Founders at Work by Jessica Livingston

These are my notes from Founders at Work by Jessica Livingston. Each one contains a core idea from the book that stood out. The goal of writing my notes this way is that each could be it's own independent idea with the need for the specific context within the book.

The Skill of Reverse Engineering

A permanent skill is the ability to reverse-engineer works and outcomes. Steve Wozniak's best work came out of things he never did before. His skill was understanding the desired end result and getting it done. Steve wasn’t skilled in how to design a floppy disk printer interface, or how to get a computer to read certain types of data. When the time came for it to be done, he reasoned from first principles—designing his own from scratch without knowing the “right” way others did it. Burrell Smith, an early member of the Macintosh team, was the same way. He didn’t go to college but he was one of the best with circuits. His success was the result of reverse-engineering what others had done to be able to build new things on his own.

Appear Big, Act Big

Tim Brady had been working his ass off at Yahoo. He was wearing multiple hats, one of which was their PR guy. When Jeff Mallett joined Yahoo's board, he took a look at the professionally bound PR kits Brady put together. “This is C+ work,” he said, passing Brady off. Mallett said, “If we're going to appear big, we'd better act big... I know you're working hard, but it's not an excuse for putting out something that looks like a startup.” They started doing two red-eye cross-coast trips before each meeting. Same team, same day. This went on for 3-4 months straight. Finding the energy to double the work they were previously doing was a step up in effort and professionalism. Being everywhere all the time made Yahoo look bigger than it was.

The Bus Comes Back Around

Any screw-ups Yahoo made in their first year of operation, they recognized them. There were so many mistakes they got good at correcting them. Jerry Yang and Tim Brady had dinner with Sabeer Bhatia and Jack Smith, the founders of Hotmail. Yet they let the opportunity pass. They didn’t believe it would get big. People got their emails through work. The possibility of personal emails never occurred to them. They saw no real demand. Clearly, this idea was wrong. When they realized it, they went out and found the #2, Rocketmail, and bought them. It took work, but eventually Yahoo became bigger than Hotmail.

Breakthroughs Come From Benders

The Apple 2 was the first computer that came with a keyboard and video display. Apple II was the third. Today it seems hard to believe, given how normal laptops have become, but during the early days of computers, the Apple II shocked the world because of one thing: its hard color. It also required half the chips of the Apple I. Something that seemed impossible to do. The breakthrough idea that lead to the creation of this came to Steve Wozniak late one night. He recalled that moment saying: “I had been up four nights all night long. Steve [Jobs] and I got manic... because your mind gets in this new creative state and it thinks of ideas that you normally just throw out.” Hands down, working on one problem for 4 days, he came up with the idea to use a little cheap (>$1) part to take the data and produce color that looked like a TV. It was their bender to come up with a solution that lead to the creative breakthrough.

Simpler Is Better

When you're building something, you have very few resources in the beginning. Everything you put time or money into has more cost than just the financials. The simpler you make it, with less parts, the cleaner and more orderly it becomes. An entrepreneur’s job is to optimize things. Every time you save on parts, you save on complexity and reliability. It’s much easier to understand. The secret to Apple’s success was to make products not as good, but with less. This was a mentality that came from Steve Wozniak’s desire to simplify a computer (which cost as much as a horse) so that he could own one. Every decision you make on how to build your business you must live and sleep with. The simpler the decision, the easier you can rest at night.

Mental Reps

During high school, Steve Wozniak would design different types of computers for fun. When asked why he designed those computers over and over again he said, "I could never build one, all I could do was design them on paper and try to get better and better." It was because he couldn't build himself a computer that he took to mental reps. His skills got so good because he was constantly competing against himself. On paper he created a design no one else had done because building it was risky and most people wouldn’t use it. These ideas couldn’t be taught in schools. Using the only resource Steve had, his head, he was able to take the mental reps required to learn and teach himself.

Luck Is Seeing the Signs

Both Peter Thiel and Max Levchin say they got lucky with PayPal's success. There were a lot of things that could have ended the company, but they did something about it. Max says their luck was not in doing the action, it was in seeing the signs. While building the company they could have been too tired to solve the problems with urgency or saw the problems as too looming. Their luck came from seeing PayPal's issues for what they were before it was too late to take action.

Innovate on the New Problems

Paul Buchheit's (the guy who built Gmail) favorite question was: "Does that apply to us?" Before joining Google he knew nothing about building large systems. Every technique used to build and scale was reused that could be. There were already successful models available that could be copied. The challenging part was knowing when to innovate. Copying only creates systemized success. Innovation drives undiscovered value. When the problem they were solving became fundamentally different that's when it became time for them to do something new.

Make the Nerds Geek Out

What moved the needle for PayPal in the early days is that the product made nerds geek out among each other. Instead of taking out $5 to split lunch, they sent it over the Palm Pilot. It was so different that people would think "Wow... This is the future." Tech geeks wanted to feel like they were in the future, and it gave them that feeling. When the nerds geek out, it creates a cult-like attraction. The idea and product of PayPal spread like wildfire. They got so much free attention. Much like Steve Jobs mastered with iPhone releases.

Scarce Skills Build Opportunity in Complexity

Max Levchin was really into security and developing software for handheld devices. It was a scarce skill combination in the 1990s. He described these skills as "sort of an art and science unto its own." His assumption was that enterprises would build and use handheld devices as their primary communication — pretty right today. The demand for cryptographic-type operations was growing too complex and poorly understood at the time. No one really wanted to dig deep into it because of this, but Max started reverse-engineering what existed. He wanted to combine his scarce skills to start a company encrypting handheld devices. Those niche skills were what birthed the beginning days of PayPal. All developed based on a hypothesis for how the world would move.

Be a Designer

Steve Wozniak was a part of the Homebrew Computer Club before launching Apple. Everyone could have been an entrepreneur in the club. Few became one. Most of the people involved were software people that had no hardware background. To a genius like Steve Wozniak, this made him feel behind. He was still tinkering with the hardware designs. The rest of the people in the club were technicians writing stuff, analyzing it, and spotting wrong configurations. Steve realized why most of them never became entrepreneurs despite having all of the skills to do so. They were electronics and software people, not designers. Designers sit down and design new things.

Your Zone of Operation

Tim Brady was the first non-founding hire at Yahoo. He was a large part of their success. But his background was never in tech. When asked about his mixed background in engineering and business, he said his success came from knowing what he knew and what he didn’t. To have success in any role, you need to understand your zone of operation. What is the thing that only you can do? Your zone of operation tells you what you’re good at. But also lets you know when you should ask for help because you don’t know what you’re doing.

Take Time to Seek Excellence

Always seek excellence. Make your work better than average. Stop and think, “Can I make this better? What would make this superior?” Taking time to slow down and think about these questions may not make the work any higher quality, but it gives you a better understanding of the work you are doing. The vision you’re working towards gets more solid. These two questions will seep deep into you subconsciously. The desire to make your work better than average will constantly run in the background. At random times, you’ll receive ideas you never thought of that will make it stand out from among the crowd. It’s easy to whip something up, check all the boxes, and call it done. What’s rare is giving the work the time and attention to seek out excellence.

Industry Framing

Max Levchin used to describe PayPal as "a security company pretending to be a financial company." They judged the risk of a transaction and decided which risks to take on. Having this frame of reference gave them a competitive advantage. They realized fraud would be their biggest issue and came up with ways to attack it on their own. Startups failed because they viewed themselves as payment processors. The fraud became too much for them to handle. Banks failed to compete because they didn’t have the same framing on fraud too. PayPal’s approach was “fraud is going to kill us. What can we do to save ourselves?” While banks fumbled with fraud and said “How can we build this and not let fraud in?” The banks’ framing limited their views, while PayPal’s forced innovation.

Set Your Breaking Points

Part of being in a startup is knowing yourself. You do as much thinking as you can up front, freeing you up to do better work later. You need to know what your breaking points are. Knowing these keeps you from quitting or going through doomsday scenarios. A breaking point draws the line. You know when you'll quit. At what point that will be. Then you can focus on the game you're really playing. Doing the thinking up front removes the emotions when you’re getting in. When do I leave? Why do I leave? What gets me up in the morning? What could stop me from getting up? This matters for the bigger picture. It shifts you in the abstract way, not in the day-to-day work.