Viewing posts for the category work

Life Math: Compound Interest

I read this quote a long time ago and it has stayed with me "compound interest is the most powerful force in the universe." The saying is commonly attributed to Albert Einstein, but after Googling it doesn't seem very likely Einstein ever said it. Regardless of where it came from; today, I linked it to a new meaning.

I've been thinking about how to define entrepreneurship, or more broadly how to describe the entrepreneurial mindset. One way that has resonated with me is efficiency in leveraging current resources. Or simply, making more out of what you have right now. Then repeating the process many times over. The result is compounding returns, which are quickly very rewarding. When evaluating how entrepreneurial someone is, one route is looking at what they have been able to accomplish so far through the lens of what resources they had at the time.

This will only get you so far, as some people are not able to continue compounding the returns. Some people are great at getting new companies or projects off the ground and then not the right people to take them from a small to medium scale. On the other side, some people are great at scaling companies or projects but their strong suit is not getting them started from scratch. Making sure the right people are involved at the right time is tricky. Ben Horowitz discusses this extensively in his book The Hard Thing About Hard Things.

Determining the life cycle of a company you are most capable of contributing at is a really helpful lens when thinking about your career. I've recently determined that mine is in the earliest stage of a company where it is just a few people looking to get an idea off the ground. 

In other areas of life "what you made out of what you were given" is often something I am interested in learning about when I meet somebody. And a question I often ask myself is "how can I use the position I'm in now, to get more of the things I care about?" This sounds a little crazy, probably because your mind probably jumped to money. Don't think of it in the context of money and it feels a lot better. For example, "How can I use the things I have today to show my partner just how much I love them?" or "How can I leverage my volunteer time into affecting the most change for our cause?" 

Think about what limited things you have and how you use those resources today to drive the results you want. People who are good at this are often very successful.


I've said "Yes" to working on a lot of projects lately as a helping hand. Over the last month, the volume of these commitments has been too much and I've lost focus on the things that are most important to me. The things where I am a core contributor have suffered for the activities where I am a part-time contributor. This doesn't make sense.

Over the next few days, I am going to work on winding down many of these extra commitments. And over the next few weeks, I am going to lean much more of my weight on the areas where I am a core contributor.

Saying Yes to something new can be easier than saying No. What have you said "Yes" to that doesn't directly contribute to achieving your goals?

American Dream

I love this speech by David Abney about the American Dream. David began his career as a part-time package loader and rose to be the CEO of UPS. Read it here:

Reflective Listening

I've never been great at communication. From a young age I found it really difficult to grasp that If I understood something in a certain way, it did not mean that everyone automatically understood it in the same way. Starting with the assumption that everyone was on the same page with me meant my speech and writing were often very terse, ineffective and I was responsible for many miscommunications. Improving my communication skills have been something I've been working on ever since.

Last year, David Cohen introduced me to the concept of Reflective Listening. It has changed the way I think about communication. Basically, Reflective Listening is a framework for thinking about the successful transfer of thoughts and ensures that everyone is really on the same page. It's really simple.

  1. Listen to what the other person is saying.
  2. Repeat back, in your own words what you think they said. Be detailed. And ask "Is that right?"
  3. Then ask "Is there anything else?" Repeat the whole process until they say "No, there is nothing else."

Reflective Listening, as implied by the name, first requires listening. Which, while thinking about what my response will be, I sometimes forget to actually do. Then report back what was heard. Asking the question "Is that right?" brings out what wasn't communicated correctly. Finally, asking if there is anything else confirms the complete picture is understood by both parties. Information transfer complete. I love this, it has been really helpful. Thanks for sharing David!

Expand or Cut the Cake (Creating Value)

I've been trying to write a post on value creation and rent capture for a couple weeks now. My words weren't coming together the way I wanted and while researching I stumbled upon Yishan Wong's Quora answer to the question "What does it mean to create value?" He captures exactly the point I wanted to make, so I scrapped my writing and here is Yishan's full response:

What does it mean to create value?

It means making something out of nothing using human effort and ingenuity.

"Creating value" is a very important concept that for years I thought was just a business buzzword, but it captures a very important distinction from doing other things that make money, as making money is a big thing in our world, and for better or worse it's often the source of a lot of grief, joy, and politics. 

Creating value is something that people inherently understand from a young age, but then later forget.  For instance, a five-year-old will make a birthday card for you out of construction paper.  This is creation of value.  When we get older, many people forget this and start to think that such shoddy handmade things are worthless, that the only value is in things we pay money for, e.g. a store-bought card or gift.  But the five-year-old has no money, and no choice but to create something of value out of nothing but the application of her effort and ingenuity upon raw materials.  Money simply represents this value creation - the five-year-old could sell the card for money.  Likewise, money you use to buy a store-bought card came from real value you created by doing your job, which likely required your own effort and/or ingenuity.

There's another way to generate money, which is rent capture (see:  This is a money-making method that does not create new value, but rather exploits a property of the environment (physical, social, or economic) in order to incur favorable transactions.  The easiest example of this is forcibly taking over a piece of unowned land or open road and charging others a toll to use it.  No new value is created, but the ability to charge "rent" is captured.  Keep in mind thatcharging rent is not necessarily rent capture - if you build an apartment complex and rent out its units, you have created an item of value and are merely charging for it, i.e. making money exchanging something of value you created.  Rent capture refers to charging money for usage (or relief from) a facet of the pre-existing environment you have exploited.  There are complicated philosophical issues around whether the unilateral acquisition of unowned-but-finite environmental resources and their place in value-creation, but I still skip those.

Either way, the phrase "creating value" is typically used to designate activities which make money but which are not rent-capturing, i.e. new value is created through either mutually beneficial exchange transactions or producing something valuable out of raw materials through human effort and/or ingenuity.  "Enlightened" capitalists or businessmen often use this term to designate "positive" business activities that make money because they apply the effort of human beings towards creating new value, versus other activities that generate money but not value.  This distinction is significant because many metrics of business success are measured by numbers on financial statements, which are nominally blind as to whether increases in money flow are value-creating or not.

Basically, there are two ways to make money:

1) Create new value and capture x percent of the new value created. (creating value)
2) Capture rent on an already existing asset. (rent capture)

The first form is the one that moves everybody forward. I think it is altogether too easy to forget that new value can be created. While accumulating wealth, you are not necessarily taking money from others. If you create new value for society that did not exist before, you have created new wealth and are entitled to capture a sustainable portion of that newly created value.