The Instant MBA - David Weekly - TwilioCon 2011


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  • [OPENER & TL;DR]

    Hello, fellow nerds! I hope you’ve had your coffee this morning because I’m going to try and put you through an MBA in the next 40 minutes. TL;DR: Focus on Pain, Stay Close to the Money, and Be Good.

    [I = COMPUTER]

    I’m an engineer by birth and training (my grandfather’s job title was ‘computer’ so I’m literally a quarter computer); I started programming at five and came out here to Stanford to get my degree in Computer Science. After I graduated and had worked for two companies out here, I realized that after another decade or two I’d become a marginally better programmer but that I was curious about other aspects of the world, like business. I talked with some friends about where I could take my career and was rapidly dissuaded from getting a PhD in Computer Science (heh). My friends who had gotten MBAs pretty universally loved the experience and found it had built them a great network and a greater liver, but they candidly confessed that even the best entrepreneurship programs wouldn’t teach you much about what you need to know to do a startup -- the best way to learn would be to jump in.


    So I did. And I learned a lot. I definitely wasn’t ready; but it’s kind of like parenting - you’re never “ready” no matter how many books you read or lectures you attend. You just need to do it and you’ll figure it out on the fly. That said, there are ways you can make it easier and harder on yourself.


And in retrospect, the biggest advantage and drawback I think I had going into this experience was Engineering Culture.

    The biggest benefit of engineering culture is this mentality that you need to build and should be judged on what you build. That you’re responsible for your own destiny and can and should code that destiny to become reality. Code is the new literacy and we coders are uniquely empowered to leave our mark on the world in an astonishingly leveraged and speedy way.

    But there were a lot of drawbacks to this culture and things that are implicitly codified in it. The culture assumes that engineers are relatively anti-social, “networking” is for weenies, that solving interesting algorithms or writing beautiful code is a recipe for success, and that if you do your job right you can avoid (or minimize) contact with slimy businesspeople.

    [FANCY TECH = $?]

    Now I’d say the biggest fallacy here, and maybe the most important one to grok, is that solving difficult problems will result in the success of your business. I spent a year and a half of my life writing from the ground up a Perl SOCKS5 proxy that could tear apart and reassemble instant messaging packets from five different protocols, all undocumented. I worked fourteen hour days in my bedroom with a packet sniffer and built an architecture that could serve millions of users. I was pretty naively appalled when the millions didn’t show up.


    The big thing you need to do is to compel people and excite them. The best way to compel people to create lasting value is to solve real problems for them, to demonstrate how their life will be so much better when they’re using your product. Look at the Apple ads - they don’t list specifications or standards or test measurements. They show the product and people enjoying using the product in a way you can relate to - they’re painting a picture of you, somewhat happier and sexier, using the product. That’s compelling and exciting. Any time you release a product you need to imagine looking over the shoulder of a person finding out and then using your product - do they understand right away, in clear and simple terms, why you’ll make their life better? If not, you need to work on your messaging.


    You’ll be really tempted to focus on the details of the technology that you’ve been working so hard to build, which makes sense because that’s where your head is at. But the market doesn’t care. USERS DON’T CARE HOW CLEVER YOUR TECHNOLOGY IS. They care about whether you solve their problems. So focus on the pains your users have, and soothing those pains. (And make sure the medicine is not more harmful than the ailment!)


    Now, this takes me to my next point - there’s an old business mantra that says “sell asprin, not vitamins”. The nugget of wisdom in there is that if you’re an adjunct, a nice-to-have, a “yeah, I ought to do that” you’re not going to get paid much for your service. Whereas if you’re solving a critical, painful, expensive problem for a company, you’ll be perceived as much more valuable. There’s another saying: “Sell on value, not on cost”. You want to make it clear to a buyer of your product how THEY are going to be so much more successful and wealthy once they adopt your product; they shouldn’t have to care at all how much you needed to spend in order to give them the solution.


    For instance, since we’re at TwilioCon, it should never come up with your customers that you are paying Twilio a penny per minute per call leg. Let’s say you’re helping facilitate a $100,000 sale and your customers incurred a hundred minutes of termination fees, that’s, well, one or two dollars that you’re going to have to pay Twilio. Do you want your customers to be asking the question “How much more than a dollar do we pay these guys?” or “How much less than $100,000 do we pay these guys?” This illustrates a really important point, which is “pegging”. People will “peg” your service’s price to other things they are used to paying money for. It’s really important to peg your service’s value high (e.g. by showing how it helps a company make more money) versus low (how much it cost you to deliver the service, or worse yet, something free.)

    [$++ = :D]

    So the best peg is effectively a commission, where you’re going to help your customer make $X more and you want a percentage of that. The second best is helping save time, or helping them do “more with less”, which - let’s be honest - is effectively pegged to the salaries the company can eliminate, but there’s obviously an upper bound to how much that could be, whereas there’s no real upper bound to how much more money you could help them earn. So it’s always better to sell on helping your customers make more money rather than save, since savings is a race to the bottom, a race to zero. Your product should ideally be CLOSE TO THE MONEY, which means you should be a part of how your customers get paid. The further you are from the money, the less clear the story is about why you’re so valuable to your customer.


    Cool, so you should make a product that solves a real problem for customers, ideally helps them make more money, is clearly messaged, and is priced based on the value it provides them. That’s a big chunk of what you need to know to build a successful business. That said, there’s another important part - people.

    Now, after graduating with an engineering degree, I viewed those who “networked” as the weak ones. Good product should speak for itself, right? People who “schmooze” were lame. Heck, they *are* lame. I went to this one event where a guy who basically hadn’t talked to anyone quietly went around the table and dropped his business card in front of each person without a word, as if he were setting napkins for our places. Quality networking is not playing 52 pickup with your business cards in a room full of strangers. It’s actually getting to know and help other people on a “pay it forward” basis. If you’re helpful, smart, and pleasant, you’ll find, like by magic, people come out of the woodwork to help you. Things get easier. Conversely, if you’re mean-spirited, reclusive, or arrogant, you’ll be dumbfounded as to why deals that should be straightforward are taking forever. Silicon Valley (and most business climates) operate via a “web of trust” and you might be surprised by how quickly reputation percolates through that web. So be good to others and you’ll reap the karmic rewards.


    So in short: Focus on Pain, Stay Close to the Money, and Be Good.

    Congratulations, y’all now have your MBAs. Now go out there and build some awesome companies. :)
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The Instant MBA - David Weekly - TwilioCon 2011

  1. 1. The Instant MBA t u r n i n g e n g i n e e r i n g - t h i n k i n t o b u s i n e s s - t h i n kDavid Weekly // @dweekly // text TWL17 to 46876 // TwilioCon 2011
  2. 2. TL;DRBuild useful things, not nerdy things.Stay close to the money.Be good.
  3. 3. I’m a Computer.
  4. 4. startups =Parenthood.
  5. 5. Engineering Culture
  6. 6. Complex !=Successful =
  7. 7. Focus on Pain.
  8. 8. Use > Features >
  9. 9. Sell Aspirin. >
  10. 10. Set Your Pegs Right.
  11. 11. Follow The Money.
  12. 12. Networking: Be Good
  13. 13. TL;DRBuild useful things, not nerdy things.Stay close to the money.Be good.
  14. 14. The Instant MBA t u r n i n g e n g i n e e r i n g - t h i n k i n t o b u s i n e s s - t h i n kDavid Weekly // @dweekly // text TWL17 to 46876 // TwilioCon 2011