And now... for something new

Writing emails people actually enjoy

For a while I’ve been frustrated. The state of sales and business email is frankly sad.

As a marketer looking at my inbox, my reaction is typically this:

approve stephen a smith GIF

Boring, unimaginative, uninspiring emails that no one in the right mind would ever pay attention to are taking my time and attention away from cool projects and creating needless distractions.

Business email should be fun and entertaining and personal. Sales people should feel empowered to make meaningful connections with us that go further than {{first.name}}.

Today, I’m doing something about it.

I’m launching GitSales.

GitSales makes it easy to send more personalized email at scale. No more cheesy first name variable tags and no more boring and dry email communications. Build real relationships with prospects by focusing on writing things they actually want to read.

Join Us

If you’re a founder, a SDR, or marketer and looking for a way to send more effective personalized emails in half the time, you’re in the right place. Sign up for early access and join us as we make sales emails fun, fast, and personal.

Get Early Access

P.S. If you’re looking for a sneak peak at exactly what we’re building and how we’re building it, take a look here.

Theory of Constraints for Startups

A commentary on Tiago Forte's "Theory of Constraints 101"

I’m going to try something different with this post. This will be a commentary and extension of an article posted by Tiago Forte. The original article explains the manufacturing concept of the “Theory of Constraints” (TOC) and is included below in its entirety (it’s short). My commentary relates this theory with popular and powerful mental models used in startups.

Some quick background.

  1. Famous VC firm YCombinator argues that “Startups = Growth”. Growth is the defining feature of a startup. Without it, you are not a startup.

  2. Theory of Constraints is a manufacturing philosophy about bottlenecks (which I happened to study in college).

  3. Famous VC Ben Horowitz wrote a book about success and the difficulties of startups called “The Hard Thing About Hard Things”.

The conclusion:

YC and other VC’s may tell you to drop everything about your business to focus on one area to unlock growth. You (the founder) may feel like you must continue improving all aspects of your business to grow. Theory of Constraints supports YC’s mentality and provides a logical framework for understanding why a narrow focus is so effective.

The article begins below. My commentary is included in the text and italicized as I tie Tiago’s TOC concepts to YC’s beliefs about startups. Enjoy.


The Theory of Constraints is deceptively simple. It starts out proposing a series of “obvious” statements. Common sense really. And then before you know it, you find yourself questioning the fundamental tenets of modern business and society.

Eliyahu Goldratt laid out the theory in his 1984 best-selling book The Goal. It was an unusual book for its time — a “business novel” — telling the story of a factory manager in the post-industrial Midwest struggling with his plant. The problems this manager faces are universal, of course, and not only for manufacturing. For 30 years now, readers have recognized their own situation in this fictional story. This flash of recognition is the hook drawing you deeper into the TOC world.

The first statement that TOC makes is that every system has one bottleneck tighter than all the others, in the same way a chain has only one weakest link.

According to TOC: At any point in time only 1 thing is holding your startup back.

For some systems you can see it plainly: the cars always slowing to a stop in that same section of freeway; that doorway in the office where everyone’s paths seem to converge; that one curve of your plumbing that you can’t seem to keep unclogged.

For other types of systems, it’s less obvious. It helps to broaden the concept from bottlenecks, which describe material flows, to constraints of any kind.

What is the constraint preventing a coffee shop from serving more customers? It’s not the size of the doorway. It could be the rate of cappuccino preparation, the speed of credit card approval, or the number of people wanting coffee in that place and time for that price. It’s not always easy to tell where the constraint is actually. But we know it’s there, or else the shop could serve an infinite number of customers at infinite speed.

Fact: Lack of growth is always the bottleneck in startups because (according to YC) startups are growth.

What is the constraint keeping the human body, let’s take Usain Bolt’s for example, from running faster? It could be his body’s ability to metabolize glucose or oxygenate his muscles; or his shoe’s grip on the track surface; or a limiting belief somewhere in the depths of his mind.

YC will often asking you, what is preventing you from growing 10%/wk? This is the same question as above but for startups.

Clearly, it gets even harder to find the constraint once we enter the world of the abstract, the psychological, and the immaterial. But we’re getting ahead of ourselves.

The second statement is that the performance of the system as a whole is limited by the output of the tightest bottleneck or most limiting constraint.

In other words, if the water in a pipe is slowed down to a trickle by a narrow section, the outflow at the end of the pipe will be no more than a trickle. This one is harder to see intuitively, because it is obscured by the messiness of the systems we typically interact with.

That coffee shop cannot serve customers one iota faster than the speed of its cash register (if that is the constraint). Usain Bolt cannot shave one microsecond off his time without increasing his proportion of fast twitch muscle fibers (if that’s his most limiting constraint).

The third statement follows from the first two , but is the hardest to swallow. It is the red pill of TOC: if the first and second assumptions hold, then the only way to improve the overall performance of the system is to improve the output at the bottleneck (or more broadly, the performance of the constraint).

STARTUPS WITHOUT GROWTH AREN'T STARTUPS SO NOTHING ELSE MATTERS.

Using the coffee shop example, if the most limiting constraint is the cash register, literally nothing else will make a difference to the bottom line except an improvement in cash register speed. Not better customer service, not higher quality food, not better interior decoration, not faster WiFi or cleaner bathrooms or stronger coffee or any one of the million other ideas we could come up with in a freewheeling Design Thinking workshop. Any improvement not at the constraint is an illusion, for the same reason there’s no way to strengthen a chain without strengthening its weakest link.

Now think about how a typical company operates. The CEO announces it’s time for the company to improve. That command gets translated down the ranks, each manager impressing upon his team the importance of their individual efforts. Each person hears what they want to hear: the accountants understand that they must improve the usefulness of the books they keep (with each person interpreting “usefulness” differently). The software devs nod in agreement that better code is crucial (with each person interpreting “better” differently). The marketing people agree that more creative promotions are the only solution (with no one bothering to define “creativity”).

Why are VC's focused on preventing the corporate traps above? Because it is the default state of work. To grow, you must fight it fiercely and focus on removing the constraint on the whole system.

Each person marches off on their personal mission, nose to the grindstone, performance bonuses on the horizon, without realizing that their collective efforts imply a management philosophy:

Local improvements everywhere automatically translate into the global improvement of the organization.

WHY AREN'T YOU WORKING ON GROWTH YET? Because whatever is preventing growth is obviously the hardest thing to do. But, the hardest thing is the most valuable and the most valuable thing is the most important.

John Maynard Keynes once said, “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

What if this implied management philosophy was dead wrong? What if, by believing that we can improve a system as a whole by individually improving each part, we are living and working according to an economic paradigm that has been defunct for decades?

That is what the Theory of Constraints proposes, and the problem it seeks to resolve.

In conclusion, the hardest thing is always the most important thing and the most valuable thing. For startups, this is growth. Startups are hard because startups are growth and growth is value!

If you enjoyed this commentary please shoot me an email response and let me know! If you did not like this or felt it was confusing please let me know as well.

How to Understand Statistics with Sports

A practical and easy guide to understanding the most valuable statistical concepts

For a long time, the core ideas of statistics escaped me. Probabilities? Things either happened or they didn’t. Like many, I believed if there was an 85% chance of something, it might as well have been 100%. If the opposite outcome occurred, it was because statisticians were wrong and stupid. Unfortunately, I was the one who was wrong and stupid. I hadn’t yet internalized the key ideas that made statistics valuable. Without truly understanding these ideas, I was a man using the handle of a hammer to hang pictures. What I was doing didn’t make any sense.

I was blaming the tools because I didn’t understand how the tools worked.

By watching the sports I love, I slowly began to understand statistical tools through practical examples. Over time, I began to understand the value of probabilistic thinking. Despite seeming elusive, it was my love of sports that began to illuminate statistical concepts. For example, when a basketball player who typically shoots 33% starts a game shooting 3/3, does that mean he’s now a 100% shooter? Well, not really. We haven’t seen him shoot enough shots to have a representative sample. What’s more likely is that if he keeps shooting, by the end of the game his make percentage will be much closer to his typical shot percentage.

Over time I began to realize that most people understand stats. This simple example shows how you already understand many statistical concepts. It contains core concepts like variance, the effect of small sample sizes, and averages. What many people didn't have was a simple vocabulary to describe what they were seeing. For something to stick in my brain, I need a practical example of the concept. Not a lofty academic definition. The guide below contains simple, concrete examples of statistical concepts that you can use and reapply to every area of your life. With applications in sports and business, you will be able to wield powerful statistical tools without utilizing significant mental horsepower.

Why Stats

  • Helps us form reasonable expectations

  • Consistent way to change expectations when conditions change

  • Scientifically measure and analyze performance of new tactics

Why Sports

  • We can visualize and experience the concepts with something we’ve know instead of charts and graphs

  • Sports are extremely popular all across the world

  • Easy to analyze and measure because of clear game rules

Why Business

  • Valuable (You can make money!)

  • Visible (Almost everyone works for a business!)

  • I like it (so the examples are easy for me to come up with)

How it Works

Here’s a guide to navigating this blog. Each section will cover a statistical concept and include a sports and business example. It’s easiest if you read it in order but not required.

Here are the statistical tools:

  • Expected Value

  • Variance

  • Net Net

Here are strategies using the tools:

  • Shots on Goal

  • Barbell Strategies

  • Trade-Offs

Disclaimer: This guide is about practical, not theoretical stats. That means some of the terms used are my own terms to help you understand the idea behind the concept better.


Expected Value

Core Idea:

Expected value tells us what value to expect! It sounds crazy, but it's just that simple.

If James Harden takes 10 three-pointers at tomorrow’s game and he typically makes 40% of his 3’s, we can expect him to earn 12 points from those shots (.4 * 10 shots * 3 points per shot).

Why this matters: We can make expectations on how many points we can or should have scored based on who shot what shots, where, and how many times.

Expected Value in Business: Predicting Sales

If we have a business and we want to close 10 customers and we have a 10% close rate, we need to reach out to 100 customers. Anything less than that then we can infer we got lucky, we are dealing with a different population, or our process improved. Expected value gives us a framework to form reasonable expectations about future events.

Variance

Core Idea:

Sometimes you're hot, sometimes you're cold, but over time you converge on your average. Just because you’re a 33% shooter, doesn’t mean you always make one shot and miss the next two.

Why this matters: If someone makes 3 shots in a row, you shouldn’t expect that result to continue forever into the future. Their performance varies over time converging on their average production.

Variance in Business: Stock Volatility

In investing, the stock price varies nearly every second of every day. If stats help us form reasonable expectations, when observing a stock that moves up 1% today, can we expect a stock to grow at 1% every day? Once again, the obvious answer is no. An infinite number of factors could've driven this price change. What explains this non-linear phenomenon? Variance (or in business parlance, volatility). Volatility basically means that we can expect that even though a stock might grow 15% a year, we cannot expect this to be a smooth, linear ride to y*1.15. While this isn't the exact academic definition of volatility, it's close enough to help us form reasonable expectations.

The key point with volatility, expect the unexpected.

Net Net

Core Idea:

Taking the difference between two values may not reflect the true impact. Sometimes you need to take the difference between the two options to understand what is going on. Net Net is when we take the difference of a difference.

If Draymond Green is a 30% 3 point shooter and Steph Curry is a 40% 3 point shooter, Steph is not a 10% better shooter but actually a 33% better shooter! (Net Net)

Why this matters: This means that over 100 shots, Draymond will earn 90 points, and Steph will earn 120 points (a 33% gain!) because he is a 33% percent better shooter Net Net.

Net Net in Business: Deciding where to invest

Today, many active investors must convince LP's to give them their money by outperforming a set benchmark. Let's call this benchmark the S&P 500. Let's say the hurdle rate (rate at which investors must outperform to see a result over the S&P hint: it's got net net built in) is 7%/year. In this example, active investors must not only make 6% per year, they must also net something greater than that to get an investor to invest in them! This means if you pitch a 9% yearly return, you're not pitching a 3% improvement but a 50% increase in their return! How?

If I give you $100 and it returns 6% that leaves us with $106. If I give you $100 and it returns 9%, that leaves us with $109. (9-6)/6 = 3/6 = 50%!

This concept may be counter intuitive but it's very powerful in games that are very competitive (like basketball and finance). When percentages are small, small changes can mean huge net net gains!


Shots on Goal

Core Idea:

Shots on Goal comes from the world of soccer. It’s a strategy to employ when our shooting percentage is predictable and has low variance. When you employ this strategy, you expect to win by simply taking more shots.

Why this matters: If a certain shot does not decrease in expected value over time or frequency of use, we want to maximize our “shots on goal”. This means sometimes to have the best shot at winning, you have to shoot your best shot over and over and over again. You’re likely to have a greater total of missed shots per game, but this is okay.

Shots on Goal in Business: Increasing Sales

Shots on goal tightly relates to the framework of expected value. If we have low variance on our close-rate, we can reasonably expect that increasing the number of reps should create outcomes in lockstep. For example, if we close at 1%, and currently outreach 100 prospects per week, we close 1 customer per week. If we're highly confident about this 1% figure, doubling to 200 outreached prospects per week means we can expect 2 customers per week. Now the catch is these are small values and there IS variance in most systems like this one but this is simply to let us know over a large time frame if we're on track or if something is wrong.

Barbell Strategies

Core Idea:

Sometimes combining two extremes is better than playing the average.

The Houston Rockets are a perfect example of a barbell strategy. Instead of trying to be able to shoot every shot on the floor, they are highly selective about which shots they take. They want to maximize the number of open 3's, layups, and free-throws. Why? Because these shots have the highest expected value. They barbell high value shots (3's) with high percentage shots (layups and free throws). Together, it makes for one of the most efficient offenses of all time.

Why this matters: Going head to head with an opponent and matching strategies works for dominant teams. For underdogs, it may make sense to try to go to the extremes of the distributions to find out-performance.

Barbell Strategies in Business: Google’s Moonshots

Google executes on a barbell strategy. They have on extremely consistent and profitable product, search ads. Then they take large chunks of their money and distribute it to "moonshots". These moonshots have an extremely low probability of success, but the nature of these projects are that they must have the potential to become the next search ads if successful. Why would companies do this? Because once you reach a certain size, a million dollar return on a project does nothing. The hurdle rate to continue growing is so high it nearly necessitates taking moonshots.

Trade-offs

Core Idea:

Once we understand variance, expected value, and net net calculations, we can make intentional trade-offs on what we can and can’t accept.

Take a look here to see one of the best sports game plans of all time. As a defense, we can determine which shots and areas of the floor we want to protect. We cannot be everywhere all the time, and that means sometimes people are open.

Why this matters: We can strategically select which shots from which areas from which players are below a certain threshold (kind of like an inverted hurdle rate) and intentionally allow the offense to shoot these shots!

Trade-Offs in Business: Where to spend our marketing dollars

Trade-offs inform us of what we’re giving up when we employ a particular strategy. Using expected value, we can attempt to quantify what strategy is best. For example, if we have $10,000 to spend on marketing this month, how should we distribute it over the following 3 strategies?

  1. We spend all $10,000 on Facebook ads that have a 99% chance of returning us 1000 sales of $20 product.

  2. We spend $10,000 on a print ad that is expected to return us 500 sales on a $50 product, but has a 20% chance of returning 2000 sales.

  3. We spend $10,000 on a billboard that is expected to generate 200 sales on a $20 product but has a 1% chance of being placed next to a valuable property that would generate 50,000 sales.

With the first strategy, we are giving up a potentially greater outcome for the near certainty of performance. The second strategy is high variance but still can generate a significant return on our investment. The third strategy is essentially a moonshot. More often than not you lose your invested money. Will that 1% make it worth it? How certain that it’s actually 1% and not 0%? How long can you stay in the game and not run out of money? These are all trade-offs you must think about when considering where to spend your marketing dollars.

Now these examples are a bit far fetched, often you can distribute your dollars to many different channels. What’s important when deciding this is understanding what you give up by not choosing a strategy.


Putting it all together

Most importantly, when we understand these tools, we can build strong strategies. Integrate these tools into your everyday thinking and have a profound impact on your outcomes.

If we take the expected value of every player, we can compare their production levels net net! Using this, we can make trade-offs on who to defend and where on the court based on their shot selection. If certain players are outperforming in a game then it’s likely that they’re having a high-variance game, and/or an adjustment needs to be made to combat this.

We use the same tools to model and measure our sales team’s performance, what is going on in the stock market, and where to invest our money. Using examples from different domains, we begin to find patterns everywhere.

Learn the tools once, apply them everywhere. Go use these tools to make great decisions!

How to Compete and Win

The best resources on strategy

The other day I was speaking with a friend who expressed an interest in business strategy. I collected some of my favorite books, sites, and podcasts to share with him. This is a lightly edited form of this list. Most resources are oriented towards startups, investing, or sports. I’ve also included a crash course with just 4 short resources that should get you 80% of the way there on strategy. If you enjoy those then you can find all of my favorite strategy resources below.

Strategy Crash Course:

“Work as hard as you can. Even though who you work with and what you work on are more important than how hard you work.” - Naval

Watch This: This is Water - Perspective on how to live

Read This Thread: Naval, How to Get Rich - How to Get Rich

Read this Speech: Mirrored Reciprocity - A foolproof framework for interacting with the world

Read this Book: Antifragile

That’s it! If you enjoy those then you will probably like the list of resources below.

All Resources

Sites

“We all believe that we are at the precipice of an enormous crossroad in American politics. But what if it’s not a choice at all? What if the choice has already been made for us?” - Epsilon Theory

Stratechery - Tech Strategy

Farnam Street - Mental Models

Epsilon Theory - A Unique Perspective on Finance and Politics

Paul Graham - The definitive guide to startups

Threads & Essays

“Every single other person in the whole world, has this list in their head – trustworthy, principled, courageous, competent, loyal, kind, understanding, forgiving, unselfish, and in every single one of your interactions with others, be the list!” - Mirrored Reciprocity

Naval, How to Get Rich - How to Get Rich

Mirrored Reciprocity - A foolproof framework for interacting with the world

pmarca - On Startups, Strategy, & Productivity

How to Make Wealth - Wealth

Keep Your Identity Small - Identity and influence on thinking

Sam Hinkie Resignation Letter - Prescient and Powerful

Career Advice - Best of the Best

The Days are long but the decades are short - On time horizons

How to be successful - Quick guide to progress

Dennis Rodman and the art of portfolio optimization - Investing strategy through basketball strategy

Steve Yegge - The differences between Amazon and Google 

Books

“Curiosity is antifragile, like an addiction, and is magnified by attempts to satisfy it—books have a secret mission and ability to multiply, as everyone who has wall-to-wall bookshelves knows well.” - Antifragile

Poor Charlie’s Almanack - Mental Models, Psychology, and UnCommon Sense

Antifragile - Non-linearity, practical stats, and payoffs

Winning Ugly - On tennis and how to win as an underdog

Podcasts

“Failure comes from a failure to imagine failure - Josh Wolfe, Invest Like the Best

Invest Like the Best - Incredibly insightful conversations

The Knowledge Project - Mental model

Venture Stories - Fresh takes on startups


Email me your favorite sites, books, and podcasts on strategy!

Entropy, Power, and Models

Power is derived from harnessing entropy.

Power is derived from harnessing entropy.

The most powerful technologies (letters, numbers, printing press, computers, internet, science) harness the power of replication.

While global entropy increases, all technologies are simply local entropy sinks. These are places where you can implement a new framework to wash out unpredictability. The creation of local entropy sinks is the key to value, to power, to knowledge, to control. The reduction of randomness is critical to our progress as humans and allows us to make reliable changes on an abstracted layer above an unusable layer.

“All models are wrong some are useful”

New technology does not have to map to perfectly to reality. New technology simply implements a slightly more accurate framework, or a framework with a more favorable distribution of outcomes. Unfortunately, many times we mistake the most accurate map, or the most reliable map, for the final map. It would be wise for us to remember how far away from the final map we are in nearly every domain.

Applied Problem: Survivorship Bias

“Napoleon is reputed to have had a profound insight into the human soul; Shakespeare also. And their vision has nothing in common.” -Shestov

Most successful entrepreneurs swear by fairly different heuristics and give different advice. Less successful people say that you should ignore all their advice due to an idea they made up called “Survivorship bias”. While the term is real, it has been consistently misapplied. In business, you can now read that term as “I don’t know why they succeeded, but rest assured, I’m certain their advice is unhelpful”. 

Survivorship bias can safely be ignored most of the time. All the successful people ignore it.

In actuality, we’re so far removed from the final map that even tiny reductions in entropy seem to produce outsized results. Those who refuse to use models never succeed because the underlying layer is far too complex to be usable. You need to operate on an abstracted layer. Is inverting every problem the key to it’s solution? Unlikely, but it reduces the entropy enough to focus the mind onto the highest impact elements. The consistency of this process allows the odds to increase significantly enough to achieve desired outcomes reliably. 

Collect Models, Harness Entropy

This is why a wide collection of mental models is so valuable. It consistently minimizes the variables that could go wrong and has been stress tested by many others. Your multi-model testing is stress testing the next abstract layer. While the situations may change, the models may change, you can choose chaos or simplicity. Only one produces reliably.

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