I’ve been re-reading my Occam’s Paradox post as well as the comments and trackbacks (which are excellent – please click through them if you have a minute).  I fell a little short of really saying what I originally intended for the post, which was that I think that we have a tendency not only to make things more complicated than need be, but also to focus on too many things (and therefore the wrong ones).  As a result we try to assimilate too much data to make decisions (not recognizing the massive diminishing returns on this effort) and try to pay attention to too many things.  I wrote a post a while ago about trying to cram too much information into financial models that argued that more complex models are not necessarily better or more accurate.  I’m realizing now that I’m connecting the dots here that this is exactly the type of behavior I’m talking about in Occam’s Paradox. [By the way, there’s an entire post to be written about how VC’s play into this in their decision making (how many customers do we need to talk with, how many models should we run, etc before we make an investment decision?) – but I don’t think I should go there in this post].

I came across two posts that I wanted to bring your attention to that speak to this general subject area and that are both worth taking a look at. The first is “Decision Making” by my fellow VC Blogger Will Price (be sure to click through this blog to the link for the Bastardi and Shafir paper – On the Pursuit and Misuse of Useless Information).  The other, Focus is the New Black, is by Paul Kedrosky.  The title speaks for itself – it’s a great read.

Please keep the comments (both public and private) coming – I’m enjoying this thread very much.

Remember Occam’s Razor? It’s the principle (that you probably learned in high school physics) that states that the simplest solution to a given problem is probably the best.  I’ve been thinking recently about complexity in business and in life and think there’s a corollary to Occam’sRazor that perhaps should be called Occam’s Paradox – the propensity of humans to make things more complicated than they need to be.  I don’t pretend to know why this is, but I notice it all the time (both in my own life and with other people).  I guess it’s just easy to start down the road of dependency mapping (i.e., making everything you do a part of a larger matrix that has many interdependencies).    I watch this tendency in the companies I work with as well. Lots of dependency mapping; lots of “if’s”, “but’s” and “its not that simple”.  Now – I get that life and business are complicated.  But I’m talking about how we react to that complexity.  We have the choice to either drown in complexity or to cut through it, because although the challenges we face in life and business are clearly complex – the solution to those challenges generally are not (generally the difference is in recognizing what you control and what you don’t control and not wasting a whole lot of time on the latter – perhaps a subject for a future post).

Keep that in mind the next time you are sitting around the board table or at a management meeting (or at dinner with your family) and see if you relate to it (let me know).

Today is the 36th anniversary of the first moon landing (July 20, 1969).  Moon’s almost full, so you’ll get a great look at it.

Google put up a moon site recently – www.moon.google.com.  Be sure to zoom all the way in <g>.

John H turned me on to a post from Investments and More titled VC’s – Top Brass Solid, Others Not (“wow – someone taking the glam out of the VC world,” he writes).  I actually found his post pretty amusing. While I think a lot of people at venture firms are fantastic (law of natural selection, I guess) there are, of course, some that are better than others. What Steve’s post did bring to mind was how important it is to recognize that when you take on an investor you’re taking on an individual more than you are taking on a firm. Some firms have more cache than others, but at the end of the day as an entrepreneur you work with a person, not a fund.  Sure, individual partners get to call on the expertise (and rolodexes) of the other partners in their fund, but firms don’t attend board meetings or strategy sessions, give feedback or pick up the phone to talk with you – an person does.

VC’s talk a lot about the importance of investing in great management teams.  Investing from this side of the table is as much about the individuals you bank on as the company. Seems like the opposite should be true as well.

Brent wrote in recently to remind me that I wrote in M&A Part I – Lines in the Sand that I’d talk a bit about changes in my negotiating style over time. I actually interested to hear if other people have had similar experiences, because what I’m about to describe both seems like a natural progression and might also be termed ‘growing up’. I had an odd introduction to more formalized negotiation a few months into my first corporate job after leaving Wall Street. The company I worked for decided to embark on a few acquisitions and I was assigned to work on these with my boss who was the head of the business development group.
Eventually we settled on our first deal and, after negotiating the purchase price, my boss turned to me and said something to the effect of “go get it done.” Disappointed that I didn’t get to participate in what I thought was the real action I accepted my role as the grunt on the deal and started work on processing the deal. Much to my surprise at the time it turned out that negotiating the price was about 5% of the actual deal and there were lots of other terms to be worked out. I had the great fortune of working with an outstanding lawyer (who I’ve since done several dozen deals with over the years) who took sympathy on this (at the time) 23 year old who knew nothing of either negotiation or m&a deals. My initial negotiation style arose out of these circumstances and was at the same time defensive (I didn’t want to admit when I didn’t understand something – which happened pretty often – and I understood nothing of the nuance of the terms I was negotiating) and brash (I didn’t fully understand the give and take nature of negotiation and thought I needed to ‘win’ on everything). I learned quickly (and in a few cases embarrassingly) that this style wasn’t going to get many deals done, but in thinking back on this period of my life realize that I maintained a somewhat brash style to negotiating deals (both m&a and business development) for quite a while (my original boss was promoted and I ended up working for someone who was more involved in the day-to-day details of the deals we were doing but who was also very harsh in his personality and negotiating style, which I think I picked up to some extent).

This style didn’t fit me very well, however, and by the time I was running an m&a group in the late 90’s and, importantly, operating in a much more competitive m&a environment, I had softened my approach quite a bit. Realizing as well that I possessed much more knowledge about the terms that I was debating with business owners whose companies I was purchasing (I’d learned a few things over about 20 deals at that point) and that the perspective they were getting from their lawyers was not always particularly balanced I also discovered the benefit of both negotiating for a ‘fair’ deal and taking the time to both fully explain my position on an item and to listen carefully to theirs (in my earlier days I would sometimes say things like “I can’t do that, because I just can’t” and in some cases draw a line just because I felt like seeing if I could get a term to swing my way; these days I’ll almost always provide my rationale and generally only pick a handful of terms that I really, truly care about to discuss).I still modulate my style some, depending on the type of deal that I’m working on (m&a exit vs. m&a where we’re still investors vs. financing, etc) and also in response to the person I’m negotiating with but I generally find a congenial approach to both lead to best results (including a higher probability of getting deals done) and causes less stress and brain damage (which is important to me; life is too short to have a heart attack over a deal term).

I actually find it pretty amusing to think back on how little I knew when I started doing this . . . which is a good reminder of how I’ll probably feel when I look back on today 10 years from now . . .

I sit through a lot of board meetings and while they are a great time for a company to harness the expertise of the people sitting around the table, they need to be structured and managed in such a way to actually accomplish that (i.e., effective board meetings don’t just happen – they are the result of planning and careful management).  I sometimes joke with my dad that it must be tuff to get a word in at his board meetings given the powerhouses around the table; he just laughs and tells me that they prepare for their board meetings carefully.  In actuality, I think he get a huge benefit out of his board – as do many of the companies I’m involved with – by doing exactly that.  Here are a couple of quick thoughts on what that kind of planning and preparation might look like. Send out the board package in advance (a week is great; minimum is a couple of days). This allows you to set up an expectation with your board that they will have all read your board package carefully (which they should do, but won’t always be possible if they get the board package at midnight the night before the meeting).  The board package should be comprehensive and cover updates from each department. Include a CEO letter or overview at the beginning of the package.  This gives you the chance to set the tone for the meeting – setting up topics that you plan to dig into deeper and asking people to think about certain areas of the business for further discussion at the meeting.  Since the board package is also probably pretty thick and full of data this gives you the chance to set the lay of the land for the board (very helpful) and point out specific things that you’d like to highlight in the package. Do not review the entire board package at the meeting.  If you are sending out your board package in advance of the meeting and the package is comprehensive by department you should not feel the need to review the entire package (since everyone will have read it).  Pick the highlights you want to cover; point out specific items that you’d like to bring the board’s attention to (presumably you’ve done this in your CEO letter as well); ask if there are any questions about the material.  But please – don’t spend hours at board meetings reading every page of the package; if you work up a separate presentation to guide the board meeting itself, don’t feel like you need to stop on every page. Many of our companies like to focus on one strategic area of the business at each meeting and prepare a separate presentation to guide that discussion.  I think this is a great idea. Make the presentation no more than ½ hour and be sure to make it strategic rather than tactical in nature.

Ask for help. Tell your board what you’d like from them. Be specific about ways they can help.  If you need help with contacts be specific about who (or what titles) you are looking to meet (i.e., “we need contacts at potential customers” is not helpful  – “we’re looking for a senior contact at xyz company for the following reason; I’ll send out a summary of where we are and what we’re looking for” is). If you are asking the board to vote on something, put all of the votes together and provide the right level of detail to make decisions.  Putting all of your board ‘business’ into one section of the meeting helps streamline board meetings, as does including the appropriate level of information (for instance, if you are asking for approval for stock option grants be sure to include the % of the company people are receiving, the proposed vesting schedule and highlight anyone who is out of the bands the board has already approved; you should also include the total number of options in the pool and the total number remaining after the issuance you are asking for).  If you’ve done extensive research on a topic and have a recommendation, put a summary of the issue and the recommendation on the same slide (and put the recommendation on paper – I find that when companies don’t do this, the discussion tends to ramble and isn’t focused on all the work that has already gone into researching the problem). Include your management team. I don’t like when companies shuttle management into and out of meetings – it’s disruptive and frankly I think that management teams should participate in the operations update for all departments – not just theirs.  To do this effectively, start your board meetings with your operations updates and cover all topics that are appropriate for management to be included in, then ask them to leave to cover other board business, option issuance, etc. Don’t introduce new info at the board meeting. It’s much harder to react to surprises on the fly.  You should include data in the board package or preface a topic you’d like to cover in your CEO letter (and if you can’t do either of those for some reason, give each board member a heads up before about a topic that you’d like to cover or about a piece of news that wasn’t included in the board package. Every board meeting should have an executive session of the non-management board members.  This is a time for the investor and outside board members to talk about their impressions of the business and react to the board meeting.  Do this every time – even if there is nothing to talk about (so that when there is something to cover it won’t be awkward).  To use this effectively, make sure your board has a specific plan for communicating back to you from this meeting (i.e., have a standing meeting with the board chairman; ask the board to appoint someone on a rotating basis to debrief, etc.) – you shouldn’t be left in the dark about this section of the meeting and they should be used to gather feedback from the board (who probably never talks as a group outside of this session of the board).

Brad had a nice post on the subject of board meetings here.  There are others floating around the blogsphere as well (if you do a Technorati search, you’ll find a bunch of them).

Hope that’s helpful. Comments/thoughts are welcome.

Here’s some stuff I’ve been playing with that I’ve been meaning to post about: First is MyBlogLog, which tracks links people follow from my blog site.  It also tells me how many page views were served from my site. Since I serve full feeds this doesn’t capture all of my link traffic (I miss everything that isn’t clicked directly from the site itself), but I get enough direct site hits to extrapolate these data to my subscriber base. If you want you can also put up a chicklet on your site that shows your most popular links.  It’s easy to set up (you have to embed a small amount of code on your site) and intuitive to use.  Some more flexible reporting and perhaps different UI for reports would be helpful, but I’m sure Eric is working on those.  If you blog and you care about user stats (what am I saying – all bloggers care about their user stats!) this is a great tool to have.  I’ve written a few posts (here and here and here) that reference better ways to view information. While the UI of TagCloud is pretty lacking its still a HUGE step in the direction I’m talking about.  You can point a bunch of blogs to this tool and it will pick out the overlapping words.  Yah – this needs a NLP engine to really be useful and pull out full concepts rather than single words.  Still it’s a great idea. Now they just need to make it look more like this. (thanks to Walker for pointing me to this site)

Last is Smartfeed which unfortunately I can’t play with directly because I’m lame (of course you already know that) and have an old, monochromatic, can hold phone numbers and play some stupid ‘snake’ game but not much else, phone.  I met Kevin Cawley who wrote it, however (he lives in Boulder and he let me play with it on his phone).  It’s an interface for downloading podcasts onto Windows Mobile Edition powered cell phones. I’m starting to get more on the podcasting bandwagon (at least for some things – by the way, Newsgator released a podcasting client that rocks and that I’m now using as my main podcatcher) and as soon as I upgrade my phone I’m all over it.

Any other cool stuff out there?

Even though I’m getting older I still like to think of myself as at least a little bit cool (although I’m sure there are many people who would set me straight on that one).  As a result I was a bit dismayed this weekend to read an amusing article in the Times that clued me in that – at least in my choice of cars – I was not as cool as I thought I was.  In fact, the Land Rover that I drive is pretty close to the “Stodgy” end of the cool meeter and in the same category as Chrysler and (gasp!) Oldsmobile.  As the kids would say these days: “Not so groovy!”

i can’t tell you how much safer i’m feeling now. i’m writing this on a flight from denver to chicago (on my danger sidekick, by the way). i almost inadvertantly took aboard an allen wrench set (in my bag from when i rode my bike to work last week and perhaps the most blunt object in my bag). the fact that i somehow got it with me to chicago in the first place aside, i know i’m much safer now that its been confiscated (apparently under the ‘tools’ clause of the tsa’s list of banned items). if not, right now, someone could have taken the set and be using it to LITERALLY dismantle the plane. . .

i’m glad to know that sending penguins through security is not distracting them from checking for these sorts of things!

Josh Kerbel wrote me with a good question to my Networking 101 post and my follow up post to that one Here’s how you do it that I thought I’d post along with my response (with his permission).

Josh Writes:
A while back you wrote a post about networking and you referenced Ben Casnocha as an example of a great network, the type of guy who writes people letters and goes out and meets them.

Being that I depend on networking for most of my deal flow and just to build up a network of contacts, I am always looking to talk with people, new people and old. So I tried a little experiement, I mailed letters of congratulations (I also included a small gift certificate to starbucks as small congratulations present)to people who people who recently landed big promotions that were announced in the newspaper, CEO and director types, but all corporate suits. Funny enough, I did not get one response. My letters were completely non sales orientated, just hi, congratulations type of thing . . . So I guess what I am asking is that do you see a difference between the entrepreneurs and the corporate types you know in there attitude to networking? Or am I just a lunatic for going out and trying to start relationships with absolute strangers. Here’s how I responded: I think it comes down to context, Josh. The difference in what you are describing and what Ben did is that I knew Ben. He reached out to me in a way that was relevant, direct and responsive to something (in this case my blog). I’ve e-mailed with Ben a few times and even talked with him on the phone once. Your postcard was marketing (a  initial introduction aimed at getting the attention of the recipient by offering them something). Ben’s was networking – reaching out in a unique and fun way to a group (he later told me he sent 50 postcards out) that he wanted to stay in touch with but that he had already had some contact with.   Interestingly, I think that your Starbucks gift certificate – while an interesting idea – may have even worked against you. I don’t want to overstep my undergrad psychology degree, but my hunch is that the gift was received by some as a sign that you were going to follow up to ask for something (there’s a chapter on this phenomenon in Influence: The Psychology of Persuasion by Robert Cianldini – ironically recommended to me by Ben a few months back). I think you may have inadvertently created a situation where people perceived your gift as an entry into something they didn’t want because the communication lacked context. I think you’d be better off looking for real entry  points with people you’d like to have in your network. If they blog, its easy – post a thoughtful comment to a few blog posts, send an article that you know they might find interesting, etc. If they don’t blog try searching for articles they might have either authored or been quoted in. Look for conference presentations they might have given on the web. Check for organizations they might be involved with other than their work. Now contact them with a thoughtful note that’s relevant to them and offers something (a link to an article they might find interesting, etc). I’d also be upfront about what you’re looking for. If you leave them to guess about your intentions I fear that most people will assume that you’re going to want something down the road.Does that make sense? I can tell you from my own experience that I’d be much more likely to respond well to a response to a blog post than to a more random attempt to get in touch with me or get my attention (this note as an example – you tracked back a few posts of mine and then wrote me this note. I read your blog so I have plenty of context all of which makes me more likely to respond to you).