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My learning/reading this week (W46 2018)

Er HC November 18, 2018

[Quote] Tyler Cowen: Now as you know, Google Groups never took off, and arguably Google failed with social networks. Maybe, in some ways, that was a blessing in disguise, but given all of the talent you had assembled, what was it that was missing in the Google cultural DNA that made it hard to succeed with social networks?

Eric Schmidt: Well, first place, I need to take responsibility for that failure. There were plenty of things that went unwell, but I think that in my CEO-ship, that was probably the one that I missed the biggest.

And my answer is because we didn’t use it, that we were of the age where we were more comfortable with telephones and email and that kind of stuff, and this was emerging. And there really was a slightly younger generation that was really driving it. The stuff was invented well past when I was in college.

And because we didn’t collectively use it, I suspect we didn’t fully understand how to do it. I think we’ve remedied this. For example, today we have quite a powerful social network embedded inside of YouTube, but I think it would be fair to say that the rise of Facebook, etcetera, occurred on my watch.

[...]

Tyler Cowen: Now some very general questions. If you could make one reform to American corporate governance, what would it be?

Eric Schmidt: Longer time frames. Pretty much everybody agrees that the quarterly cycle makes it very difficult for companies to invest and do . . .

Tyler Cowen: But that’s voluntary though, right? So companies could move away.

Eric Schmidt: It isn’t really voluntary because . . . Remember, systems run based on alignment of incentives. If you create a situation where, when you get promoted, you get a rug in your office, and if you’re not promoted, you don’t have a rug, then you’ve created a market for a rug. So my goal was always to not have a market for the rug.

I don’t want people to be focused on the wrong incentives. I want them to be focused on the right incentives, which is to change the world, have an impact, have scale, deliver great products, serve the customers.

So what I worry about is that, in companies where you have misalignment between shareholder interests, hedge funds, short-term interest, short-term owners, I’d rather have long-term shareholders in corporations. I think it would produce better governance.

Tyler Cowen: So the quality of the shareholders, you think is the key feature here?

Eric Schmidt: Well, you don’t get to choose your shareholders unless you’re a private company.

Tyler Cowen: Sure.

Eric Schmidt: But my point is that in a situation where the shareholders can overthrow anything, you can have all sorts of interventions. You might not be getting optimal long-term governance. Most of the companies that I’m aware of are more focused on short-term earnings and paying their debts and so forth and so on, than they are building for the long term.

And most of their owners won’t reward them for taking risk, even if risk is the right thing for them to take. And that’s why, ultimately, you get sort of sheepish leadership as opposed to aggressive leadership.

One of the great things about Google, is, because we have a two-class system — now three-class system — we feel somewhat insulated from that, although I can tell you even then, the share price to our employees matters. We give options, people pay a lot of attention to these things.

[...]

Tyler Cowen: What is the chance, in your view, that the Internet simply fragments globally over, say, the next 20 years? China has the Great Firewall. The European Union is going its own direction with tech and Internet regulation, and it’s mostly not their companies they’re regulating. What’s the chance that, say, 10, 15 years, we just have three or four separate Internets?

Eric Schmidt: We spend a lot of time worrying about this. In one of my books, we wrote quite a bit about this subject, we called it balkanization. My friend from the Balkan says, “Please don’t use that term.”

So you use the right term, which is to splinter. I think the most likely scenario now is not splintering but rather a bifurcation into a Chinese-led Internet and a non-Chinese-led Internet, presumably led by America.

If you look in China — I was just there — the scale of the companies that are being built, the services that are being built, the wealth that has been created is phenomenal. The Chinese Internet is a greater percentage of the GDP of China, which is a big number, than the same percentage in the United States, which is also a big number.

So, if you think of China as like, “Oh, yeah, you’re having good with Internet,” you’re missing the point. Globalization means they get to play too. And I think you’re going to see a fantastic leadership in products and services from China, and there’s a real danger that, along with those fantastic products and services, comes a different leadership regime from the government, which is censorship and controls and limits and so forth.

And if you look at the way the BRI works, which is their Belt and Road Initiative — sort of 60-ish countries — it’s perfectly possible that those countries will begin to take on the infrastructure that China has as well, with some loss of freedom. [/Quote]



[Quote] Satya Nadella: The thing I would say I have learned is the biggest challenge comes at some point anything that has hyper scale will eventually taper off. And when it tapers off, your ability to invent the next thing:

If it was just a technical shift, you have much higher percentage chance of hitting that - just because you have a big R&D budget, you would have spent [enough] to cover your base.

But if it is a business model shift which is fundamentally destroying the margin that you sort of celebrated all these days, then it is a hard one.

So for us, for example the mobile thing was just difficult because it really changed into two ways:
it became hardware gross margin for Apple; and it became services on the backend for Google.

You know and here we were with an OEM based business model and that transition was the hardest for us - which is we needed to reinvent our business model and that's where I would say we faltered and whereas in the Cloud we didn't.

We sort of decided that we were not going to be beholden to the old business model. We were not only going to change how we build products but we were also going to change the business model on the products. [/Quote]



[Quote] Question: What's the most important thing that you personally learned at Apple, that you're doing at NeXT?

Answer: Good question I'm not sure I learned this when I was at Apple, but I learned it based on the data when I was at Apple. And that is, I now take a longer-term view on people.

In other words, when I see something not being done right, my first reaction isn't to go fix it.

It's to say, we're building a team here.

And we're going to do great stuff for the next decade, not just the next year, and so what do I need to do to help so that the person that's screwing up learns versus how do I fix the problem?

And that's painful sometimes.

And I still have that first instinct to go fix the problem.

But that's taking a longer-term view and people is probably the biggest thing that's changed... [/Quote]




Transcript of the Talk:
[Quote] Question: Mr. Jobs, you’re a bright and influential man. It’s sad and clear that on several counts you’ve discussed you don’t know what you’re talking about. I would like, for example, for you to express in clear terms, how, say Java, in any of its incarnations, expresses the ideas embodied in OpenDoc. And when you’ve finished with that, perhaps you could tell us what you personally have been doing for the last seven years.

Answer: Uh… You know, you can please some of the people some of the time, but…

One of the hardest things, when you’re trying to affect change, is that people like this gentlemen are right in some areas. I’m sure there are some things OpenDoc does, probably even more than that I’m not familiar with, that nothing else out there does. And I’m sure that you can make some demos, maybe a small commercial app, that demonstrates those things. The hardest thing is, how does that fit into a cohesive larger vision that’s gonna allow you to sell 8 billion dollars — 10 billion dollars of product a year?

One of the things I’ve always found is that you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it. I’ve made this mistake probably more than anybody else in this room, and I’ve got the scar tissue to prove it. And I know that it’s the case. As we have tried to come up with a strategy and a vision for Apple, it started with “What incredible benefits can we give to the customer? Where can we take the customer?” not starting with, “Let’s sit down with the engineers and figure out what awesome technology we have and then how are we going to market that. And I think that’s the right path to take. [/Quote]


5) "Meituan vs. Alibaba vs. Didi vs. Ctrip: Why China’s Internet Giants Are Colliding In Local Services (Pt 3 of 4)" vy Jeffrey Towson

Source: http://jefftowson.com/2018/09/meituan-vs-alibaba-vs-didi-vs-ctrip-why-chinas-internet-giants-are-colliding-in-local-services-pt-3-of-4/

[Quote] “Local services” has been a hot topic this year. And we have seen big local services moves by many of China’s digital giants.
  • Tencent-backed Meituan-Dianping bought Mobike (a bike-sharing service). They also did some trials in ride-sharing (another local service). Now they have always been a services company (food delivery, hotel and restaurant reservations, etc.) but they are clearly expanding into transportation and other local services. They have also opened two “new retail” type supermarkets.
  • Ride-sharing giant Didi Chuxing has launched food delivery in 5(?) cities. And they have received a $500M investment from Booking Holdings, which looks like a move towards travel and hospitality services. Plus they are opening their driver services to all car owners (Xiaoju Auto Solutions). So they are deepening in mobility services and adding new value-added services to this.
  • Alibaba is expanding from e-commerce to local services on multiple fronts. They now offer hotel reservations (Fliggy). They are in bike-sharing (Hellobike). They have shown indications of going into ride-sharing via AutoNavi. And, most importantly, they are making big moves in Ele.me, Koubei and delivery overall. Per Joe Tsai, “Alibaba’s three-pronged consumer offerings in retail, entertainment and local services will be the long-term drivers of value creation as the Chinese middle class expands and more of these consumers demand a higher-quality lifestyle.”
  • Plus Alibaba’s “new retail” initiatives all depend on local services, including delivery and in-store services. The Hema supermarkets offer food preparation, beauty services, and so on (Hema supermarkets basically function as a store plus logistic hub plus service platform). And delivery is strongly integrated into all their new retail structures (mom-and-pop stores, convenience stores, supermarkets, department stores, etc.)
  • Ctrip continues to expand internationally and is staying pretty focused on hospitality and travel. They offer hotels, trains, and tour groups. But they are increasingly customizing travel and tours. And they have taken steps into ride-sharing.
So what is going on? Why are so many of China’s digital giants moving into local services right now?

At the simplest level, it is because there are opportunities for synergies in adjacent businesses. It’s easy to add new related services when you already have customers (and data). For example, Alibaba users can get Ele.me super membership by buying a cycling card for Hellobike. And they can access Ele.me via the Hellobike App. The customer acquisition costs are pretty low.

But more importantly, there is a new phase in the fight for Chinese consumers and their increasing discretionary spending.

Each of the above companies dominates a particular area (Didi in mobility, Alibaba in e-commerce, Ctrip in travel / hospitality, Meituan in food delivery). And they are all adding local services to their offerings to meet the increasing expectations of their own consumers. There is a strong pressure to offer an increasingly comprehensive and seamless set of products and services. Everyone is trying to keep up with their customers. And nobody wants to be outflanked. The problem is nobody quite knows where the industry boundaries are going to end up. Do we have offer everything? [/Quote]


6) "Mental Models: How to Train Your Brain to Think in New Ways" by James Clear

Source: https://jamesclear.com/feynman-mental-models

[Quote] Feynman received his undergraduate degree from MIT and his Ph.D. from Princeton. During that time, he developed a reputation for waltzing into the math department and solving problems that the brilliant Ph.D. students couldn’t solve.

When people asked how he did it, Feynman claimed that his secret weapon was not his intelligence, but rather a strategy he learned in high school. According to Feynman, his high school physics teacher asked him to stay after class one day and gave him a challenge.

“Feynman,” the teacher said, “you talk too much and you make too much noise. I know why. You’re bored. So I’m going to give you a book. You go up there in the back, in the corner, and study this book, and when you know everything that’s in this book, you can talk again.”

So each day, Feynman would hide in the back of the classroom and study the book—Advanced Calculus by Woods—while the rest of the class continued with their regular lessons. And it was while studying this old calculus textbook that Feynman began to develop his own set of mental models.

“That book showed how to differentiate parameters under the integral sign,” Feynman wrote. “It turns out that’s not taught very much in the universities; they don’t emphasize it. But I caught on how to use that method, and I used that one damn tool again and again. So because I was self-taught using that book, I had peculiar methods of doing integrals.”

“The result was, when the guys at MIT or Princeton had trouble doing a certain integral, it was because they couldn’t do it with the standard methods they had learned in school. If it was a contour integration, they would have found it; if it was a simple series expansion, they would have found it. Then I come along and try differentiating under the integral sign, and often it worked. So I got a great reputation for doing integrals, only because my box of tools was different from everybody else’s, and they had tried all their tools on it before giving the problem to me.”

Every Ph.D. student at Princeton and MIT is brilliant. What separated Feynman from his peers wasn't necessarily raw intelligence. It was the way he saw the problem. He had a broader set of mental models.

A mental model is an explanation of how something works. It is a concept, framework, or worldview that you carry around in your mind to help you interpret the world and understand the relationship between things. Mental models are deeply held beliefs about how the world works.

For example, supply and demand is a mental model that helps you understand how the economy works. Game theory is a mental model that helps you understand how relationships and trust work. Entropy is a mental model that helps you understand how disorder and decay work.

Mental models guide your perception and behavior. They are the thinking tools that you use to understand life, make decisions, and solve problems. Learning a new mental model gives you a new way to see the world—like Richard Feynman learning a new math technique.

Mental models are imperfect, but useful. There is no single mental model from physics or engineering, for example, that provides a flawless explanation of the entire universe, but the best mental models from those disciplines have allowed us to build bridges and roads, develop new technologies, and even travel to outer space. As historian Yuval Noah Harari puts it, “Scientists generally agree that no theory is 100 percent correct. Thus, the real test of knowledge is not truth, but utility.”

The best mental models are the ideas with the most utility. They are broadly useful in daily life. Understanding these concepts will help you make wiser choices and take better actions. This is why developing a broad base of mental models is critical for anyone interested in thinking clearly, rationally, and effectively.

Expanding your set of mental models is something experts need to work on just as much as novices. We all have our favorite mental models, the ones we naturally default to as an explanation for how or why something happened. As you grow older and develop expertise in a certain area, you tend to favor the mental models that are most familiar to you.

Here's the problem: when a certain worldview dominates your thinking, you’ll try to explain every problem you face through that worldview. This pitfall is particularly easy to slip into when you're smart or talented in a given area.

The more you master a single mental model, the more likely it becomes that this mental model will be your downfall because you’ll start applying it indiscriminately to every problem. What looks like expertise is often a limitation. As the common proverb says, “If all you have is a hammer, everything looks like a nail.”

When a certain worldview dominates your thinking, you’ll try to explain every problem you face through that worldview.

[...]

All perspectives hold some truth. None of them contain the complete truth.

Relying on a narrow set of thinking tools is like wearing a mental straitjacket. Your cognitive range of motion is limited. When your set of mental models is limited, so is your potential for finding a solution. In order to unleash your full potential, you have to collect a range of mental models. You have to build out your decision making toolbox. Thus, the secret to great thinking is to learn and employ a variety of mental models.

The process of accumulating mental models is somewhat like improving your vision. Each eye can see something on its own. But if you cover one of them, you lose part of the scene. It’s impossible to see the full picture when you’re only looking through one eye.

Similarly, mental models provide an internal picture of how the world works. We should continuously upgrade and improve the quality of this picture. This means reading widely from the best books, studying the fundamentals of seemingly unrelated fields, and learning from people with wildly different life experiences.

The mind's eye needs a variety of mental models to piece together a complete picture of how the world works. The more sources you have to draw upon, the clearer your thinking becomes. As the philosopher Alain de Botton notes, “The chief enemy of good decisions is a lack of sufficient perspectives on a problem.”

In school, we tend to separate knowledge into different silos—biology, economics, history, physics, philosophy. In the real world, information is rarely divided into neatly defined categories. In the words of Charlie Munger, “All the wisdom of the world is not to be found in one little academic department.”

World-class thinkers are often silo-free thinkers. They avoid looking at life through the lens of one subject. Instead, they develop “liquid knowledge” that flows easily from one topic to the next.

This is why it is important to not only learn new mental models, but to consider how they connect with one another. Creativity and innovation often arise at the intersection of ideas. By spotting the links between various mental models, you can identify solutions that most people overlook. [/Quote]


7) "Design thinking, explained" by Rebecca Linke

Source: http://mitsloan.mit.edu/ideas-made-to-matter/design-thinking-explained


8) "The right way to spend your innovation budget" by Peder Inge Furseth and Richard Cuthbertson

Source: https://hbr.org/2018/08/the-right-way-to-spend-your-innovation-budget


9) "What to do when a good employee stops trying to grow" by Whitney Johnson

Source: https://hbr.org/2018/08/what-to-do-when-a-good-employee-stops-trying-to-grow


10) "Communicating Effectively: How to Inspire and Convince" by TU Delft Online Learning

Source: https://courses.edx.org/courses/course-v1:DelftX+LEfE3x+3T2018/course/

The 2nd module of the online course offered by TU Delft Online Learning elaborates the danger of engaging the opponents in their frame of issue (step into your opponent’s frame).

[Quote] When you step into your opponent’s frame:
  • You give free airtime to your opponent’s frame
  • You put yourself on the defensive
  • You’ll probably have a heavier burden of proof than your opponent

When you enter into your opponent's frame, two more mechanisms can emerge:
  • Your response might be complex and vulnerable
  • Negating a frame = evoking a frame. [/Quote]
Er HC

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