What the book only touched on briefly is measurement as a way to build or modify a habit. Say that you live half a mile from your local grocery store and you go there 3-4 times a week to buy fresh produce. You know that walking there will save you money and add some points into your health jar but than again, you still get into the car and drive there since it is easier. Now, I am walking around with a fitbit (high end pedometer) and ever since I got it, when I get the cue (need vegetable to make salad), I changed the habit of getting into the car since the reward of walking is getting me closer to making my 10,000 steps a day goal. If I didn’t have my fitbit, these steps were not measured and reported back to me and the old habit (car) would have taken over.

Now let’s take a social example: we all know that it is better to buy from a store in our town- tax money goes to our town which in turn improve roads and schools we all use. This is why almost every city has a Shop Local program (see San Jose as an example). Nevertheless, no matter how much money San Jose is spending on this program, it does’t change the shopping habits of its residents. When they want to go out to eat, their cars will auto drive to Los Gatos or Palo Alto, although there are some really good choices in San Jose. There is no problem of awareness or motivation- there is simply not a mental reward for doing in town since no one recognizes the effort one made to change the habit of dinging out of town. But what if San Jose and other cities convinced the credit card company to report back on local shopping? They know where we live and the address of the business- they could easily show us on our statement the percentage spent in our own town and perhaps the city could have recognized top local “investors” this way and give them local points. All of a sudden, the reward of shopping local will be the recognition and after few months of active local shopping, one will not even think of driving out of the way to buy a shirt.

There is a silver lining connecting the two examples: being measured can modify the reward that can change an old habit. In order for it to work, measurement need to happen in the background (fitbit, credit card) so we don’t end up asking people to build a new habit just to change an old one.

Can you think of any other examples?

Here are some dos and don’ts that will make your designer much more productive, and therefore creating better products:

• Your “gut feeling” about the design is not important: We all watch baseball matches but don’t think we can play professionally. We all watch hospital dramas but don’t think we can operate on anyone. We all use  web products but we DO think we can design them better than the designer we hired. Your design expert is the designer you hired. If he/she are not good enough, replace them. You are unlikely to be better than them.
• “I am the target and if I don’t like it, no one will”: But you are not. You are a product manager or a tech executive living in NY or San Francisco. You are involved in the product 24/7. You can’t possibly be the target market (unless you want the market to be = 1)
• “I showed it to my girlfriend/best friend and she hated it”: don’t ever bring the girlfriend to the discussion. Everyone knows that she is not objective and you are not objective in translating her views.
• “But the competition built it this way”: so what? how do you know that the feature is successful? Why would it work for your different product? Copying is always risky as you can never copy the thought process, only the feature in isolation.

The above doesn’t mean you shouldn’t have an opinion about design. Of course you should. You just need to use different tools to explore if your “gut feeling” is right or wrong:

• Ask questions, don’t share opinions: It is possible that your designer didn’t get the use case in full. It is possible that her thought process was wrong and if she is a good designer, she will be happy to improve on it. Telling her that you don’t think the design will work is nothing she can work with. Ask questions like: “What did you try to achieve in this design”? “What do you think the user did before he got to this page?” or “What is the most important thing for the user to do on this page and how does the design support it?” . Through these questions you can understand if strategy and design are aligned and it gives the designer a real feedback she can use when iterating on the design, instead of simply redoing it.
• Don’t argue, measure- you still don’t see things eye to eye? run a test. Instead of getting into a fighting match (that you are very likely to “win”), design a test or run an A/B testing. There is so much technology that can be used to run those test that arguing became almost a non viable option.
• Challenge the designer to experiment- even when you are right, there are ways to convey it. I solved an argument on readability on a mobile app by asking the designer to load the designs on his phone and go out in the sun and “use” the app while walking. He came back and changed the colors/type weight on his own. It was much more powerful than saying “I don’t think users can read it”.
• Send then out- product managers and executives like and need to be out, interacting with users and getting feedback. In many cases, designers don’t like or are not pushed to do the same. Take them out with you to set an on boarding test in a coffee shop and spend couple of hours buying coffee to people and watch together how they experience your product. It will give your designer direct access to feedback and in your conversions on what you’ve just seen you can learn to work better together.

It is always better to manage by asking rather than telling. For most, it is a natural thing to do when you have no knowledge in an area. The trick is applying the same methodology when you do.

Image credit

• Amy’s Ice Cream- The very best ice cream in Austin. Don’t miss! My Original comment: “Like Cold Stone but with high quality ice cream”
• The Steeping Room- In the middle of the town of ribs, greasy food and Mexican beer you can find this elegant place with awesome coffee and tea selection and sophisticated brunch food. A bit out of the way but can be a great place for a meeting away from the crowd. What I said back then? ” I am back in the sane world where they serve artisan coffee and organic granola and yogurt. This place is my new BFF (plus an amazing selection of teas)”
• BBQ Heaven- BEST. BRISKET. EVER (Ellen makes a better one but only once a year or when a friend is having a baby). Open really late and a perfect place to get a late night sandwich you’d never forget. “Same awesome Brisket, same great people. Best (immobile) food truck ever.”
• Gueros Taco Bar- don’t usually like Mexican food but really liked this place. It must mean something… They also have wild Margaritas.
• Lanai- Great rooftop bar with decent drinks and good collection of people. “Loved the roof top bar and the sliders”
• Driskill Hotel- Don’t come back from Austin if you haven’t visited Driskill at night. It is a gorgeous hotel, packed with people in its bars and a typical meeting place when switching between parties and events. “if the titanic was a bar and didn’t crash, it was the Driskill.”
• Magnolia Cafe- a bit out of the way but the best breakfast I had in Austin. Well made Tex Mex homemade food that worth the wait. “Gingerbread pancake is great. Great place for breakfast. “
• La Traviata- No one comes to Austin to eat Italian food but if you do want some fine dining for a change, this is your place. “Great Italian food and fantastic ambience.”

There are many more great places like the legendary Salt Lick (which is a schlepp out of the city), or Torchy’s Taco so don’t start arguing… These are the places I will visit again when in Austin. Enjoy and tell me what you thought… (and please, bring back some brisket)

I was watching this TED video today where Avi Rubin, a security expert, explains how everything (from your car to your Pacemaker) can be hacked.  It was all very interesting but what I found fascinating was his example about hacking the two way radios that are used by law enforcement officials. These devices, made by Motorola (not known for employing the best in UX…), have an option to encrypt radio transmissions  with a switch of a button.  As you can see from this image, moving from open air to a secure channel requires 1/8 turn of a multi-purpose switch. When secure, the device is showing an indicator which is few pixels large. Because of this failed UI, 20% of the discussions in the secure channels that were sampled, actually happen in open air. 

The hackers didn’t even bother to unscramble the channels. All they had to do was to listen to the channels that were meant to be encrypted and wait for the officer to fall into this UI trap. With that, all they needed was a  scanner that allowed the hack.

Imagine all the engineering years that went into creating the most elaborate encryption code that went to waste because of bad UI. I am mostly convinced that good UI was not on the list of the buyers when they decided on the device they will buy. Larger companies both building or buying products should learn what consumer internet startups know for years- design matters as much as good engineering. 

• Bunch of hacks-  I know we should keep it a secret, but you  did you really think that we developed “a state of the art architecture”? and that our product was developed based on years of research according to a 5 years roadmap? No, a startup product is a child of intense trial and error,  on the job training and constant hacks to make it more desired by its users. While it works, you have to remember that what you bought is a combination of a product and a roadmap and it needs to either be rebuilt or updated, taking into account all the experienced and user feedback. Google does it right by taking the core team, adding smart google engineers and rebuilding everything it acquire. While it might be an extreme approach, setting an agressive feature roadmap for the acquired team is just as extreme  and is likely to lead to a “house of cards” product, littered with technical debt, product that will be hard to maintain and support.
• Knowhow- this is by far the most important asset one can buy. Years of working 20 hours days trying to understand what your customers want and how to make it work for them are something no big company can replicate. Often times, this knowhow stays locked in the team’s brains as the large company insist on teaching the heathens how things work in the real world, rather than trying to learn from them. Another problematic strategy is reorganizing the team and let managers report to the respective departments (i.e. marketing, product…) of the large company. While it sounds like a way to transfer knowledge, it often ends up in frustration on both sides, as the new manager focuses on integrating the new team, rather than embracing it.
• Group of passionate individuals- when you bought them they were a company. Now they are a group of individuals that has different interests and goals.  Joe wants few calm years in the big company, Jane wants to get back to work on a new startup and Julian can’t work in a large company bureaucracy and thinks of the fastest way to quit. They no longer have a common cause and common goal, and often develop an “us vs. them” approach towards the large company.

So what to do? I need to write another post on that. The one line preview is: embrace, empower and elevate the new team. Let them teach you and let them have an unfair vote and influence as they have to fight inertia and momentum in order to be successful.

But why China wins? I believe that China is winning because it got to an optimum between education, wealth, human rights and discipline. It seems like the formula to a national success is MIN (human rights, wealth) and MAX (education, discipline). 

20 years ago, China didn’t have enough educated professionals: the country was poor but people were very disciplined and the government disregarded their basic rights. This is a great climate for  massive projects like building highways or railways : few skilled engineers and thousands of hard workers, working for pennies, 16 hours a day. Today, these projects are the base for China’s growing economy.   But China didn’t stop there: the government (yes Ron Paul, the government) is making an enormous investment in education and sees steep increases in high school and higher education. Now, armed with employees that are as motivated and discipline, but also well educated, China can compete and win the most sophisticated manufacturing projects in the world. Yes, they run the risk of any other fast growing economy- with more wealth comes less discipline and motivation (try to wake up 8000 American workers at midnight and send them to their work stations just because someone changed a design in Cupertino…) but China is many years away from this prosperity level and you can rely on the Chinese government to keep its people disciplined for years to come.

What can we do? admit that we are wealthy and lazy. We will not win over China by being harder working or more disciplined or strip our people from their basic rights. We can only win (or at least give a good fight) by out investing China in education. After all, our starting point is so much higher and if we act fast enough we can open a big enough gap. Highly educated and innovative people can be lazy: most innovation in the world happens because a smart person wanted to work less. You just can’t be lazy and not educated. This is where Greece is. And no one wants to be Greece right now. 

So let’s stop pretending that we can bring back manufacturing jobs to this country by waving our hands and changing the laws. We can’t. Not now. We can super charge our education system today so we can benefit from this investment 10 and 20 years from now. The economic battle with China is going on for over 20 years now. China has the patience and a plan, and we talk and complain. Guess who’s going to win this fight?

It’s not a bitter victory but it is disappointing that the only thing that got the collective web to react was a direct attempt on its revenue and profits. We all know that the subtext to all the freedom speak was money. Great deal of money.  In a coordinated campaign that lasted only few short weeks and peaked today, the entire country got convinced that SOPA was evil, only to serve the interest of the internet companies. (Disclaimer, FWIW, I agree with the position of the silicon valley here, but this is beside the point).

So where is the opportunity? we just discovered that the valley can take a stand, and mobilize the public opinion. For one day, Washington was not only influenced by the car/drug/weapon industry lobbyist: it was influenced by us. It’s a great power we can use to influence our policy makers to do other things that the vast majority of the tech minds here believe in like a universal healthcare for example.

If this is too controversial, how about taking a stand on something every educated American can agree on? We need to fix our education system. While not impacting today’s revenue, great education system is the only thing that will ensure that 20 years from now, the Silicon Valley is still the center of global innovation and not a follower of countries with much better education like Finland or South Korea.

High tech is an industry with long term interests like any other industry. Today it discovered that it can influence the congress without lobbyists and dirty politics- it can do it out in the open. It is too much to expect that this power will be used again for better causes?

• Plan to go every day: No, I don’t really go every day. I just pack my gym bag, get everything in place and plan a convenient time based on my next day schedule. Sometimes the day goes as planned and I end up going and sometimes something changes and I don’t but since I plan to go every day, I still get to go 3-4 times every week in average.
• Treadmills are evil: but at the same time, they are the fastest way to get a good 30 min of cardio. At first, I tried the classic “30 min workout” music on my iPod to stay engaged but I couldn’t get myself to persist. Than  I tried TV but there is never something good and the commercial breaks are huge downer when you run. Than I tried to listen to audio books: it was an improvement, but still, the 30 minutes felt like 30 days. Just when I felt I could not listen to one more book, I bought an iPad. Since I rarely watch TV at home, there are million TV dramas that everyone talks about and I never got to see. I started downloading seasons and watch one episode every visit to the gym (right now I am watching Breaking Bad, gym TV at its best). Now since my rule is that I can’t watch it at home, I kind of looking forward to get to the gym and enjoy 30-40 minutes of good, commercial free TV.  
• I go mindless on the weight machines: You need to do weights. It helps burn more calories and keep your bones strong. Every trainer I ever went to built a free weight routine for me that required a notebook with sketches and instructions and my full attention. Once you get to heavy enough weights you even need a partner to make sure you don’t drop the weights on your head.  I know it is more effective but I ended up not doing it at all. Finally, I decided to focus only on the weight machines, so after few times of getting used to them, I can perform it mindlessly while listening to an audio book or a podcast. Now I can finish my weight routine in under 30 minutes, while I listen to Marketplace.
• Your gym must have a towel service: being able to goto the gym in the middle of the day or in the morning is critical to keeping my gym commitment. If the gym doesn’t have a towel service, you are much less likely to go in times where you need to shower after (first you need to remember to bring one, than figure out how to get it to dry. Too complicated…)
• Pick a gym near work: this way you can go before work, after work or even during lunch. Since you are at work 5 days a week, a gym near work is much more valuable than a gym near home or half way.
• Do something when traveling: make time to go to the hotel gym even if it is tiny and doesn’t have the equipment you are used to. Even if you do 50% of what you usually do at home, it worth it to keep the routine going.
• Don’t be social: I know that going with friends is a great motivator but at the same time it adds complexity and coordination and creates one more reason not to go (“Joe can’t go today. Let’s go tomorrow…”). If there is 50% chance you can make it to the gym at a given day, adding another person cuts your odds in half.
• Classes are extra: Just like the social advice above, classes add complexity and create a binary situation (I missed the spinning class, so I will not go today at all). If you want to go to classes, make it an option, not the rule.

Let’s start with some numbers: Based on CrunchBase, Gowalla received a total funding of 10.4M. Given the fact that investors tend to own preferred stock (that has priority over employees and founders that typically own common stock) and the fact that Gowalla’s investors admitted that they were not made whole, we can assume that the founders (and the investors that approved the deal), valued the company at a low double digit valuation. This is not uncommon: Investors often get nothing in return to an investment so getting some of their money back is not the worst outcome in the world. What’s striking is that this is what the number 2 in the LBS market worth. 

You see, until last week, the LBS market was red hot. Research firms estimated a market size of 2.8B in 2010, growing to be 10B by 2015. (BTW, the full report will cost you almost $4,000- still want to buy it?) Foursquare, a leader in this space, was valued at 600M less than 6 months ago. In this red hot market, Gowalla was always considered as number 2, loved by its users and reasonably successful but the Facebook deal raises real question marks over the short term prospects of this market and the hype around it.

What does it mean to VCs and entrepreneurs in this space?

• OMG- a plan that had 2M users for a free app would have been the dream of any entrepreneur and investor. Many checks were written for companies aiming at this level of “success”. VCs are quick to learn and I don’t assume it will be remotely as easy to get a check for an LBS company anytime soon.
• OMG- in a space where success means winning over the market before you can generate any meaningful revenue, you have to be number one to stand a chance. You can’t be a Living Social, number 2 to Groupon yet a huge money making machine. You can’t aim at the moon and hope to get to the stars. Gowalla proved that the reaching the stars in this space means nothing. 
• OMG- entrepreneurs will be asked to come up with monetization stratégies that don’t rely on network effect. In other words, welcome to 2003, 1999 is over. 

So sorry to hear about Bizzy. I am building a very similar service but with a twist/different monetization/different target audience: can you share your learning from Bizzy?

I answered few in writing, few via phone calls and even had couple of face to face meetings but when number 20 hit my inbox, I figured it time to have a permanent link I can send people to… Every answer here deserves a post of its own, and one more for the questions I haven’t answered yet, but let’s start with something… I also tried to write the answer in a more general way, so they are useful to the broader audience. So here are some of the questions I’ve been asked:

• What worked? this is a very open ended question but here are some highlights:
• People loved our product. this is the entry ticket to the game. Building a great product gives you the right to play, although not necessarily the right to win. I would invest (almost) any amount of time and talent in building a product that will wow the users. People expect nothing less and with so many options, will not touch any product that seems to be sub standard.
• Leveraging existing behaviors-  It’s an uphill battle whenever you want to teach users to do something new. Foursquare, for example, did a great job teaching few million active users to check in. The moment we piggybacked on Foursquare check ins, the number of people “Checking Out” with Bizzy grew dramatically  People loved to check out, they just didn’t remember.
• We had a unique voice- Early on we hired Emily that became the voice of Bizzy. She wrote our blog posts, tweeted on behalf of Bizzy and most importantly, wrote the UI language for Bizzy so that bizzy sounded like a person you want to hang out with, and not like a robot.
• What didn’t work? also, an open ended question… the short of it is:
• We didn’t rally the number of customers a consumer app needs in order to survive. The model of “let’s get bazillion users and monetize it later” requires to acquire, something like bazillion users… Unlike products that are monetized from user #1, in most consumer internet products you play an all or nothing game and if you don’t get to 100s of thousands of users within your first year of operation, you may as well relaunch if you still have the money. It worked for Path.
• We were part of a big company. ReachLocal was as good as it gets when it comes to hosting a startup and supporting our urge to innovate but we were not a real startup, despite the fact everyone tried their best to behave like one. We didn’t wake up every morning thinking a dollar we spent today might be the last one. As Chris Dixon said: you are either a startup or you are not. It’s hard to explain the type of “fear and greed” motivation you get from being a real startup but it has been fueling the Silicon Valley for 50 years now for a very good reason.
• Where did you get your data from? Phew! this is an easy one.. we got our data from number of sources but if I had to do it all over again I would go exclusively with the last source we added: Foursquare venue API. Is it perfect? no- it is littered with duplicates, wrong categorizations and goofy venues like  ”4062 Jew canoe” but it is free, up to the minute with new venues and best of all, global. We augmented the venue data with our users’ ratings, tips and insights.
• Can we buy your user list?- in general, I will not recommend for anyone to buy any user list, especially not one of a free product. There are so many apps out there and so much spam that it is more likely that a user that gets an unsolicited email from you to never use your product, rather than giving it a try.
• What were the issues with monetization? Bizzy was pre-monetization and our focus was all about providing our users with the best recommendations and discovery experience. I would assume (and experienced in the past) that any local company will face a massive challenge getting enough businesses to spend enough money in a scalable way to make a profit. Small local businesses get many phone calls from the Groupons of the world, email marketing providers and everyone else that the biggest challenge will be getting them to pay attention to what you have to offer, especially if you have less users than Foursquare or Groupon…
• What are the biggest challenges in user acquisition: It’s another case of “I need a post just for that” but in short…
• There is tons of noise in the market and dozens of new consumer apps a day
• Since there is so much noise, you need continuos tech press love to rise above the noise
• It’s hard to get a this level of love, unless you are already famous
• Viral marketing works well. You just need a really big base to make a difference. If my math is correct,  a base of 1000 users that grows a stunning 1% every day, will yield under  40,000 users in one year. If you started with 100,000 users after a successful launch, it will be just under 4M users, which means that it is nearly impossible to rely on virality alone to grow a consumer based product.

Granted, these lessons might be very different for other entrepreneurs in different companies so debating my learnings and doubting them is welcomed…. I will not take it personally…