The Emergent Fool » Management

Help Wanted: Social Capital Uncontractors

Rafe Furst — Fri, 12 Mar 2010 17:21:01 +0000

Are you struggling to pay for your food/home/whatever, or do you know someone who is?

If you can convince someone you are a superstar, there’s a way out. But if you are having trouble making that case, then maybe you’d consider becoming a Social Capital Uncontractor. What’s that, you ask? I’m not sure, I’m making this up as I write, you can help…

Here’s my life. I have a large and growing number of projects that I am working on, and an even larger (and more accelerating) number of projects I’d like to begin. The critical bottlneck for me is not money but time. It’s getting so bad that I don’t have time to even think about the management of these projects, let alone manage them. Plus I hate managing projects and it’s definitely not my biggest strength. I’m much better advising and asking questions that make you think differently.

On the other hand I have many friends, colleagues, acquaintances, etc. who are underemployed, by their own definition. I’ve thought about “clearing the market” by paying to get these projects done, but there are many issues involved.

Why I Won’t Pay You in Cash

I refuse to pay a salary (it undermines the intrinsic motivation that is needed)
I’m unwilling to have you in my life if you view me as a source of cash (if you need rent money, Starbucks is hiring, and there’s no time clock on my projects and any deadlines would be agreed upon upfront)
If you’re thinking to yourself (no doubt, while you read this at the one internet cafe in your village before you trek home five miles with daily drinking water you just collected for your entire family) that there are no jobs paying what you need to survive so that you can work on one of my projects for no pay, you’ve failed the first test.

For all those who’ve passed and are still intrigued, I’m interested in doing an experiment in social capital. I’d like to see how far I can get on my projects without my having to pay any cash and while reducing the time I spend currently on “the management issue”.

Why You Might Want to Work With Me

Eventually, if you are successful, you will become an equity stakeholder in one or more for-profit ventures that you oversee. Or you may find a project that you go off and run by yourself. Or I might pull some strings and recommend you for your dream job.

Uncontractors Only

Here’s the deal: there is no deal. You either want to work with me in this capacity or you don’t. There’s no commitment on either side, and no contract (stated on implied). If you let me down, there will be no legal, financial (or otherwise visible) recourse. Your social capital account with me will be diminished though. And as it does, I pay you less attention, I stop recommending you to people, etc. I start everyone with a positive social capital balance, but once you deplete it, it’s really hard to replenish.

Your Ideal Traits

Emotionally self-sufficient
Think like I do, but eager to accomplish stuff (vs just catalyze it like me)
Can work well with others by generating, and using, your own social capital
Communicate well via writing
Communicate well visually (graphic design / video skillz are huge plusses)
Technologically very savvy/geeky
Only reinvent the wheel when it can’t be created with existing parts

Areas of Interest

Presentation Creation

creating standalones like this and like this for subjects like cancer, social ventures, Science 2.0, whatever I blog about, etc.
creating presentations on the same themes for live forums like TED, The Feast, Idea Project, etc.

Project Management

Managing anything you see on RafeFurst.com and many more like them in development

Software Development

e.g. email solution that sits on top of Mail.app or Gmail that adds functionality I want
e.g. implementing crowdsourced rating system for my blog content (primary and comments)
e.g. seeding the application space for A World of Goodies
e.g. building out the vision on TruthMarkets.org (and combine with Goodies for EPIC WIN!)

System Administration

Managing my domains, websites, blogs and integration thereof on an ongoing basis

How I’d Like to Work With You

Virtually, via a combination of skype video, email, and phone mostly. Ideally, you just get shit done with as little interaction from me as possible, throw it on the web for the world to benefit, but do it in such a way that someone who knows me well could stumble upon it and “get it” in under two minutes and the first thing that would pop into their head would be: “OMG, Rafe would love this, I gotta call him and tell him about it!”

Time is Money

I love people who understand what this really means to me. People who don’t understand it tend to write long emails and create work for me in having to read through stuff I don’t care about and expect me to respond appropriately. People who do understand it, think really hard about how to get me interested in spending my limited time addressing what they’d like me to (and realize that it takes time away from my being with other people I care about too, helping other people with their also-important projects, etc).

Guilt works on me, but it very quickly depletes your social capital. I take my obligations extremely seriously, which is why I hardly ever consciously create them for myself.

Money is Violence

I am not opposed to spending money to make things happen, I just view it — like violence — as a last resort.

I don’t want to pay you in cash because I don’t want to do violence to you. My vision is that you make your money working hourly for someone else so you can meet your worldly needs, while at the same time, you work with me to get yourself to the Adjacent Possible where you can make increasing cash returns via the social value you add to the ecology.

I’m willing to pay cash for completed projects that meet my specification and exceed my vision. I love crowdsourcing with cash prizes for this reason. But I’m not going to pay you cash to complete the project because it’s a waste of your valuable time.

If you can figure out a model for a project that sustains itself financially and generates value (cash, social, some combo) then I’m willing to listen to your pitch as to why I should invest my money. But realize that you start with two strikes against since I said at the outset this is about an experiment in pure social capital.

Want to Participate in the Experiment?

First and foremost I am looking for a single individual (a leader) who will oversee everything and not require oversight themselves. If you fit into the big picture somehow but are not that leader, you can make your case below in the comments and prospective leaders will be able to evaluate whether they want to work with you.

The Limitations & Dangers of Incentives

Rafe Furst — Mon, 14 Sep 2009 14:30:01 +0000

If you liked this, check out these posts:

Equity Micro-Investing

Rafe Furst — Thu, 16 Jul 2009 21:47:37 +0000

I’ve been having a serious discussion with two colleagues of mine about closing the gap that exists between two groups:

People of my generation (40 and older) who have capital they want to invest in innovation but only know the VC for-profit-only value model and don’t have any true view into or understanding of social entrepreneurship business models;
People coming out of college today (27 and younger) who are actually creating untold value for the world without taking on investors because they don’t (a) know how to attract them, and (b) have heard too many horror stories

Jay and I fall into category 1 and Michael falls into category 2. All three of us agree that the gap above exists — due in part to rapidly declining startup costs — and represents a very real (and lucrative) investment opportunity if it can be closed properly. This opportunity is partly what the so-called “black swan fund” is tapping into as well, but I’m talking here of a distinct effort, which we want your feedback and participation on.

Creating a Workable Micro-Investment Model

Michael, Jay and I represent the three basic classes of people in this entrepreneurial ecology. Michael is an entrepreneur, I am a micro-investor, and Jay is person who sees and creates deal flow. We are trying to come up with a model that works, especially for Michael and myself — if it works for the two of us, Jay’s life becomes much easier and he makes more money. To these ends, I’ve outlined here the important elements of a micro-investment from my perspective (that of the investor). Hopefully Michael and others will chime in and say what’s important from the entrepreneur’s perspective (and what they need to motivate people on their team).

I’d like to invest $1K to $5K in a number of different nascent “projects”.

Monetary ROI potential is a necessary pre-condition for this activity, but it’s not my main motivation.

The main “return” on investment for me is a combination of:
- catalyzing social good (40%)
- being “in the mix” on a social/business level (30%)
- feeling personally useful and productive in my life (20%)
- getting external ego validation (10%)

The thing I want to invest in is a tribe in the Seth Godin sense. Tribes by definition coalesce around a leader (aka, the entrepreneur).
- I specifically don’t care about the legal structure or legal standing of the tribe. It can be a whole company, a project within a company, a de-facto, fluid, amorphous partnership of individuals, or a crowdsource. If successful, it will evolve into the correct formal/legal structure and I will trust the entrepreneur to honor the spirit of my investment in compensating me (see “moral integrity” bit below).

I have to like and trust the entrepreneur first and foremost (and then I take it on faith that the tribe is reflective of that person’s values and energy).

I will only invest in projects whose leaders I like personally and who have high moral integrity.

I know I will be disappointed on the moral integrity front at some point by someone, and that’s okay. There will be zero tolerance for moral lapses: no more investment for such people, and they will be ostracized from my circle of influence.

I am looking to get about 10% of the equity of the project for my initial investment of $1K to $5K.

I expect the first look for follow-on funding if the project gets traction, and I understand the price will go up since the risk is lower.

I expect the tribe to know if the project gets traction within about 3 months, if not it needs to be ruthlessly abandoned.
- I will not shed any tears and will praise the entrepreneur/tribe for making that tough decision rather than dinging them for “failure”. True failure — tragedy in fact — results from missing the real opportunities due to wasting time and money clinging to a bad or mediocre one.

Since the cost for me to get in is about a tenth of the typical angel investment, I feel no qualms about doing little to no diligence or business model validation — in fact I feel liberated.

Some entrepreneurs will ask for my strategic help (connections and advice) more than others. I will (mostly) give it on an as requested basis and not worry if a leader is not making the most of the relationship.
- Those that do leverage my strategic help are definitely more likely to get funded by me in the future, unless of course they make me a ton of money without it :-)

Three Paradoxes

Here are some paradoxical-seeming truths that I have come to believe through my past experiences, and which the above model of investing relies upon and leverages:

#1 I am more happy and motivated to strategically help projects that I put only a small amount of money into (or no money!) than ones I put a big amount into. With the latter, the leader needed to convince me they have a brilliant, solid business plan and know exactly how they are going to go from concept stage to being wildly successful over the course of 3 to 5 years. This, of course, is utter bullshit: no success story follows the original business plan. But having that CEO come back to me (after convincing me to plunk down $100K) and admit they have no idea how they will eventually be successful, that does not inspire confidence. With a micro-investment, I’m happy to throw it on the wall and see if it sticks. If not, let’s all move on — and let’s keep the kitchen open to make more pasta while we still have some dough, the water is boiling and the staff is happy.

#2 Making money has little to do with why I want to invest like this, but if the project does not have making profits as it’s #1 goal, I’m not interested. Why? Because I don’t think it will be successful in achieving the non-monetary goals either in that case. When I evaluate a project for potential investment, I will concentrate most of my decision on the money-making potential. But I will need to convince myself that the project is set up so that non-monetary goals are structurally assured if the money flows.

#3 By “overly” and “naively” trusting the entrepreneur with my money, I know that I will be paid back manifold financially in the long run. Because by giving this trust so freely (once I am convinced of moral integrity) I am invoking powerful social influence factors that will make the entrepreneur feel like treating me more than fairly whenever they have any discretion in making decisions that affect me. And by not boxing them in with rigid contractual obligations and manufactured incentive schemes, I am increasing the number of discretionary decision points the entrepreneur has.

If you are interested…

If you have actual experience as an entrepreneur or angel investor, I want to hear from you most of all. Please comment below on what parts of the above resonate with you and what parts do not.

If you have put serious thought into becoming an entrepreneur or making an angel investment but have never done so, I want to hear from you as well, especially the reasons why you haven’t (there are no wrong reasons).

If you don’t fit any of these categories, please don’t respond, your opinion is not relevant. I will update everyone on what ultimately transpires.

World’s Most Ambitious Crowdsource

Rafe Furst — Sun, 31 May 2009 17:50:46 +0000

Everyone has heard about the Large Hadron Collider, arguably the most ambitious and complex engineering project ever undertaken, anywhere. The purpose, no less ambitious, is to answer all sorts of burning questions about the nature of the universe, including whether the Standard Model of particle physics is valid. Given such ambition and high stakes, it would surprise most people that the LHC is managed in a collaborative manner with very little hierarchy. Essentially it’s a giant, crowdsourced science experiment.

As Krisztina Holly discovered on her recent visit,”there are no directors. No CEOs or presidents.” And

Because their community is close-knit and their most valuable currency is reputation, experimental physicists around the world know who contributes. Conversely, the few who have been too proprietary with their ideas have been ostracized. It’s like a crowd-sourced performance review.

Interestingly, because of such thorough amounts of collaboration, Holly points out that it’s unlikely for anyone to win the Nobel Prize. My favorite part of the LHC though is the (clearly) crowdsourced website.

As an aside, I was curious what the prediction markets think of the likelihood is of finding the Higgs boson (the last unobserved particle predicted by the Standard Model). Surprisingly, given how important this proposition is to the future of science, there is very little action on it. Intrade.com has two bets: will it be discovered before the end of 2009 and will it be discovered before the end of 2010. Based on the historical price of these — the latter was a 4-1 favorite as recently as last fall — it seems as though the low odd currently (10-1 and 4-1 against, respectively) has to do mostly with the timing of the discovery and not whether the discovery will happen. Personally, I’m willing to bet against the Higgs boson’s existence if given 4-1 odds, so anyone looking for some action on this, let me know.

Alfred Hubler on Stabilizing CAS

Rafe Furst — Thu, 23 Apr 2009 15:33:43 +0000

With his permission, I am posting an email thread between myself and Alfred Hubler. I had contacted him on the recommendation of John Miller when Kevin and I were posting on the possibility of dampening boom-bust cycles in the financial markets through policy or other mechanisms. Here’s what Hubler had to say:

I would compare large scale boom-bust cycles to catastrophic forest fires.

Two thoughts:

Policy impacts only small forest fires: When small forest fires are suppressed, large forest become possible and, more importantly, the untorched forest changes the local climate and therefore the forest may grow faster and faster. At some point forest fires are potentially so devastating that policy makers have no choice but to suppress them. Eventually the amount combustible reaches a threshold where the forest fire can not be prevented, the catastrophic forest fire takes place, and the cycle starts over.

Self-adjusting systems suppress catastrophic boom-bust cycles – therefore catastrophic wildfires are rare in un-managed forests: self-adjusting Systems avoid chaos [1,2]. However such adaptation to the edge of chaos occurs only if the system parameters change slowly, compared to the dynamical variables, i.e. if we change policy faster than the period of the boom-bust cycle, then self-adjustment will not suppress them. The good news is, that almost any type of self-adjustment suppresses chaos[3].

[1] P. Melby, J. Kaidel, N. Weber, A. Hübler, Adaptation to the Edge of Chaos in the Self-Adjusting Logistic Map, Phys.Rev.Lett 84, 5991-5993 (2000): http://server10.how-why.com/publications/2000/Melby00.pdf

[2] P. Melby, N. Weber, A. Hübler, Robustness of Adaptation in Controlled Self-Adjusting Chaotic Systems, Phys. Fluctuation and Noise Lett. 2, L285-L292 (2002): http://server10.how-why.com/publications/2002/Melby02.pdf

[3] T. Wotherspoon and A. Hubler,”Adaption to the Edge of Chaos with Random-Wavelet Feedback” is accepted by the Journal of Physical Chemistry: http://server10.how-why.com/blog/chemical.pdf

I then asked him if he had any specific thoughts on either Sumner’s proposal or synchronized chaos. Here was Hubler’s response:

In desert oasis, larger, more specialized ants often dominate. Smaller non-specialised ants have smaller populations and competition pushes them to boundary of the oasis. However the small, non-specialised ants species are around for very long periods of time whereas the larger, specialised ant species are often wiped out by a change in climate and catastrophic events. The smaller ants may initially suffer from a catastrophe too, but have a higher likelihood of survival, and even thrive temporarily after the catastrophe, since the competition from the larger ants is gone. The group around Jim Brown, at UNM, did work on ants and we just started work on bacteria colonies in changing environments.

By analogy, I conclude that boom-and-bust cycles are more harmful for larger and more specialised organizations which flourish in a certain environment, and disappear if this environment changes suddenly. A forest fire helps smaller plants and increases diversity.

Yes, chaotic synchronization sounds attractive and I have published many papers on this topic over the past 20 years. It work wells with simple nonlinear oscillators but it does not seem to work with living organisms, such as yeast cells. We do not understand that. Maybe there are adaptive processes or evolutionary advantages suppressing synchronization. For years we tried to entrain the life cycle of cancer cells and yeast cells with heat pulses, microwave pulses and other stimulus, but the cells always escape synchronization.

By analogy, I conclude that it might be difficult to synchronize economic systems.

I’d like to hear your opinions on what this means for policy, regulation, incentive plans, etc.

Executive Compensation

Rafe Furst — Sat, 04 Apr 2009 18:50:48 +0000

The main problem with executive pay is not that they are compensated too highly, but that there’s not enough pain for them personally when they do a bad job. I propose that the top three executives in all public companies be required to invest 100% of their salary in their own stock each year, with a decaying lockup period before they can sell.

Why 100%? Let’s face it, if you are one of the top three executives in a pubic company, there’s no reason, financially speaking, you should need guaranteed cash compensation. Having a safety net only serves to misalign your incentives with those of your employees and your investors, most of whom are at the mercy of your decisions. If you do need a guaranteed salary to pay the bills, go get a real job! Coffee is for closers.

How long of a lockup? The point of the lockup is to discourage short-term decision making. Long-term value investors typically have a minimum 3 year horizon, and illiquid venture-backed companies typically have 3-5 year vesting schedule on contingent compensation. In the past, you could have argued for an even longer lockup period, but with the pace of innovation today, I suggest a 5 year decay with 20% of salary-purchased stock becoming unlocked after each year.

What about benefits? Any non-contingent compensation (healthcare, company car, vacation pay, etc.) should not be allowed; it just serves to undermine the goal here. Again, being a CEO of a public company is a privilege you should earn by your past performance, not a God-given right. Remember all those years before you made it to the top when you were accumulating significant personal wealth? Put some of that aside to bankroll you through your tenure as top-dog. If you are good at your job, you will be hansomely rewarded via your equity.

What about other contingent compensation? You want extra stock or stock-option grants beyond your “salary”? That’s fine as long as it’s negotiated at arms length with the board of directors, and the grants are vested over a similar 5-year period. The key is that there should be no safety nets where you get paid while the other company stakeholders suffer.

What happens year after year? Every year, you are up for a renewal or change in salary. The board makes you an offer, if you don’t like it you leave. Over the course of time, you will have stock that is being released according to the 5-year clock but on staggered schedules. If you leave, you still get your locked up stock, but there is no change in schedule for unlocking it. You have to reap what you sow, but now your long-term fate is in someone else’s hands.

What about pre-IPO companies? What about them? Private companies wouldn’t change under this proposal. But once you file for IPO, the top three execs have to agree to the new compensation rules, including the 5-year decaying lockup for all equity and options previously granted.

Why 3? Seems like a reasonable number. Most of the decision making power is conferred to the top three executives. I can see the number being tied to market cap, so that while the minimum might be 3, GE might have it’s top 10 executives paid this way.

Isn’t this plan still too soft? Personally, I think it is. One could argue that the risk-reward ratio should be turned on its head so that it’s much less risky to start a new venture* which has huge value-upside and much more risky to take the helm of a established “blue chip” ship. With this line of reasoning, simply requiring executive salary to be invested seems like too much of a freeroll to me; I’d like to see some real skin in the game and require the top execs to reach into their savings and buy lock-up stock as well. But I’m happy to try the basic plan and see how it goes.

* I’ve put my money where my mouth is on this one [REDACTED 05/08/2009: see here].

Designing for Generosity

Rafe Furst — Sun, 25 Jan 2009 07:23:35 +0000

Clay Shirky is always a great speaker. Here’s his Pop!Tech from last year:

@ Yahoo! Video

Mechanical Turk

Rafe Furst — Tue, 26 Feb 2008 20:39:15 +0000

A few months ago, on a different blog I posted a method for reading books for free on Amazon. Hopefully they didn’t take offense to this but rather saw it for what I did which was a way to get people interested in a book enough to want to purchase it. But just in case Amazon has any hard feelings, I will make amends here by plugging one of their little-known but extremely powerful services called Mechanical Turk.

Mechanical Turk is matchmaker between people who have spare time do to tasks that humans are good at and people (or organizations) that need such tasks done. These HITs (Human Intelligence Tasks) range from doing research to giving opinions for a survey to beta testing a website to giving advice on a travel destination to whatever you can dream up.

If you want a task done, you simply post a HIT description, determine how many different people you want to respond and how much you are willing to pay for each qualifying response (typically between 10 cents and a few dollars). Then you watch people from around the world respond. You accept or reject each response, and only accepted responses get paid the pre-specified amount.

If you are someone with time on your hands and looking to make some cash, you can browse through the posted HITs and choose to respond to whichever ones you like (either because you have easy access to the answer, the cash looks attractive, or you just find the task interesting).

What is compelling about the marketplace dynamic is that HIT posters get their projects done extremely cheaply, certainly for less than they would have to spend doing it themselves or paying for it locally. It’s hard to compete with the combined intelligence and resources of thousands or millions of people on the internet for both cost and quality (after all, there is a self-selection of expertise when people choose to respond to your HIT). From the responder’s standpoint, they get to leverage — and get paid for — their knowledge, expertise and time, whereas without the Mechanical Turk marketplace, they would not have nearly the opportunity to do so on a regular basis. It’s hard to believe that someone would spend any time at all responding to a 10 cent HIT, but when most of the world lives on a few dollars per day, 10 cents here and 10 cents there makes a lot of sense.

As a case study, I recently used Mechanical Turk to gather some data that I was interested in. I knew that there was likely a lot of data out there, but my initial attempts at crafting Google and Wikipedia searches didn’t yield much, probably because I needed to invest more time and be more creative with my search terms.

Before I tried Mechanical Turk though, I tried two other methods: I asked friends and colleagues who I thought might happen to know a bit about the topic, and I also posted a question on Yahoo! Answers. The former yielded nothing due to the fact that nobody had the information at their fingertips and it was not worth their time to do my research for me for free. Yahoo! Answers I was more hopeful for since I have had good success in the past with it, but what I found in this case is that since few people had the answers I was looking for at their fingertips, nobody responded. Seems as though you have to pay people to do actual research, even if it’s not very hard research.

Proving this point, Mechanical Turk yielded 20 acceptable data points over the course of a few days, for which I paid a whopping sum of $20. And I’m convinced that I could have gotten the same response for much less money had I used a strategy of starting low and upping the price I was wiling to pay per HIT as needed to fill my request. At a $1 price point per HIT, mine was on the high end; the average hit seemed to be about 25 cents. Not bad considering that I probably would have been willing to spend a couple hundred dollars to not do it myself. Plus it got done a lot faster than if I were on the case.

Mechanical Turk, like Yahoo! Answers, Wikipedia, Rent-a-Coder and open-source software development, is an example of crowdsourcing. The book, Wisdom of Crowds is a can’t miss if you like this sort of thing (as I do). So is the work of Louis von Ahn, who invented (among other things), CAPTCHA, that security mechanism with distorted text that you have to type to prove you are human.

The beauty of Mechanical Turk and all other crowdsourcing systems is that the more people who use it, either on the demand side or the supply side, the more useful it is it everyone. In other words, value is being created where it existed in only latent form before (more on this subject in a later post).

Check out Mechanical Turk next time you have a task that you don’t want to do yourself, or if you are bored and looking for a way to make a few bucks in your underwear.

Management 2.0

Rafe Furst — Wed, 18 Jul 2007 19:44:36 +0000

There is a movement afoot in the business world that parallels the growing maturity of the internet and Web 2.0. Let’s call it Management 2.0. Google is a famous example at the vanguard, notable not so much for its management innovation per se — many companies are just as innovative when it comes to management — but rather for its rapid growth, global mindshare and financial success. A Harvard Business Review issue in the winter of 2006 claimed that management innovation — not technological innovation — is now the key driver of economic value worldwide. To be sure, management innovation is enabled by new technologies, especially those involving the internet and communication. Following are some of the concepts of Management 2.0, you are encouraged to complete and refine this list.

1. Crowdsourcing

With “The Wisdom of Crowds” in one hand and Wired’s “Crowdsourcing” issue in the other, businesses and even entire industries are being built on the backs of, well, you and me. But we like it that way. In a sense, the story of Web 2.0 is the story of crowdsourcing: open-source software development, creative commons and GNU licensing models, wikis, blogging, social networking, peer-to-peer networks, and scores of specific crowdsourcing niches like journalism (c.f. Digg, TMZ, et al). Google’s search algorithm is built on crowd wisdom (i.e. PageRank), and eBay’s entire business model is one giant crowdsource. They all work (and only work) because what we the crowd are being asked to do is compelling and of value to each of us individually. The trade is usually a no-cash affair, like when I correct an error I see in a Wikipedia entry. But sometimes crowd members get paid to contribute, and sometimes they even pay to become a member. Regardless, the real currency is Community and Goodwill, built on denominations of Trust and Fairness. Once this non-monetary economy is robust enough, conversion to dollars is manifest. Just be careful to control inflation.

2. User-Generated Content

If you do crowdsourcing right, what you end up with is user-generated content. The real beauty is that not only will your users create your content for you, but if you treat them fairly enough and add enough value yourself, you can turn around and sell them what they created.

3. ROWE Your Boat

ROWE stands for Results-Oriented Work Environment. For many job titles it makes perfect sense to let your employees make their own schedules: as long as they get their work done, what do you care what (or even how many) hours they work? But what about jobs that require frequent team meetings and ones that involve face-to-face customer interaction? ROWE advocates suggest in the former case, if you stop dictating from the top, teams will self-organize out of necessity; everyone has incentive to work out mutually agreeable meeting times, and those who are consistently uncooperative will be weeded out. Similarly, when customer face time is the issue, employees would much prefer to work out scheduling with their co-workers, trading favors where necessary. This yields a more globally optimal solution than could be achieved by centralized scheduling which can’t possibly take into account of each employees individual preferences and dynamically changing circumstances.

4. Failure is Good

Everyone knows that we learn more from failure than from success, but who wants to pay the immediate price when it could mean going out of business or getting fired? The key is to set up an environment in which experimentation is encouraged, consequence of failure is mitigated, and individual failure scenarios aren’t correlated. You are setting up a robust ecology of micro-businesses within your company, all competing for resources in terms of budget and talent. Initial success is backed up with additional investment, and failures are either quickly re-vamped or canned. Most importantly, the case study of failures (as in Harvard’s Case Method) must be analyzed and shared across the company, not as public flogging but rather as a way to learn and not repeat the same mistakes again. Failure in such an environment creates selective pressure for the entire company to evolve to the highest fitness peak in the business landscape.

5. Culture is Key

Jack Welch built GE into the single most successful for-profit corporation in the history of the world. His secret? Create the right company culture for your employees to achieve miracles. Welch’s greatest legacy at GE by his own reckoning was the “GE Way”, a cultural manifesto that he carried around and shared with his managers which at first visualized and ultimately created the GE corporate culture. For Welch, the rest of his job as manager was inconsequential to the bottom line and long-term success of the company. Warren Buffett claims in his 2006 Annual Report that one of his only roles is to “sculpt and harden our corporate culture”, which last year resulted in a valuation increase of $16.9B, the largest net-worth increase ever recorded for any American business, excluding those that resulted from mergers.

6. Everyone is Smart

Everyone in the company, from CEO to janitor, has big potential as a contributor. Yes, they may be vastly different in importance to the company’s success. But everyone is smart. American Airlines famously rewarded employees no matter what their job titles for suggesting ideas that helped the company. One favorite was the flight attendant who built a new house by recommending that the airline reduce their standard three olives per salad down to two (she’d noticed that a large portion of the olives were being left over). Whether you believe this apocryphal or true, the key to harnessing the wisdom of your company’s internal crowd is to provide the right incentives for individuals and make sure those incentives are in perfect alignment with the company’s goals.

7. Let the Market Decide (NASDAQ:LTMD)

Conventional economic theory views markets as efficient allocators of global resources. But they are also great sources of information. Robin Hanson, Professor of Economics at GMU, came up with a great idea: a marketplace where the “products” being bought and sold are ideas, not physical entities or services. Such markets turn out to be amongst the most accurate predictors we have of uncertain future outcomes, and when employed properly, can be used to make smart decisions on anything from corporate strategy to hiring to product innovation. Knowing exactly how and where to employ decision markets inside your company — especially knowing where they should NOT be used — is more art than science at this point. But when companies like Google are using internal markets to make better project timeline forecasts, and when the Department of Defense approves the use of markets to predict the next terrorist attack, you can be sure that LTMD is a long term BUY.

8. Simple is Back

Remember when all the good web sites were portals that did everything and had cluttered home pages, chock full o’ features you never used, and domain names like auctions.com? Notice how Web 2.0 sites tend to have lots of white space above the fold, do exactly one thing very will and tell you clearly what that is on the home page, and have intriguing (yet information-less) domain names like joost.com? Now compare revenues and profitability at time of IPO for Web 1.0 companies vs Web 2.0 companies. Communicating your product and value proposition to the masses is way more difficult than entrepreneurs realize. Expecting 30 million people to absorb anything more than a soundbite, let alone something as complex as a three sentence paragraph, is a lost cause. Even among VCs (the entrepreneur’s greek chorus in lieu of customers), the 30-page MS Word business plan has been scrapped in favor of the 12-slide PowerPoint with lots of pretty pictures. In other words… White Papers? pwn3d. Elevator Pitches? l33t!

9. Lose Control, Embrace Chaos

It’s so simple, just give all of your product away for free and you will be rich! How? Well, we’re not sure. But it’s got to work, after all YouTube is worth a billion after a year of operation and all they do is give away content and spew money down the bandwidth drain. Embracing chaos is antithetical to most people’s business sense and to everything we’re taught in school and by our parents. Must be something in our genes that demands we keep things close to the vest and have a firm hand on the wheel. Obviously you can’t just take your hand off and expect the car to find its way home (yet). But gripping tight enough is not most people’s problem, just the opposite. If you love your wealth, set it free. Have some faith.

10. Kinder + Gentler = Crazy Profitalicious!

Who says you can’t save the environment, eliminate poverty, create community and have fun while you make money? Ayn Rand, Milton Friedman, and Gordon Gekko to name a few. Greed is no longer good. Doing good is good and you will be rewarded in the marketplace. Everyone is talking about you behind your back and in yo’ face, and reputation is important. If you build a better mousetrap, you may get customers in the short run, but if you aren’t nice they will trash you in their blogs, and as soon as someone builds an even better mousetrap (in three months) your customers will jump ship never to return. So the only thing a rational business person can do is to play nice, be good, and feel good about making the world a better place. Oh, and you’ll make a lot of money if you do.

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