Georgetown Class Essay – The Structure of Global Industries, Pt 1

I’m writing class essays while I’m here at Georgetown to ensure I translate everything I’m learning into my own words and assist with deep learning. After orientation, we began a three-week, two-class intensive with 4.5 credits packed into thirteen days of classroom time. The below covers my main learnings from the economics-focused class, Structure of Global Industries.

Credit for good material goes to Georgetown and their faculty. Mistakes or omissions are mine.

The Structure of Global Industries, Pt 1

1. Economic Frameworks

Supply and Demand
Over and over again the concepts in class came down to different applications of supply and demand. The law of supply says that increased price increases quantity produced and that a decrease in price decreases quantity produced. This is coupled with the law of demand that says the a increase in price decreases demand and a decrease in price increases demand. These fundamental laws interact with each other to find a price and quantity equilibrium, where the price entices producers to make this quantity (supply) and the price entices enough consumers to purchase (demand).

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Quick examples:
– A finite of supply of gold plus an increased demand for gold has led to an increase in price
– Long lines outside Apple stores when new phones release (price increase here is normal phone cost + hours spent waiting)

Elasticity
If the price changes on a good, what will the response be? Will demand suddenly increase? An example of inelasticity would be a 10% increase in the price of Netflix. For most of us, that wouldn’t change our purchase of that subscription. This means the demand here is inelastic. A counter example could be a $0.50 increase in the price of Orbits gum. Many more people would switch to a different brand of gum if the price increased.

High elasticity often happens at the upper end of the price axis, where price is high and quantity produced is low (think luxury goods). Low elasticity often happens at the upper end of the quantity axis, where price is lower (think commodities).

Production possibility frontier
This was a helpful thought exercise in understanding international trade. Imagine a country that can produce only two things. Let’s keep it paleolithic and say this country is made up of a caveman and a cavewoman who can catch fish and pick berries.

If the caveman picks berries all day he can pick two units of berries. If the cavewoman fishes all day she can catch two units of fish. For the sake of the thought exercise, assume a unit of fish and a unit of berries are equal.

1 caveman day = 2 units of berries
1 cavewoman day = 2 units of fish
2 total days = 4 total units

Let’s say now that the caveman goes to help the cavewoman catch fish. Unfortunately he’s too slow and only can catch one unit of fish per day. The next day, the cavewoman goes to help the caveman pick berries. She’s not very good at picking berries so she can only pick one unit of berries per day.

1 caveman day fishing = 1 unit of fish
1 cavewoman day fishing = 2 units of fish
2 total days = 3 total units

OR

1 caveman day picking berries = 2 units of berries
1 cavewoman day picking berries = 1 units of berries
2 total days = 3 total units

It’s clear that most they can produce is four units. This is the production possibility frontier – the maximum units they can produce.

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Productivity and the two-good model
Now we’ll assume that there are two paleolithic countries, each with one caveman and one cavewoman. Country A has an abundance of rivers and lakes and together they can catch 6 units of fish per day, but they don’t have much fertile land so together they can only pick 2 units of berries per day. Country B has the opposite and can catch only 2 units of fish per day but can pick 6 units of berries.

This is where trade becomes beneficial for both countries. Country A benefits by trading 2 units of fish (1/3 day of work for them) for 2 units of berries (a full day of work for them). They have the same total units of food but with trade they have the berries they would have picked in a full day plus 4 units fish. The reverse is true for Country B. They have 6 total units of food (4 units of berries and 2 units of fish).

Country A’s comparative advantage in catching fish gives them an incentive to produce that and trade it for berries. This advantage can come from a number of things: factor abundance (your country naturally has a lot of something), institutions (school, etc), policy (tax incentive to produce something), and sometimes just luck and chance (discovering the wheel).

Purchasing Power Parity (PPP)
This is an economic theory that says the same basket of goods in one economy should cost the same relative amount in another economy. Relative is typically measured as a percentage of GDP. For example, a gallon of milk costing 1% of your average daily wage in Country A should cost the same 1% of average daily wage in Country B. This is helpful when determining exchange rates.

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Parts two and three covering policy and strategy are coming up soon.

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Who to Follow on Twitter in Tech

Since starting business school, I’ve recommended to a number of classmates interested in startups and tech to start using Twitter. The fact that they are ideal Twitter users but somehow aren’t finding value in it is another blog post.

For the first person to whom I made this recommendation, she opened her Twitter app and on her behalf I followed the most interesting and prolific users that I personally followed.

Of course, that’s unsustainable. Below are the people I’ve found most interesting on Twitter.

Side note: Twitter – a good function for new users would be to follow all of the users someone else follows, rather than do this manually. New users would build their feeds with accounts that have already been curated by power users.

VCs/Entrepreneurs/Tech

Marc Andreessen
Chris Sacca
Jason Calacanis
Kevin Rose
Paul Graham
Gary Vaynerchuk
– Startup L. Jackson
KPCB
Walt Mossberg
Adam Bain
Peter Diamandis
Mattermark
– Product Hunt
Melissa Barnes
Tracy Chou
Ellen Chisa
Chris Dixon
Launch Ticker
Re/code
The Verge
Travis Kalanick
Hacker News 20
Hunter Walk
Andy Ellwood
John Doerr
David Heinemeier Hansen
Megan Quinn
TechCrunch
Y Combinator
Benedict Evans
Sam Altman
Dharmesh Shah
Ali Mese
Max Levchin
Steve Blank
Nilofer Merchant
Ryan Allis

Science/Space

Elon Musk
– Science Friday
Curiosity Rover
– Phil Plait
Popular Science
Chris Hadfield
NASA

Other

Startups, Wanderlust, Life Hacking

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Better pitches, unsolved mysteries, how to be an influencer – What I’m Reading (8/22/15)

It’s been a while since I’ve been able to read anything outside of cases and my accounting textbook, so this list is short given the time since I’ve last posted what I’m reading. Lots of good ones in here though. Hopefully I’ll have class essays from pre-term posted soon.

Want a Better Pitch? Watch This. – Andy Raskin
The Economist Science Briefs: A Series of Six Specials on Science’s Unsolved Mysteries  – The Economist
Influencers Aren’t Born, They’re Built – Here’s How – First Round Review
Formula for Entrepreneurial Success – Ev Williams
Accelerators Are The New Business School – TechCrunch
16 Startup Metrics – a16z
Why Design Matters More than Moore – KPCB
Location, Location, Location (Podcast) – a16z
How to go from a nobody to a somebody – Jason Calacanis

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Keep Working

I’ve read two blog posts recently that emphasized the frequency of startups to get distracted by being somewhat successful, getting some funding, etc and drop off the trajectory that got them there.

This has been particularly poignant in business school. There’s pressure from every direction to not miss out on clubs, activities, panels, happy hours, etc. For some careers there’s a clear value in that (consulting) but I think for me it’s probably just a very nice distraction from building and shipping a product.

Still thinking through how to handle this, but here are the posts:

Sam Altman – The Post-YC Slump
Jason Calacanis – Do the work, skip the party

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How I’m Learning to Code (Part 1)

“Software is eating the world.” – Marc Andreesen (@pmarca)

This truth hit me slowly and then over and over and over. After I finished my MBA applications and was able to finally think about anything else, I read a piece on Marc Andreesen in The New Yorker. The article talks about how Andreesen sees the future and it illuminated how software is deeply influencing or fundamentally disrupting almost every industry. Fewer companies and people are capturing more of the economy through the exponential power of software. Example: Instagram sold to Facebook for one billion dollars with just 13 employees.

The world is being overthrown and built again by software companies. I’ve been in on this at Yodle, but not in the software side. The great tech CEOs now all have deep CS knowledge or are coders themselves and that will only be more true in the coming decades. The conclusion for me? Learn a lot more about CS and code.

My first instinct was to just jump in, which I did for an hour or so on Codecademy, a site where you can “learn to code interactively, for free.” That was wrong. It’s a great site and I’ll come back to it but, as I learned when I started golfing, it’s best to start at a super fundamental level to understand what you’re doing instead of grabbing clubs and going to the driving range. I learn better when I understand the big picture, so I started listening through The Innovators, a book on the history of and the teams behind computers and software, by Walter Isaacson, the author of Steve Jobs.

This was very important. It brought context to where software is at now and exposed the most important pillars on which computers and software are built. Microprocessors? Compilers? The book really helped me understand how we’ve arrived in the current environment.

About halfway through the book, a fortuitous Google search led me to Harvard’s CS50 through edX, a very popular class that serves as a perfect next step. The class (so far) has breezed through the history and only touched on it when explaining something, such as a compiler. But it has let me start coding through Scratch, a free resource created at MIT.

So that’s where I am now. After seeing the first crack in software’s illusion of magic, I see it everywhere. I no longer see a new email notification, I see the result of a series of zeroes and ones from a server that came to Google’s server which changed the information it is telling my browser to tell my computer to tell the screen. As stated in a really long but must-read article by Paul Ford titled What is Code?, “It’s amazing any of it works at all.”

More posts to come.

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Great career advice from @Jason

The below is some spot on advice from @Jason. Enjoy.

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1/The most important piece of advice I can give folks starting out: BE GREAT AT AN IMPORTANT SKILL.

The important skills in the world right now include:

a. sales
b. coding
c. product design
d. growth
e. design
f. corporate storyteller

2/REFINE YOUR SKILL FASTER THAN YOUR PEERS.

If you’re a product designer, stop binge-watching TV & read every book on UX. Learn to use every tool you find on the internet.

Many folks will tell you that the world is not a zero sum game, with one person not having to lose at the expense of another winning. This is simply not true, as in most startups there is a very limited number of seats and they go to the people who work the hardest and who have the most skill.

In your career you will find that life is a zero sum game: the winners get the prime positions and the person who comes in second place for that position is the first loser — not the second winner.

3/TAKE YOUR SKILLS TO A STARTUP. PERIOD. FULL STOP.

Don’t worry about your salary, just get enough money to live in a closet close to work. Focus on providing your CEO 10x the value of your contemporaries. Your CEO will notice you, eventually, and she will love you.

CEOs love people who work hard and who refine their skills faster than everyone else (see #2) because those people remind them of themselves. How the f@#4k do you think she got the CEO slot, by waiting in line? By random luck? No, she f@#$king took that slot.

If you’re taking your slot by working harder than everyone else and by refining your skills faster than everyone else she will notice it.

4/ONCE YOU’RE NOTICED BY THE CEO: TAKE ON EVERY PROJECT SHE OFFERS.

Great CEOs obsess over their high performers. They like to talk to them, they like to mentor them and they like to challenge them. Once you prove yourself, it’s time to reap the benefit of being a hard worker with massive skills and the ability to learn new ones.

Never leave work before she does, respond to her emails quickly and without excuses. Here are things to say to her when she gives you amazing responsibilities that will make her love and trust you more.

When your boss asks you to set up the sales department for your startup you say:

“I have never set up a sales department before, but I’m going to find three people who have and suck their brain dry after work. If you know anyone smart I can leverage let me know — if not, I’m off to the races.”

When your boss asks you to set up a blog and podcast for your startup you say:

“I’m on it.” Then you come back to her 24 hours later with a Google Doc and say:

“Here are links to the five best corporate sites I could find, ranked in order of how well I think they’re executed. On each one I listed the three best editorial devices they used. I also put together a list of the platforms they’re using and how often they have each published in the last 60 days. Based on all of this I’d suggest we use Squarespace or WordPress, SoundCloud or this podcast plug-in. We should publish a blog twice a week and spend 2x as much time promoting it as we did writing it. By my estimate this will cost us 20 hours a week of editorial time and 50 hours of setup time. At $25 an hour fully baked it’s a $30,000 year one expense, so if we land three clients for our average enterprise software subscription we break even — at a 20-month LTV, of course.”

Here’s how most folks answer that:

“I’ve never set up a blog.”

or

“Can you just tell me what to do?”

or

“I wasn’t hired to do this.”

I can go for hours on how most folks answer these challenges and then never follow up, forcing their boss to chase them: “How’s that blog and podcast project going?”

There are two types of people in this world: killers and the killed.

You can move yourself from the killed bucket to the killers bucket by ‘doing the work,’ but in my experience only 10% of the people in the world ever make it from deer to tiger.

Counter arguments to working hard include burnout and missing out on life. The truth is, many startups do run on 80-hour weeks. 50 hours a week is probably the norm, and paying your dues early is the quickest way to acquire the skills necessary to become a founder yourself — and accumulate enough wealth never to work again.

Hustle early and often is the best life strategy.

5/TEACH EVERYONE AROUND YOU EVERYTHING YOU’VE LEARNED.

There is always more knowledge to acquire, new skills to be mastered, yet most folks hoard their talents. This is a mistake. Give away everything you’ve learned, and take credit for doing so with your CEO with language like: “I’ve fully briefed our new hire Joe on how the blog and podcast work, and he understands the best practices we’ve established. I’ve asked him to update the best practice document if he learns anything new and to send us those learning points by email as well. What’s next?”

If you level people up you have a new job title: CEO!

Counter arguments to teach everything you know are many, not the least of which is “What will I do if someone does the job better than me?” Simple. You either learn from them or you move on to your next skill.

I’ve had executive assistants take over operations, operations managers take over sales, and sales executives take over marketing. Having multiple, overlapping skills is what defines the best senior executives often: “She started in sales, but now she’s CFO” and “He was a designer but now he runs product” are commonly heard.

6/NEVER GET INVOLVED IN POLITICS & NEVER BE NEGATIVE.

The people who are killed, the deer, tend to huddle around the kitchen or go on cigarette breaks and bitch and complain about everyone and everything at the company. The tigers are too busy killing it to be bothered with such things.

If you see people crying and pouting walk away. Go back to work. Here’s the language:

Deer: “Bitch bitch, moan moan, blame blame, cry cry.”

Tiger: “Hmmm…that’s an interesting take on things. I gotta get shit done, good luck with that.”

You can always focus on the product, and how much it delights, helps, and inspires your customers instead of complaining.

Note: debating how to make your products better is healthy and your observations can be about the negative aspects of your product. However, you shouldn’t be negative on the team and company, you should see problems as opportunities.

7/GET AS MUCH EQUITY AS YOU CAN, DON’T BE AFRAID TO ASK FOR MORE!

If you’ve done 1-6 in the list above, it’s totally warranted to ask for more money or equity. I suggest asking for equity first and letting your boss bring up cash — she will, because she values the equity more (that’s a protip right there).

After five years of crushing it for your CEO, ask her to invest in, and be an advisor to your company…

….and then email me, because I’m the most helpful angel investor in the world. 🙂

8/BRING ORDER TO THE CHAOS, DEFINE REALITY.

In a startup things can often be vague and confusing, because things are just… starting… up. There is no HR manual or sales process, the org chart has never been memorialized and what you’re supposed to do next is confusing.

Oh yeah, things change constantly! Your job is to take what is unclear and make it clear. To take what is a vague concept and make it into a process. To take a system without metrics, strategy, and discipline, and install all of those things simultaneously.

That is called leadership, and leaders at their best define reality.

IN CONCLUSION

Don’t bust your ass and sharpen your skills for your boss alone, do it for yourself and your boss. Taking on all the problems at a startup is not being taken advantage of — it’s taking advantage of.

Slurp up all those problems and knowledge, and leave nothing for anyone else to do. Tackle the hardest problems, because those are the ones that make you strong, especially when you fail at solving them.

Have a great weekend … solving the problems your peers are too stupid and cynical to own.

best @jason

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What I’m Reading (7/2/15)

Energy – Sam Altman
Free Templates for Great Startup Board Decks, Direct from VCs – NextView Ventures
They’re All P2P Employment Agencies – Techcrunch
Why The Church Should Neither Cave Nor Panic About the Decision on Gay Marriage – Dr Russell Moore
Startup Funding – Paul Graham
How to Raise Seed Capital – Nextview Ventures

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