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And he tweets, Business is so much easier when you invert. And he gives an example there. He gives an example from Charlie. Charlie Munger, who’s Warren Buffett’s partner in crime. And he says problems frequently get easier if you turn them around in reverse. In other words, if you want to help India, the question is you should ask is not how can I help India is what is doing the worst damage in India? You want to invert, always invert. I think this is particularly useful. I’m sort of fairly interested in problem solving and getting unstuck and thinking about things in different ways. Kids, particularly in business, when you don’t have people telling you what to do, when you’re your own boss or when you’re running a business. It can get quite easy to get sort of stuck in a groove, in a hole to go down like a sort of deep dive hole and get stuck in there and not even realise you’re in there sometimes. And so I like to sort of pick a sort of interesting questions or different ways of looking at things which can help you sort of like bust out the hole. And I think this one’s a particular give on because it places the problem at the forefront of your thinking, which I think is an important thing to do, because, again, when you’re an entrepreneur, you can get excited by an idea or a solution or a fantastical idea for a business or a fantastical idea for feature in your product or whatever it might be, whereas it always pays to have a problem first sort of approach to thinking through these things, because that’s what your clients and customers have, is they have problems. They’re looking for solutions for sure, but they’re looking for solutions to problems. So you should always start with the problem. So your tendency as an entrepreneur is to start with solutions or fancy ideas and so actively forcing yourself to invert that look at it in the other direction, then you can come up with stuff from a different direction. Now, obviously, Charlie Munger is talking about that from a sort of very sort of geopolitical kind of viewpoint. But you can you can bring that down a level, you can say. Okay, you know, in my SAS product, I’ve got this idea for a chat widget, and I just took a chat with you and I’m interested in the chat with you. And I think that would be great for my customers. Okay, well, think of it. The other action is like. What problem is that, Chatwood, you’re trying to solve for your clients? Do they have a problem with communication? Dilday gang interrupted all the time by some sort of voice phone calls or something like that, in which which means that if you can push it off into a chat with you, then that would be helpful from the perspective of the problem that it’s trying to solve. Or if their problem is, is they’re constantly getting bombarded by phone calls, then is having a chat window, which they get constantly bombarded by chat. Actually a solution to the underlying problem, or is there a better one go around the office with a giant pair of bolt cutters and cut all the phone lines or, you know, wrap your cubicle in tinfoil. See, no mobile phone signals can come through, but it can often lead to better. It can either prove that your initial idea was correct or actually does it. A better thinking, which I think is always important. And it can often lead to sort of 80-20 kind of thinking, as I was, the 20 percent thing that can get you 80 percent of the way there. And particularly when you’re starting a business and growing a business, you’re gonna have far more tasks on your plate. You could possibly have time to do so. Finding those places where you can do 20 percent of the work by the result is really important. What do you feel about this?
Yeah, I think many times and nurse, forget about the problem that they are trying to solve and they focus too much on maybe creating a beautiful product.
You know, the design of the product and the idea, the name of the brand, how we are going to do this and that and all that illusion and in the good sense. But it is like yours. All that excitement. It can very well put you out of right on on on track out of track of what’s the real goal, which is solving a problem. So and also by going granular on solving the problem, you can measure as well. You know how big that problem is. Therefore, you measure your market. And then if you know your market size, you and your audience or your potential customers, you can also forecast how much you can actually earn. Yes. So. So I think that’s critical. And also probably is a bit connected to being contrarian as well. So to think it like being birds, I started my problem. I agree percent and keep it always in mind as well. And the more you do it, the greater solutions you can find. Because if, you know, it’s very rare that there’s just one problem you’re solving with something, because it’s very interconnected, intertwined with many other things, even within a company. They may have one problem, but maybe the solution is just to scrap it altogether. That way of communicating with clients or about technology. So which will require a bigger solution. It will depend on how it affects different parts of the business or if there is a solution that can solve that on other problems. So. So you to call it. Yeah. Be sure. And oriented by problem solving rather than design. Probably. So design is a by product of the solution. Yeah. So I will stick to that I guess.
Yeah, I definitely agree. So.
Coming around to the first of our sort of Elon Musk related topics, I think there’s a connexion there between that problem solving and the design sort of phase of things. And also, you know, you were mentioning about having a problem, actually having the problem sort of well-defined that your solution is trying to solve actually provides you with a way of measuring your performance against something, you know. Does it actually leave the problem in some way, shape or form? And Chris, back up again on Twitter has a tweet about Elon Musk. And he says people who work for Elon Musk are great at Mission to Metrics. For example, Space X, his mission is to colonise Mars. To do that, we need reusable rockets. My job is to help design the steering system that allows our rockets to land back on Earth. You know, I’m successful because the rockets land successfully back on Earth and.
That speaks to that kind of like problem statement, but also being able to say, okay, what are the big challenges you’re always gonna have in your big business is saying, okay, the grand goal of the business.
What is the what is the goals of the individuals who are in that business who may be at some lower levels and low, it is that business. How do you how do you stack those goals towards the sort of ultimate sort of company’s goals? And how do you measure their performance against, you know, all of these? Are they doing well or are they not doing well? Are they solving a problem which goes towards solving, you know, a general problem in the business or the ultimate goal of the business, or are they not?
And he illustrates that quite well in terms of, you know, Space X has a very stat, you know, a well known or Elon Musk three Space X has very one goal, which is like, I want to live on Mars, say, you know, everyone can trace their sort of lineage of the job that they’re doing, even if you are sort of like welder in the, you know, the starship rocket factory in. Boccaccio, Florida, wherever it is, Texas, you know, welding, little steel rings together to make these giant rockets, you know, where you sit and you know how to measure your output, a relation both to your immediate goal, but also what the goal of the company is up at the top. Have you had an experience with this kind of like measurement of metrics when it comes to different people and jobs?
Oh, yes. So I think I actually recently stumbled upon with a book. I don’t have a title at hand, but we can do it in the show notes with these old K.R. methodology. So. Which means sounds for objectives and key results. So similar to today’s approach. And I think it’s really valuable, especially when the organisation scales. You need, you know, not only key performance indicators for your company, like typical sales profits, decent that, but how you measure them, performance of and place. And and then that could be linked to how you retrofit them. So and I was growing a company. I would also say that the time factor is important. So, OK, we will want to go to Mars. But by when I’m sure eLong wants to be, you know, around to see that. So for him, it’s wonderful, too, to Mars by not only astronauts possible, but certainly the heat. He will have somewhat like hard deadlines. And because, of course, if you allow enough time to pass, then you will eventually go to Mars. But if you need and then that there are there are all these, you know, plants that suggest that I’ll get before going to Mars, you need to first go to the moon again and establish like a base there so you can refuel and and also prove many, many things. So if if you cannot if asteroids kind of leaving the moon for long, then they won’t be confidently Mars either. But they will have also less support. So so which is I and they have a point there for sure. But I’m not that doesn’t mean you cannot go straight to Mars, which is what I think he is planning. So so you need to bear in mind the goals, but then measure results and yet always get time based as well.
So they now they said public companies, this space X is a private company, but not for long. I guess. So I think it’s very easy, you know, short term, driven by results on profit margins and sales, some of this. So, yeah, you should have a system in place to get. It’s like getting feedback, especially if if you are not. Sometimes when you are developing something that is long term, you don’t have customers yet. So you need to put a system in place internally to to gather feedback. And that’s that sort of result based on objectives. Is that critical? Look, you need to have.
Another thing that has been big in the Elon Musk world recently is Tesla, Oxly and Tesla just had their annual annual shareholder presentation, shareholder meeting and what they were calling their battery day, which is where they released details of their sort of improved battery tech. That’s coming down the line just prior to that reveal. Elon Musk tweets this. The extreme difficulty of scaling production of new technology is not well understood. It’s 1000 percent to 10000 percent harder than making a few prototypes. The machine that makes the machine is vastly harder than the machine itself. And obviously that he’s referring to the noley. That they have to do sort of, you know, cutting edge science and doing brand new stuff to try and sort of improve the performance of batteries. But that’s then taking that science and making it be able to be manufactured at immense scales as described by the names of their factories, like giga factories and all the rest of it. That, you know, he’s saying that the harder part actually is to is to. Is the design, the system, which is the factory which churns out these better, newer batteries at the sort of scale they needed to be produced in order to produce the outcomes of the company. And obviously, you and I are not sort of doing cutting edge battery science. Most people aren’t. If the business that you’re involved in is, you know, somewhat mundane, that it might not feel this is particularly applicable, but actually your job as an entrepreneur? Oh, I think that you should be spending most of your time on is building the machine, which is your business, and then your business is producing the products or services or whatever it is which generates the cash. And so you’ll you should always try and be one step removed. And I think this this kind of information is applicable because you are essentially building a machine, a factory, a system, a system of systems, which is your business, which involves, you know, sharp edges and fuzzy decision making and, you know, people with all of their sort of fun and games and emotions and trials and tribulations, et cetera, et cetera. And that you shouldn’t you should always, you know, realise that it is hard. It’s hard to do. That is hard to build. It’s hard to build a factory which produces something, the outputs. And the U.N. is you know, it’s just as hard to produce a factory of ideas and humans and all that kind of stuff. And but you should always have your eye on all or keep in mind that that is actually what you are doing, because, again, it’s very easy to get stuck in the weeds of actually producing the widget. So the things at the coalface that you don’t you end up firefighting and you don’t have time to sort of come up and look at how the whole thing works. Have you found it, you know, sort of going from small, small beginnings to actually sort of building the organisation, the infrastructure to to try to produce the result and some of your companies that you’ve been involved with?
Yeah, I think it’s important to bear in mind. Yeah. Both your product and the site or the technology, let’s say, and then the scalability of that. So most of the biggest companies today are software based businesses.
And that’s because it has a unique ability to scale. So you want to have some piece of software you can serve what? More and more clients at the marginal cost? Of course, it’s not free. I mean, you used to have the decent investment, but over time, you know, there are many examples, Google, Apple and almost anyone that like Netflix, etc., they enjoy those benefits from scale and so forth. But when it comes to some goods or manufacturing, it’s it’s it’s way harder. And you should always keep that in mind. So how are you planning to scale it nowadays? Supply chains are also an issue because of protectionism on all that.
So do something that you should really be a mind if you’re dealing with goods, especially if you’re dealing with services. And so, OK, so how will that as you say, you are building a service based company, let’s say our nation’s marketing agency. So how we are gonna scale that? Because if you don’t want to scale it, then you should consider other routes, like becoming really professional and knowledgeable in in some verticals off their marketing space. So you can be the expert on charge as much per hour as possible for that.
But if you go for the agency where you have multiple employees and this and that, your your role will change.
And if if you are the expert, you know, and and you don’t have systems to pass on that knowledge efficiently to others so that you can hire like juniors or semi senior managers, because if you hire only all experts like you, all your rights will be super high. And therefore, you will have less clients and they probably will work out better for each of them to work out individually than being an agency is no point on it. So there the value added of an agency is just have multiple resources. Would ICE an organisation that has expertise and knowledge and benefits from economies from scale. But you need to put a lot of processes, things in place. And we talked in previous podcast that is car Dr. Diphones Partners, that this this transition from being a solo producer to a small company and then from there to scaling it is really hard. So an outside software businesses, it’s not that. So the agency business especially, it’s especially hard when you have a like a sales team, like lots of people. Your role as entrepreneur will become more like the leader or the motivational guy and or your.
Hire someone for that swap, but that will all impact on the margins. So then you will need to keep figuring out how is that growth gonna happen. Otherwise, you should abandon that business model entirely and focus on becoming more professional in your vertical.
I think one of the challenges. Yes. So basic. There are. I think that links back to what we’re talking about before when you’re saying about. Okay. I’ll say, like, actually sort of like measurement and giving people very sort of concrete structures and goals and sort of metrics and things like that in which they can work can help them. And another side to you know, the difficult is that you often run into with people, you know, having an organisation that’s made up of people and that kind of stuff is alignment of incentives. So we’ve got another tweet thread here, actually, from again, from Andrew Wilkinson. And he’s talking about that. And he says, I used to wonder why people in my country didn’t care as much as I did. I didn’t get excited about revenue ends or saving money. I always had to do that stuff, otherwise it wouldn’t get done. Turned out to be simple incentives, drive behaviour. I was paying everyone a flat salary no matter what happened to the business gain or loss. They got paid the same. Why would you care about driving a little bit more revenue? If anything, more revenue equals more stress. As soon as I start layering in variable bonuses based upon hitting targets, the company doubled in a year. Show me the incentives and I will show you the outcome again. That’s Margaret. Court incentives.
A real hard one to get right. And it can often be a bit of an afterthought because you as an entrepreneur or if you’re if you’re starting a business, then there’s probably an element of drive and passion and motivation you got for that business because you’re either super interested in the business model or the product or the service or whatever it might be.
You might be super passionate and interested just about entrepreneurship in general and doing your own thing and being a boss. And you might just be a sort of passionate person in general. A lot of entrepreneurs tend to have be on the most passionate scale of thing because you need to have that to get to drive through a lot of the fun and games and hurdles and problems it gets right away. That that personality type just helps. And I’ve definitely found this in the past.
It’s like you’re there and you’re slaving your slaving away at a business. You know, you’re working 12, 14 hour days and you’re going and going and going. And you’re right. And you’re going and, you know, you employ someone and then. Or you employ those people and they turn up at night nine, they go home at five. They take an hour for lunch. They did, you know, very standard and actually fine. Okay. Employee things to do. But you’ll see they’re going like, wow, man, I’m just. Why aren’t they sort of. Why isn’t this sort of passionate motivation’s sort of, you know, rolling off? Why is what? Rubbing off? Why is it not in motivating? Why aren’t they working harder and evolves? You gotta put yourself in a different sort of headspaces of people, like people have different work life balances and things like that. And that’s totally understandable. But. It’s very often like as an afterthought, as an entrepreneur about incentives, because a lot of the incentive for you is built in. In doing the thing and maybe you’ve got some longer term financial incentive anyway, because if you are the owner of the business, then the rewards of the business will come to you eventually. You know, you obviously have to work hard and scrape by in the first instance. But, you know, there’s there’s that in the background. Plus, you’re you’re really into it and, you know, you’re very alive. You are incentivised just by the nature of the beast. And you just forget that the other people aren’t in the same boat as you. They are you know, they are employees. They are doing a job that they may enjoy. And they may overestimate, but ultimately is a job to them. It’s not the most precious thing. They’ve got families and all the rest of it going on. And so it really pays to think about, okay, how. Again, we were talking about sort of Elon Musk and Space X and the way that you can align people’s sort of goals and metrics and incentives to the sort of the outcomes that you want from the companies and from the company and using. Okay, you can do that as well. The Google Oakdale’s framework. And so having those incentives where it’s like, okay, if if the company needs to increase revenue and decrease churn and do whatever it’s like, how do you incentivise and compensate your employees to be care about the same things that you care about? And actually for employees is far more about like all they paid to care as much as do they just naturally care in general. What kind of experience that you had with sort of incentive schemes or like changing compensation to make sure that sort of some of these things are aligned?
Yeah. There’s a bunch of options that you can play around off. Of course, if you are starting a company with the founders, you have equity that you give to people. But then as you grow, companies do share options and they’re especially valuable and very common in listed companies because it’s very liquid ISIS sort of bonds. But they still have our next strain’s. And, you know, to it’s not a cash payment, it’s just a stock payment. So, yeah, and many it’s it’s a way, I think beyond all these sa I said. I mean, the equity part, stock options are not what when you leave stock option. Unless you give a lot of stock options, which is more to key managers, then it’s like a cash bang or like a bonus based on results. That’s always the case. But usually start-ups are rarely doing that much of a profit, you know, to be paying bonuses. So I think Bain equity and I think it’s worthwhile giving enough equity to people that are really important organisation, because that’s a sign that that’s going to be a key success factor for your company to keep people. But I wouldn’t undermine their importance to many employees to just feel like listening within the organisation. So just the fact of listening to their ideas and being around, you know, talk to them either yourself or their managers or someone in the organisation that goes on this side, H.R., you know, just that’s a. Ah, yeah.
It’s more about having a system where ideas can have a place than go from the bottom up all the way through on Bilston List. I’m not I’m not only listen, but also action on that. So that that’s very rewarding for many people and it’s been hugely beneficial for the company as well. So I think Netflix has this approach as an organisation. They always say they encourage people to be creative. They don’t have my maximum Holliday’s per year. We can take as many lives as you want. So so they have less structure and more of if they create what they call. I’m paraphrasing, but it’s more like they’re out there. Right. Setting or atmosphere for their ideas to flourish. So, yeah, that’s an interesting approach. And certainly people stay motivated. Of course, then they will like compensation. But yeah, just link them to a company’s performance is one thing, but also just listening to them. I will say something important.
Yeah, I think I think you make a good point about there is there is a difference between intrinsic and extrinsic motivation. So intrinsic being, you know, the stuff that comes from where within you your own personal motivation or the stuff that motivates you and extrinsic, which is the externally applied kind of source of that, can be, as you said, like money that can be praised, that can be understanding, listening to trustable, you know, other sort of more intangible kind of extrinsic. Yeah, and trying to find that right balance can be can be delicate, right, because different people are demotivate motivated by different things. And so you have to be you have to try and ferret out, find out what motivates a particular person more than other things. So like, for instance, for example, personally, I tend to sort of buy into the mission of the thing, whatever it is that’s going on, that I find that relatively motivating. I find small amounts of equity far less motivating than some people. Partially because it’s kind of like, well, it doesn’t feel like much at all. Yeah, this is just my personal view. To me, it doesn’t feel like that much to you know, I’ve I’ve had small bits of equity in other things that send it to nothing. So to me very much feels like a raffle ticket as opposed to anything which is concrete. It doesn’t pay the rent, doesn’t buy me food, doesn’t do it if I want to. But there are plenty people who are like that. And I want my sort of basis point equity option because I want to know max out my pension contribution and I want to, you know, because they’re motivated by very different things that might be sort of long term stability vs. short term gain. And people are on that or on different sort of spectrums when it comes that comes.
Some say some people also value like working remotely. For some now it is mandatory, but. Yeah, but still many people enjoy that. Others are the opposite. They like to go to an office. So, yeah, I think you’ve made a good point as well. I’m trying to balance all that everyone out. Yeah, it’s gonna be hard, but maybe just have different mean or flexible policies. I would say, of course, that it depends on the size of company and the beginning. You just need committed to working people over time. It’s fine to have just employees that are more predictable as well. Don’t. Not not every 100 percent needs to be fully charged. So. Yeah. So you should be. You should create like a competitive environment. But yeah, that is that provides gratification as well for for people to stay on.
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