need a developer, you should either bring on a co-founder/CTO, and pay them with equity, OR hire a freelancer, and pay them in cash.

(There are two exceptions. One is if you’re paying in a combination of cash and equity, though make sure you’re getting enough of a cash discount to make it worthwhile. The other is if it’s a “charity raffle” situation; ie, the developer is really helping you for the Warm Fuzzy Feeling ™, and the equity is just given as a bonus (raffle tickets)).

(Also I found this: http://lawyerist.com/freelancing-startup-equity/, which is a counter-point to my argument, though I think lawyers are in a different position to developers; their time commitment  is a lot less).

So Foxconn’s chief let slip about Apple’s rumoured iTV , confirming that an all-in-one TV set is in the pipeline.

I don’t imagine tech’s most secretive company taking too well to a leak of this scale:

From: t.cook@apple.com

To: gou.t@foxconn.com.cn

Subject: Re: leak

No worries. I understand how sneaky the press can be. Why, just now I accidentally let slip to a WSJ journalist about what really happened to your Chengdu workers. But no-one in China reads the American press, so no problem, right?

From: t.cook@apple.com

To: leekh@samsung.kr

Subject: Re: Masterplan

It’s all going well. As we suspected, Foxconn can’t be trusted; it looks you’re our only true Asian manufacturing partner. Good thing we only gave them the plans for the fake prototypes — can’t believe the fools think a better TV is our next revolutionary advance.

PS: Love the latest prototypes you sent us. Not sure about the name though. iBrain? Also we’ll have to go back to using monkeys as test subjects — only thing I’ll miss about our Chinese ex-partners is their supply of expendable humans. And lemme know when the new chips are done; Johnny’s itching to finally test his iTelepathy app.

The following article was posted on Hacker News today: Nobody Seems to Understand What Jeff Bezos is Doing. Does He?

Here was my comment:

A very dumb article. A shame, as it seems the author did have some interesting insights, but missed the main point completely.

Bezos is a very, very smart guy. He’s the closest thing we have to Steve Jobs right now.

(Though that’s not really a fair comparison — Jobs excelled at product and branding. Bezos isn’t as good in those areas, but he has a solid background in finance and tech, and he’s *far* better at strategy.

Jobs was a samurai warrior that was so good at swordfighting he didn’t need much guile. Bezos is a ninja; not as tough in a straight fight, but he never lets it get to a straight fight.)

E-books are a massive growth industry right now. In a growth industry, it’s generally strategic to invest heavily in growth at the expense of profit. If you want to have a nice profitable business, within a few years your business will be undermined by the “foolish” guys that burned cash to gain market share. Walmart followed a similar strategy.

(Lesson: if you want a nice profitable business, don’t enter a new, high-growth market).

First the publishers ignored e-books, then laughed at them and hated them. Now they’re fighting, and some time in the next two years, Bezos will likely win. When you look at the Kindle strategy, you’re looking at a business unit mobilised for war. An army doesn’t return a profit until after the land is conquered.

I read Bezos’ biography recently. From that, and from other comments about the guy, I think the guy is thinking long-term. Not just “a roadmap for the next 5 years and vaguer plans for the next 10 or 15″ as another commenter said.

I’d guess he has concrete plans out to at least 2030 (though obviously with room for various contingencies and black swan events). His current areas of focus like retail and cloud computing are likely just preliminaries. As one internet commenter put it:

“I wouldn’t be surprised if Jeff’s secret goal is to achieve Singularity in space by 2030. That isn’t my guess, but that’s the scope you should be considering.”

Sources:

http://www.forbes.com/sites/venkateshrao/2011/12/14/the-amazon-playbook/

http://www.antipope.org/charlie/blog-static/2012/04/understanding-amazons-strategy.html

More HN discussion here.

I think Bezos is the man, and I’ll likely have more to write about him post-exams.

We’ve pivoted to an idea that’s truly disruptive! If we make if freemium we’ll go viral for sure!

People saying stuff like that makes my blood boil. It’s not that they’re using the latest startup buzzwords, it’s that these shallow-seeming words actually represent deep strategic concepts. “Disruptive” does not mean “sort of, changes things, y’know?”; there’s a whole academic theory of disruption developed by someone who is probably a lot smarter than you or I.

Reading up on these concepts felt like I was levelling up my knowledge of business strategy. In an ideal world, use of the word “disrupt” would be restricted to a secret cabal consisting only of people who’ve actually read The Innovator’s Dilemma. It would be like a secret handshake — they’d ask about your well-established competitor, you’d reply that you’d beat them with a disruptive strategy (wink, wink). On discovering you were one of the cabal they’d invite you to a secret hangout, far away from social media gurus and idea guys, where you could discuss high-level business strategy over port and cigars.

Sadly this is not possible. These terms are now mainly used by morons to make themselves sound smarter. Am I being too finicky about some mere words? Maybe, but I think I’m justified. These terms let you communicate complex concepts simply. Misusing them weakens them, strips out their meaning, leaving only vague buzzwords.

Anyway, if you want to join the cabal, read on.

Term 1: Disruptive

The word disrupt, when applied to startups, is normally used to mean “change”. Something disruptive changes a lot of things, in a sexy, revolutionary, disruptive way.

The original meaning of the word is much subtler, and is actually a bit counter-intuitive. Clayton Christensen, a Harvard professor, developed his theory of disruptive innovation after years of research into how innovations spread throughout society. The innovations he looked at weren’t necessarily the cool ones — he devotes a whole chapter to mechanical diggers. He studied the hard drive industry in depth, an industry where new companies were rapidly displacing old companies that couldn’t adapt to new technology.

But he noticed something strange. Established companies were generally good at adapting to new technology. But everyone once in a while, they’d miss out on a new trend, and be replaced by a new batch of startups. Why were the incumbents able to adopt some innovations and not others?

The answer is that there’s two types of innovation. Not every innovation is disruptive. Most are sustaining innovations — that doesn’t mean they’re boring, sustaining innovations can be revolutionary –but they have one major difference from disruptive innovations. And it’s a market difference, not a technological difference.

Christensen realised that companies could adapt to new technology provided it was what their existing customers wanted. If the new technology was better on the metrics their customers cared about, they’d adopt it quickly.

What they couldn’t do was adopt a technology that their existing customers thought was worse. Why would they? But there might be a new market that cares about different metrics to the existing customers. A disruptive innovation is one that meets the needs of this new market.

Let’s use a recent example: the Nintendo Wii. The market for games consoles was power gamers; when Sony and Microsoft made the Playstation 3 and XBox 360, they made them for this group, and focused on hardware specs (these two devices could be considered sustaining innovations). The Nintendo Wii, with it’s feeble processing power, was laughed at by this group.

But granny and the grandkids didn’t care about hardware specs. What they cared about was accessibility; they wanted simple games they could play together. The Wii was disruptive because it opened up a new market — casual gamers — that was unserved by existing consoles.

That was a rare case of an incumbent (Nintendo) doing something disruptive. Normally disruption is a chance for a scrappy startup to overthrow an established player.

An example is PCs. IBM sold mainframes to corporations, who cared about performance/dollar. On a price/performance basis, PCs were much worse than mainframes. But they were much cheaper overall, and suddenly consumers could afford their own computers (new market: consumers, new metric: absolute price). Apple, Commodore and other startups took advantage of this gap left by the incumbents. PCs got better over time and eventually became good enough to replace mainframes. IBM was disrupted, and almost died.

The key lesson for startups is a disruptive strategy is necessary when you’re taking on an well-established competitor. You have to outmanoeuvre them and find a market segment they haven’t spotted, the cheese that’s too small for them to bother with. If you want to learn more, definitely check out Clayton Christen’s original book, which goes into all this in far more detail then I can: The Innovator’s Dilemma.

Next week’s misused startup term: “pivot”.

Paul Graham wrote a great essay recently, about how the definition of property has changed over time, and how this is relevant to the music and film industries in particular.

As a child I read a book of stories about a famous judge in eighteenth century Japan called Ooka Tadasuke. One of the cases he decided was brought by the owner of a food shop. A poor student who could afford only rice was eating his rice while enjoying the delicious cooking smells coming from the food shop. The owner wanted the student to pay for the smells he was enjoying. The student was stealing his smells!

This story often comes to mind when I hear the RIAA and MPAA accusing people of stealing music and movies.

It sounds ridiculous to us to treat smells as property. But I can imagine scenarios in which one could charge for smells. Imagine we were living on a moon base where we had to buy air by the liter. I could imagine air suppliers adding scents at an extra charge.

The comments on the article brought out the old for-and-against copyright arguments. Very few actually engaged his main point, which is this: the idea that a book, a song or a movie is something you can own is not an immutable law of the universe, but a by-product of a particular era in history. That’s not to say it’s a bad idea — it’s enabled the existence of full-time, professional artists where before there was only patronage by the wealthy — but it’s an idea that is rapidly becoming obsolete.

I’d say the idea of copyright depends on two things: mass reproduction being possible, and mass reproduction being excludable (ie, possible to prevent other people from doing it).

Before the printing press, there were few books, and no novels at all — only worthy texts hand-transcribed by monks. Before the phonograph and the camera, there was no recorded music or movies, only live musicians or theatre. The printing press, phonograph and camera made mass reproduction of books, music and movies possible.

Take music in particular — whereas before, enjoying music had always required live musicians, music could now be stored on platters, copied thousands of times, and shipped around the world. But not anyone could reproduce the music; the publishers’ copyright — their right to copy — was easily defended.

If you wanted a high fidelity recording, you’d need access to the original artist. Sellers of bootleg tapes or ripped CDs could steal a few sales here and there, but they couldn’t undermine a publishers’ copyright completely. A bootlegger might get away with a few dozen copies sold to friends, but they couldn’t start pressing thousands of copies and hope to get away with it. Likewise for books and movies.

That was the golden age of copyright — and it was a golden age, since it enabled a simple business model (selling physical products) that supported a whole class of professional writers, musicians and film-makers. Previously, if you wanted to be a full-time artist, you’d have to hope some wealthy duke would stump up the cash.

Then, as Paul Graham put it, the atmosphere became breathable. The internet happened. More specifically, BitTorrent happened.

You can now make infinite, perfect copies of any piece of music with a few keystrokes. And BitTorrent decentralises the distribution of these copies, so there’s nowhere to attack. (The MPAA and RIAA are playing whack-a-mole with the various file-sharing sites that pop up, but killing the actual filesharing system is as feasible as killing the internet).

In economic terms, creative goods had suddenly become both non-excludable and non-rivalrous, changed from private goods to public goods.

I hold that this made the idea of copyright obsolete. Stealing music is no longer stealing. Before you dismiss me as yet another copyleft-advocating freetard (I hate them too), let me explain myself.

Let’s try a thought experiment. Let’s say that BitTorrent, or something like it, was invented before the phonograph. Civilisation passed straight from live music only to ubiquitous copying without ever passing through the age of controllable mass reproduction.

That is, every time some wandering minstrel composed a new melody on their lute, the entire world would be able to listen to it again whenever they wanted. Would people still describe that as “stealing music?”

I think they wouldn’t. In fact, the whole concept sounds pretty awesome, doesn’t it?

I think if we’d never passed through the copyright age we’d rightfully see BitTorrent as one of the greatest advances in history. All of human culture available for free! The only downside — and it is a big downside — is that it’s cut off the main income stream for all the people who actually produce this culture.

I can see two ways the current copyright situation will pan out for the artists: two business models that will work.

First, there’s two models I don’t think will work, long-term. Free-stuff-as-a-marketing-tool (give away albums, sell t-shirts) works now, but will become much more difficult when everyone does it. Product placement won’t go away, but it won’t be able to support culture on its own — and not everyone wants to sell out. The trouble with both these models is that they imply content is not valuable in itself, but only as a means to advertise something else.

The first viable business model is the convenience model, represented by iTunes in music, the Kindle in books, and Netflix in movies. BitTorrent is unreliable and full of porn and malware. The other solutions “just work”. People are happy to pay a premium for this ease-of-use.

The downside of this model is that over time, BitTorrent or its equivalents are going to get better and better. You can already store the entire Library of Congress (20TB of text) on a few external hard drives. Some day you’ll be able to do the same with music and movies. (It’ll take decades, maybe, but we’re talking long-term). What’s the value of iTunes in such a world? I think the only long-term future for the convenience model is locking down your computing infrastructure so unrestricted copying is impossible. Apple already does this. I really like my iPad, but the future it represents scares me.

The second viable model is the ransom model, made popular by Kickstarter et al. If I get $10,000, I’ll make a new album. The big question mark is how much money this model could raise — I doubt you’d be able to fund another Avatar solely by donations. That’s probably not a bad thing.

My prediction is that the iTunes/Kindle/Netflix model will slowly rise to pre-eminence over the next 10-20 years. It’ll take some time — for example, the TV content creators are fighting hard, so Netflix is still the underdog in that space. But publishers are starting to realise it’s their only option. It’ll win eventually.

But it’ll be a short-lived victory — eventually falling storage costs and rising bandwidth will make the convenience model obsolete. But it’ll be difficult for the Kickstarter model to disrupt it; by that point, Apple might have a tighter chokehold on computing than Microsoft or IBM could ever dream of.

The big wildcard in this future is China; by that point, it’ll be close to global hyperpower status. And companies there already exist in an environment where IP theft is taken for granted. If you’re looking for the future business models of the content industries, I’d suggest keeping watch on Chinese entrepreneurs.

Your new startup needs some extra hands. You post ads on various job boards and get six replies.

Your hiring budget will let you choose TWO candidates from list A, and ONE candidate from list B.

Here’s the candidates:

List A

Candidate 1 is a fresh-out-of-university computer science graduate. They’ve hacked together a few Android apps and websites for fun. They answered most of your technical questions correctly. They’re able to make a product that works; competent, but not spectacular.

Candidate 2 is a fresh-out-of-university business graduate. They once ran a small T-Shirt printing business. They understood the basics of your business model when questioned. They’re able to sell a product; competent, but nothing spectacular.

Candidate 3 is a fresh-out-of-university design graduate. They’ve designed a few flyers and websites. They showed a few basic insights into your target audience when questioned. They’re able to conceive a product that people like; competent, but nothing spectacular.

List B

Candidate 4 is Linus Torvalds. (Or any top tier “technical guy/gal”).

Candidate 5 is Warren Buffet. (Or any top tier “business guy/gal”).

Candidate 6 is Steve Jobs. (Or any top tier “product guy/gal”).

—

Who do you choose?

(If your answer was “it depends”, well done. Have a cookie. Now what does it depend on?)

Come back in a few days for the answers!