Google in the (Null)Plex – Part 3: a culture

After Part 1 on the technology and Part 2 about the business, here is Part 3, following chapter 3 of Steven Levy‘s In the Plex.

in-the-plex-home

“You can’t understand Google,” Marissa Mayer said, “unless you know that both Larry and Sergey were Montessori kids.” [Page 121]

“It’s really ingrained in their personalities,” she said. “To ask their own questions, do their own things. To disrespect authority. Do something because it makes sense, not because some authority figure told you. In Montessori school you go paint because you have something to express or you just want to do it that afternoon, not because the teacher said so. This is really baked into how Larry and Sergey approach problems. They’re always asking ‘Why should it be like that?’ It’s the way their brains were programmed early on.” [Page 122]

Nerdy jokes

As a corporation, Google was determined to maintain its sense of play, even if it had to work to do it. The high holy day of Google culture is April 1, when imaginations already encouraged to run wild are channeled into elaborate pranks requiring months of work. The effort involves considerable organization, as ideas go through an elaborate approval process to find a place in the company’s ever-increasing roster of seasonal spoofs. The need for some oversight became clear as early as 2000, when Brin sent employees an email announcing that Google had a new valuation (meaning the estimate of its market price had gone up) and would soon reprice its employee stock options— from 25 cents to $4.01. Some people didn’t realize that $4.01 was a reference to the calendar and frantically tried to buy up all the shares that they were entitled to before the price went up. They dug into savings and borrowed from their families. Google eventually had to make people whole. [Page 123]

As the years went on, more Google divisions felt compelled to devise their own jokes, and by 2010 Wikipedia listed seventeen major April Fool’s initiatives for that year alone. [Page 123] What follows is just one example, among the most famous ones.

************ GOOGLE MENTALPLEX – APRIL FOOL 2000 ************

Title_HomPg2

Enter your search terms…


…or browse web pages by category.
New! Search smarter and faster with Google’s MentalPlexTM
foolanim Instructions:

  • Remove hat and glasses.
  • Peer into MentalPlex circle. DO NOT MOVE YOUR HEAD.
  • Project mental image of what you want to find.
  • Click or visualize clicking within the MentalPlex circle.

See our FAQ and illustrations for correct usage.

Note: This page posted for April Fool’s Day – 2000.

© Google Inc.

A unconventional company

The Bayshore Googleplex, also known as Building Zero, or the Nullplex, was the staging ground for Google to build out its culture into a sustainable corporate structure. No matter what happened, engineers would have the run of the place: their Montessori-inspired freedom would be Google’s distinguishing trait. [Page 129]

“Google is not a conventional company,” began Page’s letter, released on April 29, 2004. “We do not intend to become one.” It was an explicit warning to potential shareholders: fasten your seat belts!
In his “Owner’s Manual to Google,” Page put front and center the unofficial motto of Google, “Don’t be evil.” “We aspire to make Google an institution that makes the world a better place,” he wrote. “We believe strongly that in the long term we will be better served—as shareholders and in all other ways—by a company that does good things for the world even if we forgo some short-term gains. This is an important aspect of our culture and broadly shared within the company.”
[Pages 149-50]

The impact of money making…

Even the Google masseuse noticed the impact of money, especially when it came to the divide between early employees holding valuable options and those who came later. “While one was looking at local movie times on his monitor, the other was booking a flight to Belize for the weekend,” she said in a book she wrote. “Don’t think everyone wasn’t aware of the rift.”
[Pages 149-50] She became a millionaire herself.

Engineers can self-organize

Both Page and Brin believed that the company should run like the Internet itself: fast-moving, bottom up, going to work every day to make yesterday obsolete. “We were born in the Internet time,” says Megan Smith, “so our company’s like our products in some weird way.”
Google, however, had been through an early ordeal that showed that this flat-org ideal was unattainable. In 2001, Google had more than four hundred employees, reaching the point where it was impossible to pretend that it was an intimate company where everyone knew everyone else. Worse for Page and Brin, despite their best efforts, a layer of middle management was creeping in. Worse still, some of the newcomers were experienced product managers from companies such as Microsoft, whose training made them un-Googley—and those newcomers had difficulty adopting the often heretical approaches of the founders.
Brin and Page came up with a solution: Google would no longer have managers. At least not in engineering. Instead, they figured, the engineers could self-organize. That approach worked well in the nascent days of Google. If something needed fixing, people would figure out on their own what was wrong, and what was broken would be fixed. Other people would identify interesting problems in computing, and from those insights new products would arise. At the time Google had just hired Wayne Rosing to head engineering. Brin and Page figured that everyone could just report to him. The engineers would arrange themselves in pods of three, work on projects, and check in with Wayne.
That struck some of Google’s executives as madness. Stacy Sullivan, the head of HR, begged Page and Brin not to go through with it. “You can’t just self-organize!” she told them. “People need someone to go to when they have problems!”
The newly arrived Schmidt and the company’s unofficial executive coach, Bill Campbell, weren’t happy with the idea, either. Campbell would go back and forth with Page on the issue. “People don’t want to be managed,” Page would insist, and Campbell would say, “Yes, they do want to be managed.” One night Campbell stopped the verbal Ping-Pong and said, “Okay, let’s start calling people in and ask them.” It was about 8 P.M., and there were still plenty of engineers in the offices, pecking away at God knows what. One by one, Campbell and Page summoned them in, and one by one Page asked them, “Do you want to be managed?”
As Campbell would later recall, “Everyone said yeah.” Page wanted to know why. They told him they wanted somebody to learn from. When they disagreed with colleagues and discussions reached an impasse, they needed someone who could break the ties.
Nonetheless, Page and Brin were determined to go through with the plan. They called an all-hands meeting and announced it to a baffled workforce. For a few people it meant leaving the company. Others scrambled to find new roles. On the other hand, the move was welcomed by the engineers, who had been chafing at the creeping management restraints. For example, Eric Veach, who at the time was trying to invent the auction-based AdWords, later said that losing a manager had liberated him to make his breakthrough.
Ultimately, however, the plan petered out. After the initial turmoil, there was a quiet backslide where Google’s managerial class reassembled and regained a place in the structure. You just couldn’t have more than a hundred engineers reporting to Wayne Rosing. Google was taking on new engineers at a furious rate, and, brilliant as they were, the new people needed some guidance to figure out what to do. “I don’t remember Larry and Sergey saying that they were wrong and that we were right, but they agreed we could start to hire managers again, as long as the managers were good culture fits and technical enough and could be highly respected by the engineers,” says Sullivan.
[Pages 158-59]

It was Marissa Mayer who told him the obvious—Page wasn’t looking for project managers who were smart enough to understand engineers—he wanted them to be engineers. Mayer suggested that Google look for computer science majors who saw themselves not just as engineers but as future CEOs. Her idea was to assemble a legion of “associate product managers.” Google would get them straight out of school, young people with no preconceptions derived from working elsewhere. Their careers would co-evolve with Google. “We value insight over experience,” says Mayer. “We take people who we think have the right raw skills and insights and put them into roles with a lot of responsibility. And while that happens with APMs, it also happens all across the company. People here might not really be accomplished or have a long career before coming to Google, but they have the right data instincts about their area.” […]That process made the managerial weakness of the APM an asset for Google, by making sure that data was at the center of decision making.
[Page 161]

Ultimately, the program helped Google maintain its team approach while still focusing on engineering as opposed to the kind of more elusive un-Googley skills that an MBA brings. (One might also note that Google, in its management practices and hiring preference for freethinkers, has achieved a complete turnaround from the ethic posed in William H. Whyte’s 1956 classic The Organization Man, which describes the perfect corporate employee as “obtrusive in no particular, excessive in no zeal”—the polar opposite of a Googler.) [Page 162]

Larry’s and Sergey’s peripatetic ways could drive Googlers crazy. Even Eric Schmidt sometimes viewed them acerbically: “Larry will call and say, ‘I’m going to go visit Android,’” he says, referring to Google’s mobile phone project. “He’s not going over there to inspect—he’s going over there to have fun.” But Maria Montessori might approve. “To be … helpful,” she wrote, “it is necessary rigorously to avoid the arrest of spontaneous movements and the imposition of arbitrary tasks. [Page 166]

Why doesn’t Europe create any Google or Apple?

This is my latest contribution to Entreprise Romande. In the middle of my accounts of In the Plex, I think it is an interesting coincidence. React if you wish…

ER-Aout2015-EuropeanGoogle

Why did not Europe create Apple, Google or Tesla? Or should we say, why don’t we have Steve Jobs, Larry Page and Elon Musk on the old continent? Innovation is complex and success comes only as an unlikely alignment of planets that are a product, a market, founders and a team they have managed to assemble, capital, and even a favorable macroeconomic situation. Also we cannot ignore in the success of a start-up, the luck factor involved in this unlikely combination.

The recent and great biography of Elon Musk [1], the founder of PayPal, Tesla Motors and SpaceX describes in an exemplary manner how a migrant from South African origin, who could have been a very brilliant student, took risky decisions with a nearly inhuman focus to build businesses that might change the world. We must of course be wary of the myth of the superman that Silicon Valley tends to highlight. All the success of the new Steve Jobs will depend upon a favorable and highly efficient environment. But why Europe and Switzerland create so rarely similar “role models”? We have of course Richard Branson or the Hayek dynasty and recent analyzes show that Europe has its “unicorns” [2] but the comparison shows a “shy” Europe. So why?

The serious and competent analyst will explain the multiple benefits of the United States: a discreet but substantial public R&D, particularly in the military field, a highly efficient capital market, a homogeneous and sometimes protectionist market, and a devilishly aggressive policy and economy at the limit of imperialism. But the pessimist pamphleteer may also see an aging (precisely) old continent where migrants are seen as a threat – whereas they are the lifeblood of Silicon Valley – and more seriously a lack of ambition of youth, encouraged by a society with dreams dying off.

The roots of our weakness are deep. We say to a young graduate still full of dreams to go and learn from the private sector to acquire skills and experience. But is there any European company with dreams of electric vehicles and interplanetary travel? Worse, we say to the children first and foremost to integrate well and we forget to let them dream further. The school does not encourage the crazy adventures and in this environment dreamers quickly fall from the stars on dry land.

Five EPFL start-ups have recently been sold (Sensima, Jilion, Lemoptix, Composyt and Aïmago) to the satisfaction of their founders and many others will be delighted to build strong SMEs with fifty employees or so. But when I tell them that in the United States their counterparts dream of changing the world, they look at me with a funny look. They tell me as their investors that we are not on the same planet and that the German and Swiss model of SMEs is a beautiful alternative. The ambition is seen as arrogance and an engineer does not like uncertainty or risk of failure.

So much unnecessary suffering for the rare exceptions. Some of them face advisors or investors, sometimes incompetent, mostly benign but having references only to our modest success. “Prove that your first model can work here.” “Do not go looking for too much money.” “You’ll lose control and you’ll be replaced.” Not to mention the finicky reading of business plan. Everyone should know that they are only the expression of a vision. To the point that I sometimes advise them to leave if they are ready to do so …

I will remain optimistic because Skype and Spotify are recent encouraging counter-examples and Europe took the measure of the threat, I think. I will mostly remain optimistic because entrepreneurship is a matter of exceptions and I meet young people who still have some dreams. But please, do not turn them off!

[1] Elon Musk: Tesla, SpaceX, and the Quest for a Future Fantastic Ashley Vance; Ecco – May 2015.
[2] http://www.bloombergview.com/articles/2015-06-16/europe-s-tech-unicorns-are-so-tame

Google in the Plex – Part 2: … and a business.

Following my part 1 about In the Plex, here is part 2 and though I will come back with the topic in part 3 let me begin with this: Googlers love jokes and in particular April Fool. Nobody knew how successful and profitable Google had been for some years…

in-the-plex-home

The hiding ended on April 1, 2004. As a consequence of going public, the company was required to share its internal information with the bankers who would potentially handle the IPO. Google’s finance people had gathered the bankers in its headquarters, then located in Mountain View. On the eve of the meeting, chief financial officer George Reyes and Lise Buyer, the director of business optimization, came up with a plan to reveal the secret Google style. Opening the meeting, Reyes welcomed them. Since the bankers had taken a big gamble by signing on without seeing the bottom line, he said, he’d go straight to the numbers. Then he put up slides with some figures. “You could hear a pin drop,” Buyer would later recall. The slides indicated that Google was indeed making pretty good profits. Not earthshaking but more than respectable, especially for an Internet business offering a free service supported only by ads. The bankers listened politely, but you could tell that they’d heard chatter that things had been, well, better than good, and they were apparently doing some mental recalculations.
Then Reyes told the bankers he was sorry, but he’d mistakenly put up the wrong slide. Could he display the real numbers? A balance sheet appeared with more than double the revenues and profits on the previous slide. It exceeded even the wildest expectations. April fool! “George was flawless,” says Buyer. “It was a beautiful moment.”
[Page 70]

What’s a business plan?

The Google founders had not been that much focused on the business side… Salar Kamanagar would be a very unusual hire:

Kamangar more than compensated for his lack of experience with quiet determination. Though he appeared placid and self-contained— and loathed the spotlight—he had a steely, gnawing resolve. […] Kamangar made a short list of companies he might like to work for—brand-new start-ups that might take a chance on someone like him—and because, like many Stanford students, he had been playing with an early version of Google, he put it on his list. One day in March 1999 he saw in the Stanford Daily that Google was recruiting. He went to the Tresidder student center and found Sergey Brin in a small booth. “Unlike everyone else I’d talked to, he wasn’t using jargon. He had a very clear, very ambitious, grand—in some ways grandiose—vision for what Google could become,” Kamangar would recall. But Brin was not interested in hiring him. Kamangar was a biology major, not an engineer. Even at that stage, the Google preference was for computer science majors. Kamangar kept pressing. “He would walk in every day and say, ‘I want to work for free,’” says investor Ram Shriram, who was taking a day off from Amazon every week to help protect his investment in Google. Brin finally agreed to take him on part-time to do things that engineers couldn’t be bothered with, such as drawing up a business plan. “Neither founder had any interest in that,” says Shriram, “They said, ‘Yeah, we need money, but we’re not really interested in spending too much time on that. What’s a business plan?’” Whatever it was, Google needed one. Its original million-dollar funding had been granted solely on the basis of Google’s technology. But the company was already struggling to pay for equipment—its servers were overwhelmed by new users—and Brin and Page needed full coffers to finance their ambitious hiring plans. Venture capital could provide that. But they’d have to make a credible case that Google could one day be profitable.
Kamangar became the point man in one of the weirder VC rounds in Silicon Valley’s history. Shriram helped him out, but Salar had a remarkable degree of responsibility. He wrote the slides for the presentations, crunched numbers for the valuation, and, of course, drew up the business plan. Though hired as a part-timer, he went fulltime two weeks later, dropping his pursuit of a second degree at Stanford. “It was ten times more exciting than what I was doing at school,” he says of Google.
[Pages 71-72]

“How big do you think this can be?”

[John Doerr, from Kleiner Perkins]’d seen plenty of smart nerds with good ideas, and was more than happy, on the recommendation of Andy Bechtolsheim, to see two more. Google’s idea, presented with Kamangar’s slides, was compelling. And its founders seemed straight out of the mold of previous winners from Stanford. The meeting was just ending when Doerr asked a final question: “How big do you think this can be?”
“Ten billion,” said Larry Page. Doerr just about fell off his chair. Surely, he replied to Page, you can’t be expecting a market cap of $10 billion. Doerr had already made a silent calculation that Google’s optimal market cap—the eventual value of the entire company—could go maybe as high as one billion dollars. “Oh, I’m very serious,” said Page. “And I don’t mean market cap. I mean revenues.”
More than a decade after that meeting, Doerr would still marvel at the conversation. “I didn’t think the guy could do it, but I was impressed,” he says. “It had to do with the tone of voice. He wasn’t saying this to impress me or himself. This is what he believed. This was Larry’s ambition, in a very thoughtful, considered way.”
[Page 73]

A business or three?

The post-VC business plan anticipated three streams of revenues: Google would license search technology to other websites; it would sell a hardware product that would allow companies to search their own operations very quickly, called “Google Quick Search Box”; and it would sell ads.
Brin and Page themselves had made the very first licensing deal, with a company called Red Hat, a software company that distributed a version of the free Linux operating system. It earned Google around $20,000.
[Page 78]

But advertising was far from obvious…

But they had no idea what a Google ad should be. Some at Google—including the director of technology, Craig Silverstein—thought that the whole effort was a distraction and that Google should outsource its ad system to some company more accustomed to waddling in the muck of Mammon. “I was like, ‘We’re not an advertising company, we’re a search company—let someone else worry about the advertising,’” says Silverstein. “It was good they did not take my advice.” [Page 78]

Susan Wojcicki later admitted the real problem: “No one clicked on the ads.” But she felt that the experiment was a great success. “It was incredible that we were going to build an ad system at all. What, we didn’t have enough to do with search? Now we’re asking our engineers, ‘Can you develop subsecond delivery times in every language in the world for every specific keyword?’ It was impressive that they actually did it.”
One contingent unimpressed at this point was Google’s investors. By the time of the Amazon affiliate bust in January 2001, it was almost two years after the $25 million investment, and the company was yet to make any money from the 70 million daily searches on its site. One angel, David Cheriton, was joking to friends that all he’d gotten from his six-figure Google investment was a T-shirt—“the world’s most expensive T-shirt.” To the money people on Google’s board, the problem was no joking matter.
[Page 79]

So they hired a full-time CEO as the founders needed “adult supervision”.

From the start, Schmidt adopted a public stance toward the founders of unfettered admiration, a position he carefully maintained thereafter. “I fairly quickly figured out these guys are good at what they do,” he told me in early 2002. “Sergey is the soul and the conscience of the business. He’s a showman who cares deeply about the culture, the one who talks more, with a bit of Johnny Carson. Larry is the brilliant inventor, the Edison. Every day I am thankful I accepted this job offer.”
His anecdotes about disagreements with Sergey and Larry followed a consistent storyline: Schmidt expresses a tradition-bound preconception. The young men who, technically at least, report to him, reject the idea and demand that Google pursue an audacious, seemingly absurd alternative. The punch line? “And of course they were right,” Schmidt would say. What had seemed crazy was actually a canny assessment of how things worked in the new Internet-based economy! […]
That deference would prove a winning strategy, even though for a couple of years there were serious adjustment problems, because the founders clearly suspected that they would have done just fine on their own. Kordestani remembers that as Schmidt’s arrival was impending, both founders expressed their anxiety to him. Ostensibly, the issue concerned the titles each of the founders would use to describe his respective role. On a deeper level Sergey was troubled, says Kordestani, because “he was hiring his own boss, in a way, knowing he wants to be the boss.” Brin took the title president of technology.
Larry was even more troubled. Kordestani had to assure Page that he was still essential and Google would fail without him. Kordestani also reminded Page that he would no longer have to perform tasks that he didn’t enjoy, such as dealing with Wall Street and talking to customers. Page wound up describing himself as president of products.
As late as 2002, the founders still sounded bitter when explaining why Schmidt was hired. “Basically, we needed adult supervision,” said Brin, adding that their VC investors “feel more comfortable with us now —what do they think two hooligans are going to do with their millions?” The transition was rocky, but as the years went by, Page and Brin seemed to genuinely appreciate Schmidt’s contribution. Page would come to describe the CEO’s hiring as “brilliant.”
[Page 81]

Indeed three ad models.

But contempt for traditional advertising permeated Google from the top down. In their original academic paper about Google, Page and Brin had devoted an appendix to the evils of conventional advertising. The founders weren’t sure what their ads would be but were adamant that they somehow be different. […] Nonetheless, the early Google ads worked like traditional ones in one key aspect: the advertiser was billed according to how many people viewed the ad. This CPM (cost per thousand) model was the basis of almost all ad markets. […] While Google expected to make most of its money from licensing, Armstrong was told, advertising might one day account for as much as 10 to 15 percent of its revenue. [Page 84]

Finally Google created AdWords Select and AdSense in addition to the classical AdWords Premium. And surprise, surprise…

The dicier challenge was getting skeptical customers of the original AdWords to leave a system they were happy with to try this complicated new one. On January 24, 2002, Google tested AdWords Select by offering it to selected advertisers. […] From that point on, revenue from the right-hand side of Google’s search results page—which had previously constituted only 10 to 15 percent of Google’s ad take, with the bulk coming from the direct sales of premium ads—began rising. […] In any case, Google was reaping rewards, and 2002 was its first profitable year. “That’s really satisfying,” Brin said at the time. “Honestly, when we were still in the dot-com boom days, I felt like a schmuck. I had an Internet start-up—so did everybody else. It was unprofitable, like everybody else’s, and how hard is that? But when we became profitable, I felt like we had built a real business.”
Best of all was that Google, against all odds, was making that profit without surrendering its ideals. “Do you know the most common feedback, honestly?” Brin asked. “It’s ‘What ads’? People either haven’t done searches that bring them up or haven’t noticed them. Or the third possibility is that they brought up the ads and they did notice them and they forgot about them, which I think is the most likely scenario.”
[…] Page said in 2002. “Every month we make more money than the last one.” The only slight regret? They never got those PhDs.
“I’ve been meaning to,” said Sergey.
“Maybe someday,” said Larry.
“My mom keeps asking,” said Sergey.
Larry frowned. “My mom doesn’t ask me anymore.”

[Pages 93-94]

Still automatic advertising may be risky…

The only hitch in the program was the risk that the ads Google placed on a website would be inappropriate or even offensive. When human beings created an ad for a publication, they took care to avoid situations where the combination of a certain ad with a certain type of article would produce a tasteless match that would appall readers and win no business for the advertisers. Google’s algorithms weren’t so sensitive. “The editors would get freaked out,” says Liebman. Some of the unintentionally offensive matches became classics. Liebman would cite an ad that ran alongside a gory murder story in the New York Post: someone had chopped up a body and stuffed it in a garbage bag. Alongside this gruesome text was a Google ad for plastic bags. “We didn’t foresee that there were times when you don’t want to target ads to the content,” says Georges Harik. “We would analyze a page about a plane crash and happily place an ad for airline tickets. I think we rapidly discovered that this was a bad idea.” Google engineers started working on ways to mitigate this problem, but it would never be totally eliminated. It was just too hard for an algorithm trained to discover matches between articles and ads to exercise human good taste. In 2008, a story about the Mumbai attacks headlined “Terrorists kill the man who gave them water” was accompanied by an ad that read “Terrorism: Pursue a certificate in terrorism 100% online. Enroll today. Ads by Google.” An account of massive food poisoning at an Olive Garden restaurant in Los Angeles was accompanied by a coupon offering a “FREE Dinner for Two at Olive Garden.” [Page 105]

A really amazing business…

When someone clicked on an AdSense ad, the money paid by the advertiser was split between Google and the publisher whose site hosted the ad. According to Rajaram, the original thought was to split the money down the middle—Google would take half and the AdSense publisher would take the other half. But Brin thought that such a split gave too much to Google. The idea was to build the program for the long run, and if Google made it clear that it was taking half the money, a competitor might undercut the program by giving 80 or even 90 percent of the fee to the publisher. So Google decided to give the majority of the money to the publisher. Then Susan Wojcicki came up with an idea that some might find strange: What if we don’t reveal the revenue share percentage with the publisher? That way Google wouldn’t have to worry about a competitor boasting a better split. [Page 106] Which they did.

“It was one of the single biggest painful things for me,” says Rajaram. “On every panel I went to for the first year, I would get questions about why isn’t Google sharing the revenue split and why isn’t Google being transparent. People said we were doing it because we weren’t generous. But quite to the contrary, we were being generous. We just didn’t want our competitors to tell publishers that they were offering a better revenue share.” (In May 2010, Google finally revealed the split. “In the spirit of greater transparency,” Google reported that of the money received from advertisers on AdSense for content, 68 percent went to the publishers whose pages hosted the ads. Google kept the other 32 percent. That was close to the proportions that participants and analysts had long assumed. Google’s belated announcement only raised more questions as to why it had been a secret in the first place.) [Page 106]

Later in the year, AdSense achieved a milestone in its run rate— $1 million a day. […]While AdSense was a great success, the bulk of Google’s revenues came from AdWords. Eric Veach and Salar Kamangar’s auctionbased AdWords Select product had first been thought of as a supplement to the more traditional, impression-based ads in the premium program, which was now called AdWords Premium. But it was working so well that Google would sometimes allow its auction-based ads to break out of their side-of-the-page ghetto and leapfrog to the premium zone sitting on top of the search results. If Google felt that the outcome would raise more revenue, a select ad would “trump” a premium ad and knock it out of that coveted position. As more and more auction-based ads trumped the hand-sold premium ads, Kamangar argued that Google should entirely end the practice of selling premium ads by a sales force that set prices and charged by impression. He set up a project, code-named D4, to implement the idea. Most Googlers called the plan Premium Sunset. […] Eric Veach believed that the data showed that the auction-based, pay-per-click model was actually better for everybody. The key was the ad quality, which made sure that ads would appear before sympathetic eyeballs. He did a close analysis and concluded that ads bought through AdWords Select performed better. He also uncovered hard proof that some premium advertisers were paying way too little for some valuable keywords. […]Nonetheless, the move would be painful. It meant giving up campaigns that were selling for hundreds of thousands of dollars, all for the unproven possibility that the auction process would generate even bigger sums. “We were doing $300 million in CPM ads and now were going to turn this other model on and cannibalize that revenue,” [Page 110]

And here is the history of Google growth…

Google growth 1998-2015

Google in the Plex – Part 1 : a technology…

In the Plex is an(other) amazing book about my favorite company. Google is the reason why I wrote a book about start-ups: When I did a PowerPoint presentation in 2006 gathering what I knew about the Mountain View start-up, some friends told me to write a more general book about start-ups. Which I did in 2007. Hence this blog !

I have read already three books about Google and this one is as good as the previous ones. Maybe better. So I should thank here Michele Catasta, who advised me to read it when I did last June my updated presentation of the 2006 one. And I should certainly have read before this book published in 2011… I have also posted many articles about the company, just check with the tag Google. But I learnt many things In the Plex, and it is what I want to focus with this post(s). And first with Chapter 1 which is about its technology.

in-the-plex-home

Google was not the only one with the technology

Larry Page was not the only person in 1996 who realized that exploiting the link structure of the web would lead to a dramatically more powerful way to find information. In the summer of that year, a young computer scientist named Jon Kleinberg arrived in California to spend a yearlong postdoctoral fellowship at IBM’s research center in Almaden, on the southern edge of San Jose. With a new PhD from MIT, he had already accepted a tenure-track job in the CS department at Cornell University. […] Kleinberg began to play around with ways to analyze links. Since he didn’t have the assistance, the resources, the time, or the inclination, he didn’t attempt to index the entire web for his link analysis. […] all sorts of IBM vice presidents were trooping through Almaden to look at demos of this thing and trying to think about what they could do with it. ”Ultimately, the answer was … not much”. […] Kleinberg kept up with Google. He turned down job feelers in 1999 and again in 2000. He was happy at Cornell. He’d win teaching awards and a MacArthur fellowship. He led the life in academia he’d set out to lead, and not becoming a billionaire didn’t seem to bother him. [Pages 24-26]

There was yet a third person with the idea, a Chinese engineer named Yanhong (Robin) Li. […] Li came to the United States in 1991 to get a master’s degree at SUNY Buffalo, and in 1994 took a job at IDD Information Services in Scotch Plains, New Jersey, a division of Dow Jones. […] He realized that the Science Citation Index phenomenon could be applied to the Internet. The hypertext link could be regarded as a citation! “When I returned home, I started to write this down and realized it was revolutionary,” he says. He devised a search approach that calculated relevance from both the frequency of links and the content of anchor text. He called his system RankDev. […]Robin Li quit and joined the West Coast search company called Info-seek. In 1999, Disney bought the company and soon thereafter Li returned to China. It was there in Beijing that he would later meet—and compete with—Larry Page and Sergey Brin. [Pages 26-27] (Robin Li is the founder of Baidu.)

The technology was ultimately the best but initially nobody saw the value

Excite would buy BackRub, and then Larry alone would go to work there. Excite’s adoption of BackRub technology, he claimed, would boost its traffic by 10 percent. Extrapolating that in terms of increased ad revenue, Excite would take in $130,000 more every day, for a total of $47 million in a year. Page envisioned his tenure at Excite lasting for seven months, long enough to help the company implement the search engine. Then he would leave, in time for the fall 1997 Stanford semester, resuming his progress toward a doctorate. Excite’s total outlay would be $1.6 million, including $300,000 to Stanford for the license, a $200,000 salary, a $400,000 bonus for implementing it within three months, and $700,000 in Excite stock […] “With my help,” wrote the not-quite-twenty-four-year-old student, “this technology will give Excite a substantial advantage and will propel it to a market leadership position.” Khosla made a tentative counteroffer of $750,000 total. But the deal never happened. [Page 29]

In barely a year since Brin and Page had formed their company, they had gathered a group of top scientists totally committed to the vision of their young founders. These early employees would be part of team efforts that led to innovation after innovation that would broaden Google’s lead over its competitors and establish it as synonymous with search. […] It was at least a ten-day process with one of Google’s first crawl engineers, Harry Cheung (everyone called him Spider-Man), at his machines, monitoring progress of spiders as they spread out through the net and then, after the crawl, breaking down the web pages for the index and calculating the page rank, using Sergey’s complicated system of variables with a mathematical process using something called eigenvectors, while everybody waited for the two processes to converge. (“Math professors love us because Google has made eigenvectors relevant to every matrix algebra student in America,” says Marissa Mayer.) [Page 41]

A technology but not a science… and maybe a dangerous one

In its first few years, Google had developed a number of specialized forms of search, known as verticals, for various corpuses—such as video, images, shopping catalogs, and locations (maps). Krishna Bharat had created one of those verticals called Google News, a virtual wire service with a front page determined not by editors but algorithms. Another vertical product, called Google Scholar, accessed academic journals. But to access those verticals, users had to choose the vertical. Page and Brin were pushing for a system where one search would find Everything. [Something called Universal Search]. [Page 58]

When the Universal Search team showed a prototype to Google’s top executives, everyone realized that taking on the project […] had been worth it. The results in that early attempt were all in the wrong order, but the reaction was visceral—you typed in a word, and all this stuff came out. It had just never happened before. “It definitely was one of the riskier things,” says Bailey. “It was hard, because it’s not just science—there are some judgment calls involved here. We are to some degree using our gut. I still get up in the morning and am astonished that this whole thing even works.” Google’s search now wasn’t just searching the web. It was searching everything. In his 1991 book, Mirror Worlds, Yale computer scientist David Gelernter sketched out a future where humans would interact, and transact, with modeled digital representations of the real world. […] But though Gelernter looked on the overall prospect of mirror worlds with enthusiasm, he worried as well. “I definitely feel ambivalent about mirror worlds. There are obvious risks of surveillance, but I think it poses deeper risks,” he said. His main concern was that mirror worlds would be steered by the geeky corporations who built them, as opposed to the public. “These risks should be confronted by society at large, not by techno-nerds,” he said. “I don’t trust them. They are not broad-minded and don’t know enough. They don’t know enough history, they don’t have enough. [Page 59-60]

Google’s researchers would acknowledge that working with a learning system of this size put them into uncharted territory. The steady improvement of its learning system flirted with the consequences postulated by scientist and philosopher Raymond Kurzweil, who speculated about an impending “singularity” that would come when a massive computer system evolves its way to intelligence. Larry Page was an enthusiastic follower of Kurzweil and a key supporter of Kurzweil-inspired Singularity University, an educational enterprise that anticipates a day when humans will pass the consciousness baton to our inorganic progeny. [Page would hire Kurzweil in 2012 ]What does it mean to say that Google “knows” something? […] “That’s a very deep question,” says Spector. “Humans, really, are big bags of mostly water walking around with a lot of tubes and some neurons and all. But we’re knowledgeable. So now look at the Google cluster computing system. It’s a set of many heuristics, so it knows ‘vehicle’ is a synonym for ‘automobile,’ and it knows that in French it’s voiture, and it knows it in German and every language. It knows these things. And it knows many more things that it’s learned from what people type.” […] Spector promised that Google would learn much, much more in coming years. “Do these things rise to the level of knowledge?” he asks rhetorically. “My ten-year-olds believe it. They think Google knows a lot. If you asked anyone in their grade school class, I think the kids would say yes.” What did Spector, a scientist, think? “I’m afraid that it’s not a question that is amenable to a scientific answer,” he says. “I do think, however, loosely speaking, Google is knowledgeable. The question is, will we build a general-purpose intelligence which just sits there, looks around, then develops all those skills unto itself, no matter what they are, whether it’s medical diagnosis or …” Spector pauses. “That’s a long way off,” he says. “That will probably not be done within my career at Google.” (Spector was fifty-five at the time of the conversation in early 2010.) “I think Larry would very much like to see that happen,” he adds. [Page 66-67]

As a final comment read the book. You may also have a look at my slideshare presentation.

Elon Musk – the new Steve Jobs – insane or genius? (part 3)

I just finished reading Elon Musk and following my two previous posts (part 1 and part 2), here are additional notes.

elonmusk-vance

How does innovation work

It’s really a fascinating book and obviously Elon Musk is too. A really unique and tough character. And obviosuly, very much criticized and hated too. One such harsh critics comes from the MIT Technology Review with Tech’s Enduring Great-Man Myth by Amanda Schaffer. You should read it. I just extract two sentences:
“To put it another way, do we really think that if Jobs and Musk had never come along, there would have been no smartphone revolution, no surge of interest in electric vehicles?” Well, this is a critical question about the source of innovation. Society or individuals. The question is relevant for science too.
– “It’s precisely because we admire Musk and think his contributions are important that we need to get real about where his success actually comes from.” This is a quote from Mariana Mazzucato whom I have often quoted here. her book The Entrepreneurial State is a Must Read. It deals with the role of government in innovation. my stronger and stronger belief with years is that the governement makes things possible (science, technology and invention, innovation) but without exceptional individuals – often geniuses, sometimes to the border of insanity – I am not sure so much happens.

Now let me quote more Ashley Vance because the final chapters are as great as the first ones. These quotes show that despite the high role of the governement, it’s not sufficient to explain how innovation works.

As Tesla turned into a star in modern American industry, its closest rivals were obliterated. Fisker Automotive filed for bankruptcy and was bought by a Chinese auto parts company in 2014. One of its main investors was Ray Lane, a venture capitalist at Kleiner Perkins Caufield & Byers. Lane had cost Kleiner Perkins a chance to invest in Tesla and then backed Fisker – a disastrous move that tarnished the firm’s brand and Lane’s reputation. Better Place was another start-up that enjoyed more hype than Fisker and Tesla put together and raised close to $1 billion to build electric cars and battery-swapping stations. The company never produced much of anything and declared bankruptcy in 2013.
The guys like Straubel who had been at Tesla since the beginning are quick to remind people that the chance to build an awesome electric car had been there all along. “It’s not really like there was a rush to this idea, and we got there first,” Straubel said. “It’s frequently forgotten in hindsight that people thought this was the shittiest business opportunity on the planet. The venture capitalists were all running for the hills.” What separated Tesla from the competition was the willingness to charge after its vision without compromise, a complete commitment to execute to Musks’s standards.

[Pages 315-16]

During the entire period of SolarCity’s growth, Silicon Valley had dumped huge amounts of money into green technology companies with mostly disastrous results. There was the automotive flubs like Fisker and Better Place, and Solyndra, the solar cell maker that conservatives loved to hold up as a cautionary tale of government spending and cronyism run amok. Some of the most famous venture capitalists in history, like John Doerr and Vinod Khosla, were ripped apart by the local and national press for their failed green investments. The story was almost always the same. People had thrown money at green technology because it seemed like the right thing to do, not because it made business sense. From new kinds of energy storage systems to electric cars and solar panels, the technology never quite lived up to its billing and required too much government funding and too many incentives to create a viable market. Much of this criticism was fair. It’s just that there was this Elon Musk guy hanging around who seemed to have figured something out that everyone else had missed. “We had a blanket rule against investing in clean-tech companies for about a decade,” said Peter Thiel, the PayPal cofounder and venture capitalist and Founders Fund. “On the macro level, we were right because clean tech as a sector was quite bad. But on the micro level, it looks like Elon has the two most successful clean-tech companies in the US. We would rather explain his success as being a fluke. There’s the whole Iron Man thing in which he’s presented as a cartoonish businessman – this very unusual animal at the zoo. But there is now a degree to which you have to ask whether his success is an indictment on the rest of us who have been working on much more incremental things. To the extent that the world still doubts Elon, I think it’s a reflection on the insanity of the world and not on the supposed insanity of Elon.” [Pages 320-21]

Tony Fadell about Musk

Tony Fadell, the former Apple executive, credited with bringing the iPod ad iPhone to market, has characterized the smartphone as representative of a type of super-cycle in which hardware and software have reached a critical point of maturity. Electronics are good and cheap, while software is more reliable and sophisticated. […] Google has its self-driving cars and has acquired dozens of robotics companies as it looks to merge code and machine. […] And a host of start-ups have begun infusing medical devices with powerful software to help people monitor and analyze their bodies and diagnose conditions. […] Zee Aero, a start-up in Mountain View, has a couple of former SpaceX staffers on hand and is working on a secretive new type of transport. A flying car at last? Perhaps. […] For Fadell, Musk’s work sits at the highest of this trend. “Whether it’s Tesla or SpaceX, you are talking about combining the old-world science of manufacturing with low-cost, consumer-grade technology. You put these things together, and they morph into something we have never seen before. All of a sudden there is a wholesale change. It’s a step function.” [Pages 351-52] Doesn’t this remind you of Zero to One by peter thiel.

Larry Page about Musk

Google has invested more than just about any other technology company into’s Musk’s sort of moon-shot projects: self-driving cars, robots, and even a cash prize to get a machine onto the moon cheaply. The company, however, operates under a set of constraints and expectations that come with employing tens of thousands of people and being analyzed constantly by investors. It’s with this in mind that Page sometimes feels a bit envious of Musk, who has managed to make radical ideas the basis of his companies. “If you think about Silicon Valley or corporate leaders in general, they’re not usually lacking in money,” Page said. “If you have all this money, which presumably you’re going to give away and couldn’t even spend it all if you wanted to, why then are you devoting your time to a company that’s not really doing anything good? That’s why I find Elon to be an inspiring example. He said, ‘Well, what should I really do in this world? Solve cars, global warming, and make humans multiplanetary.’ I mean those are pretty compelling goals, and now he has businesses to do that.” [Page 353]

Larry Page about education

This is a very interesting piece [pages 355-56] not linked to Musk: “I don’t think we’re doing a good job as a society deciding what things are really important to do.” Page said. “I think like we’re just not educating people in this kind of general way. You should have a pretty broad engineering and scientific background. You have some leadership training and a bit of MBA training or knowledge of how to run things, organize stuff, and raise money. I don’t think most people are doing that, and it’s a big problem. Engineers are usually trained in a very fixed area. When you’re able to think about all of these disciplines together, you kind of think differently and can dream of much crazier things and how they might work. I think that’s really an important thing for the world. That’s how we make progress.” [Pages 355-56]

Some final words about Musk

It’s funny in a way that Musk spends so much time talking about man’s survival but isn’t willing to address the consequences of what his lifestyle does to his body. “Elon came to the conclusion early in his career that life is short,” Straubel said. “If you really embrace this, it leaves you with the obvious conclusion that you should be working as hard as you can”. Suffering though has always been Musk’s thing. The kids at school tortured him. His father played brutal mind games. Musk then abused himself by working inhumane hours and forever pushing his businesses to the edge. The idea of work-life balance seems meaningless in this context. […] He feels that the suffering helped to make him who he is and gave him extra reserves of strength and will. [Page 356]

However….

As Thiel said, Musk may well have gone so far as to give people hope and to have renewed their faith in what technology can do for mankind. [Page 356]

Space Invaders in Paris and Tokyo: an update

Not directly linked to my main blog activity, I publish from time to time about Street Art. The summer is a good time for summarize findings and I did some work about my Paris and Tokyo’s quest of Space Invaders. Paris has now 1167 invasions. Tokyo is still at 138 but I could find old ones online.

3-SI

Here are also two other nice works. First my favorite artist, “Mirror Man” from Pully (Switzerland) who created this in Paris.
IMG_6528

– Breaking Bad
1-breakingbad-s

– Cost
2-cost-s

More “seriously” here are some stats about Paris.
SI-PA-stats3

So my synthesis, which you also find on SlideShare gives this:

Paris: from PA_1000 to PA_1167

Toyko

Elon Musk – the new Steve Jobs (part 2)

After reading chapters 8 & 9 of Elon Musk and after my recent post about the Tesla and SpaceX leader, I am now fully convinced Elon Musk is much more than Steve Jobs. He has brought back optimism to Silicon Valley, to the USA and maybe to the world. He has also brought back hardware and engineering in a world that was thinking everything was virtual and online. Mea culpa, I felt the same; I felt that software and intelligence was what was driving the world. Elon Musk has shown that tinkering, experimenting coupled with an ambitious vision could change the world.

elonmusk-vance

“When the launch was successful [SpaceX 4th launch but the 1st to be successful], everyone burst into tears”, Kimbal said. “It was one of the most emotional experiences I’ve had.” Musk left the control room and walked out of the factory floor, where he received a rock’s star welcome. “Well, that was freaking awesome,“ he said. “There are a lot of people who thought we couldn’t do it – a lot actually – but as the saying goes, ‘the fourth time is the charm’, right? There are only a handful of countries on Earth that have done this. It’s normally a country thing, not a company thing…. [Page 203]

But the reader should not forget the tough reality: For Gracias, the Tesla and SpaceX investor and Musk’s friend, the 2008 period told him everything he would ever need to know about Musk’s character. He saw a man who arrived in the United States with nothing, who had lost a child, who was being pilloried in the press by reporters and his ex-wife and who verged on having his life’s work destroyed. “He has the ability to work harder and endure more stress than anyone I’ve met”, Gracias said. “What he went through in 2008 would have broken anyone else. He didn’t just survive. He kept working and stayed focused.” That ability to stay focused in the midst of a crisis stands as one of Musk’s main advantages over other executives and competitors. “Most people who are under that sort of pressure fray,” Gracias said. “their decisions go bad. Elon gets hyperrational. He’s still able to make very clear, long-term decisions. The harder it gets, the better he gets. Anyone who saw what he went through firsthand came away with more respect for the guy. I’ve just never seen anything like his ability to take pain”. [Page 211]

Again, Musk is not afraid of risk-taking. As 2008 came to an end, Musk had run out of money […] The couple had to start borrowing hundreds of thousands of dollars from Musk’s friend Skoll and Riley’s parents offered to remortgage their house. Musk no longer flew his jet back and forth between Los Angeles and Silicon Valley. He took Southwest. [Pages 206-207] He manage to save Tesla, The deal ended up closing on Christmas Eve, hours before Tesla would have gone bankrupt. Musk had just a few hundred thousand dollars left and could not have made payroll the next day. […] On December 23, 2008, however, SpaceX received a shock. People inside NASA had backed SpaceX to become a supplier for the ISS. The company received $1.6 billion as payment for twelve flights to the Space Station. [Page 210]

It is also interesting to mention Musk’s hiring methods! The SpaceX hiring model places some emphasis on getting top marks at top schools. But most of the attention goes toward spotting engineers who have exhibited type A personality traits over the course of their lives. The company’s recruiters look for people who might excel at robot-building competitions or who are car-racing hobbyists who have built unusual vehicles. The object is to find individuals who ooze passion, can work well as part of a team, and have real-world experience bending metal. “Even if you’re someone who writes code for your job you need to understand how mechanical things work. We were looking for people that had been building things since they were little.” [Page 220] Interviews are tough with puzzles, code writing and Musk interviewed the first 1’000 employees de SpaceX.

I am far from finished but needs to end up for now with my usual cap. tables for Musk’s ventures: 1-Paypal, 2-Tesla Motors, 3-SolarCity which he did not found but backed from the early days and the two founders are his cousins, 4-finally a tentative cap. table based on what SpaceX announced.

1-Paypal
Musk-PayPal-Captable

2-Tesla Motors
Musk-Tesla-Captable

Musk-Tesla-Rounds

3-SolarCity
Musk-SolarCity-Captable

4-SpaceX
Musk-SpaceX-Captable

Elon Musk – the new Steve Jobs

Elon Musk is probably the new Steve Jobs. He might be much more even. His early life, his private life has not been simple and easy. He is probably as tough with a similar distorted perception of reality as the Apple hero. But as an entrepreneur, he may have a broader vision and ambition. He began small and simple with Zip2, an early Internet yellow pages start-up, which he still sold for $307M, followed by X.com which had the ambition to change the banking system before it merged with Confinity to become Paypal. Both were just experiments! He learnt and developed his “grandes oeuvres”: Tesla and SpaceX.

Ashlee Vance has just written a remarkable and fascinating book Elon Musk, Tesla, SpaceX, and the Quest for A Fantastic Future about his life and achievements.

elonmusk-vance

Zip2 – 1995 – 3 co-founders (Elon and Kimbal Musk, Greg Kouri) $3M with MDV – sold to Compaq / AltaVista for $307M on April 1, 1999 after more than $50M additional funding. Elon made $22M, Kimbal $15M, MDV 22x its money.

X.com – 1999 – 4 co-founders (Ed Ho, Harris Fricker, Christopher Payne, Elon Musk) and early employee, Scott Anderson. Bill Harris, CEO in Dec. 99. Merges with Confinity in March 2000. Musk netted $250M from the sale to eBay or $180M after taxes.

All told, Musk invested $12M into X.com, leaving him, after taxes, with $4M or so for personal use. “That’s part of what separates Elon from mere mortals,” said Ed Ho, the former Zip2 executive, who went to cofound X.com. “He’s willing to take an insane amount of personal risk. When you do a deal like that, it either pays off or you end up in a bus shelter somewhere.” [Page 80]

Musk was replaced as CEO while on honeymoon. But when it became clear that the company had already moved on, Musk relented. “I talked to Moritz [from Sequoia] and a few others,” Musk said. “It wasn’t so much that I wanted to be CEO but more like ‘Hey, I think there are some pretty important things that need to happen, and if I’m not CEO, I’m not sure they are going to happen.’ But then I talked to Max [Levchin] and Peter [Thiel], and it seemed they would make these things happen. So then, I mean, it’s not the end of the world. […] Throughout this ordeal, however, he showed incredible restraint. He embraced the role of being an advisor to the company and kept investing in it, increasing his take as PayPal’s largest shareholder. “You would expect someone in Elon’s position to be bitter and vindictive, but he wasn’t”, said Botha [from Sequoia], “He supported Peter. He was a prince.” [Pages 88-89]

Musk is direct and tough but “He comes from the school of thought in the public relations world that you let no inaccuracy go uncorrected” [page 91]. An example of toughness in his private life: “He was constantly remarking on the ways he found me lacking. ‘I am your wife,’ I told him repeatedly, ‘not your employee’. ‘If you were my employee,’ he said just as often, ‘I would fire you.’” [Page 94]. He married and divorced 3 times, first with Justine Wilson, with whom Musk had 1 baby who died after 10 weeks, then 2 twins, then 3 triplets, then twice with Talulah Riley.

Chapters 6 and 7 are a MUST READ. They show the drive, craziness, vision, obsession that Musk put into building rockets and electric cars, combining the chaos of start-ups and the structure needed for manufacturing.

SpaceX – Space Exploration Technologies Corp. – 2002 – https://en.wikipedia.org/wiki/SpaceX. The [PayPal] deal gave Musk some liquidity and supplied him with more than $100M to throw at SpaceX.

Tesla Motors – founded on July 1st 2003 by Martin Eberhard and Marc Tarpenning who had sold a previous start-ups for $187M in 2000. In parallel Musk helped J. B. Straubel, a passionate Stanford student, who had seen batteries had reached efficiency possibly useful to electric cars. Musk invested $6.5M in Tesla and Straubel joined in May 2004. On January 27, 2005, the 18 Tesla employees had built the first prototype. Musk invested another $9M in a $13M round. In May 2006 Tesla had 100 employees. Musk invested another $12M together with DFJ, Larry Page, Sergey Brin and others for a new $40M round. In the middle of 2007, tesla had grown to 260 employees. [page 165]

There is an interesting section about Detroit and how different its culture is from Silicon Valley [Page 164¡: Every time Tesla interacted with Detroit it received a reminder of how the once-great city had been separated from its own can-do culture. Tesla tried to lease a small office in Detroit. The costs were incredibly low compared with Space in Silicon Valley, but the city’s bureaucracy made getting just a basic office an ordeal. The building’s owner wanted to see seven years of audited financial from Tesla, which was still a private company. Then the building owner wanted two years’ worth of advanced rent. Tesla had about $50 million in the bank and could have bought the building outright. “In Silicon Valley, you say you’re backed by a venture capitalist, and that’s the end of the negotiation.” Tarpenning said. “But everything was like that in Detroit. We’d get FedEx boxes, and they couldn’t even decide who should sign for the packages”.

Then fights began between Musk and Eberhard: The engineers credited Eberhard with making quick, crisp decisions. […] Musk wanted changes that started to delay the Roadster, Musk kept pushing the car to be more comfortable. […] Eberhard groused that these features were slowing the company down. […] The company as a whole was sympathetic to Martin [Page 165]. Many issues began to appear, technical problems such as the transmission, overall costs issues and finally delays in delivering the Roadster to customers who had prepaid for it.

In August 2007, Tesla’s board demoted Eberhard to president of technology. Most of the employees were tired; Tesla was running out of money after $140M spent. In the meantime, SpaceX failed with its first two rocked launches. And musk filed for divorce. When the 2008 crisis burst out, Musk was in personal and business troubles with his two companies.

More to come if I love as chapters 8-11.

PS – a short reminder about previous posts about Elon Musk:
– June 3, 2010: What makes a good technology company? A mastery of fear and envy.
– March 8, 2010: Tesla Motors and Paypal, a tale of two founders

Startup Land : the Zendesk adventure from Denmark to Silicon Valley to IPO

Many of my friends and colleagues tell me that video and movies are nowadays better than books for documenting real life. I still feel there is in books a depth I do not find anywhere else. A question of generations, probably. HBO’s Silicon Valley may be a funny and close-to-reality account of what high-tech entrepreneurship is but Startup Land is a great example of why I still prefer books. I did not find everything I was looking for – and I will give one example below – but I could feel the authenticity and even the emotion from Mikkel Svane’s account of what building a start-up and a product means. So let me share with you a few lessons from Startup Land.

Startup-Land-the-book

The motivation to start

“We felt that we needed to make a change before it was too late. We all know that people grow more risk-averse over time. As we start to have houses and mortgages, and kids and cars, and schools and institutions, we start to settle. We invest a lot of time in relationships with friends and neighbors, and making big moves becomes harder. We become less and less willing to just flush everything down the drain and start all over.” [Page 1]

No recipe

“Along the way, I’ll share the unconventional advice you learn only in the trenches. I am allergic to pat business advice that aims to give some formula for success. I’ve learned there is no formula for success; the world moves too fast for any formula to last, and people are far too creative—always iterating and finding a better way.” [Page 6]

About failure

In Silicon Valley there’s a lot of talk about failure—there’s almost a celebration of failure. People recite mantras about “failing fast,” and successful people are always ready to tell you what they learned from their failures, claiming they wouldn’t be where they are today without their previous spectacular mess-ups. To me, having experienced the disappointment that comes with failure, all this cheer is a little odd. The truth is, in my experience, failure is a terrible thing. Not being able to pay your bills is a terrible thing. Letting people go and disappointing them and their families is a terrible thing. Not delivering on your promises to customers who believed in you is a terrible thing. Sure, you learn from these ordeals, but there is nothing positive about the failure that led you there. I learned there is an important distinction between promoting a culture that doesn’t make people afraid of making and admitting mistakes, and having a culture that says failure is great. Failure is not something to be proud of. But failure is something you can recover from. [Pages 15-16]

There are other nice thoughts about “boring is beautiful” [page 23], “working from home” [page 34], “money isn’t only in your bank account, it’s also in your head” [page 35], and an “unconventional (possibly illegal) hiring checklist” [page 127]

I will quote Svane about investors [page 61]: “I learned an important lesson in this experience – one that influenced all of the investor decision we’ve made since then. There is a vast spectrum of investors. Professional investors are extremely aware of the fact that they will be successful only if everyone else is successful. Great investors have unique relationships with founders, and they are dedicated to growing the company the right way. Mediocre and bad investors work around founders, and the company end in disaster. The problem is, early on many startups have few options, and they have to deal with amateur investors who are shortsighted and concerned with optimizing their own position.” [and page 93]: “Good investors understand that the founding team often is what carries the spirit of a company and makes it what it is.”

And about growth [page 74]: “Even after the seed round with Christoph Janz, we were still looking for investors. If you’ve never been in a startup this may seem odd, but when you’re a startup founder you’re basically always fund-raising. Building a company costs money, and the faster you grow, the more cash it requires. Of course, that’s not the case for all startups – there are definitely examples of companies that have come a long way on their own positive cash flow – but the general rule is that if you optimize for profitability, you sacrifice growth. And for a startup, it’s all about growth.”

In May 2014, Zendesk went public and the team was so extatic, many pictures were tweeted! The company raised $100M at $8 per share. They had a secondary offering at $22.75 raising more than $160M for the company. In 2014, Zendesk revenue was $127M!… and its loss $67M.

Zendesk-IPO

There was one piece of information I never found neither in Startup Land nor in the IPO filings: Zendesk has three founders, Mikkel Svane, CEO and author of the book. Alexander Aghassipour, Chief Product Officer and Morten Primdahl, CTO. I am a fan of cap. tables (as you may know or can see here in Equity split in 305 high-tech start-ups with founders, employees and investors shares) and in particular studying how founders share equity at company foundation. But there is no information about Primdahl ‘s stock. I only have one explanation: On page 37, Svane writes: “the thing about money is, it’s happening in your head. Everyone processes it differently. Aghassipour adnSvane could live with no salary in the early days of Zendesk, but Primdahl could not. It’s possibly he had a salary against less stock. I would love to learn from Savne if I am right or wrong!

Zendesk-captable
Click on picture to enlarge

FT’s Top European Tech. Entrepreneurs

Following my article posted on June 25, entitled Europe and Start-ups : should we worry? Or is there hope? Here is a more detailed analysis of the FT’s Top 50 tech. entrepreneurs. First, you may want to do a quiz: do you know them from their pictures?

FT Top 50 Europe

Before I give you the full list (ranking is from left to right and top to bottom), here are some interesting statistics (I think).

FT Top 50 Europe Stats

The countries are not really surprising whereas the huge presence of Index Ventures, compared to Atomico or even Accel was. American funds, including the best ones, are all around. Interesting too. So how many entrepreneurs did you know…

FT Top 50 Europe List
(click on picture to enlarge – additional sources : Crunchbase and SEC)