Friday, March 28, 2014

Cash Flow & Liquidity

I explained to the boys the concepts of cash flow and liquidity. These concepts are relevant to organizations as well as individuals. You might be "profitable", have more income than expenses, but if the timing of your expenses is sooner than that of your income, you might run out of cash and get into a lot of trouble. This, I believe, is the primary reason start-ups fail.

You might have valuable assets, but if they are illiquid they might do you no good when you need cash. A house might take weeks or months to sell; a company might take months, years or never find a buyer. Often there is a trade-off between speed and value: a car can always be sold quickly at a dealer, but for less than a private buyer, who might take weeks to find, would pay.

Understand these concepts and keep an eye on them for your personal and professional lives.

Thursday, March 27, 2014

Sleep on it

Someone asked one of my relatives for a favor that he wasn't sure he wanted to do. It wasn't something urgent, but instead of taking his time to think about it, my relative agreed on the spot to do the favor. A few hours later he was regretting his decision. I mentioned to the boys that I try to take my time and "sleep" on important or difficult decisions. But some people feel compeled to answer requests right away. One approach that often works for me is to take a tentative decision and see how I feel about it after a few hours. My gut usually gives me pretty good feedback, but it does need a bit of time to "react" to my decision.

This approach shouldn't be confused with dragging our feet or being indecisive. Additional days will rarely help, and we need to be sensitive to the timeframe of the specific matter and set clear expectations about when we will provide an answer. For example, sometimes someone asks me for something and he can't wait hours for an answer. But 10 minutes are not a problem. So I take the ten minutes to think about it or maybe discuss it briefly with someone else. I find this approach particularly helpful for phone calls: someone calls me with a tough request. I ask him if I can call him back in ten minutes with an answer, hang up and think about it without the pressure of having the phone to my ear.


Friday, March 21, 2014

Plan with your Left Side, Execute with the Right one

I have been trying to learn to tack on my foilboard. Progress has been VERY slow... I must have attempted hundreds of tacks by now! The other day, instead of "thinking" about what I needed to do (pull gradually on rear hand to send the kite to the new side; wait for the kite to be overhead then send board to the new side; shift weight forward as I swing under the kite, etc, etc) I tried just letting my body do whatever came naturally. In other words, let the Right side of my brain take over. If I could do the tacks in slow motion, thinking through them would work just fine. The problem is that I can't think through the steps fast enough. I am still thinking about step number 2 when I need to be doing step 3! The Right side of my brain, on the other hand, operates much more quickly than the Left.

Of course the answer is not that simple because the Right side of my brain doesn't know what to do (at least not yet). I think this is where a technique like visualization comes in: you go through the maneuver in your head in advance and in slow motion. You do this guided by the Left side of your brain - while, hopefully, the Right side is quietly paying attention.  Then when you are in the water and need to do the maneuver quickly, you let the Right side show you what it learned.

OK. Enough mumbo jumbo. I am going to go kiting know and see what happens!


Tuesday, March 18, 2014

20 Feet From Stardom

Watched this great documentary over the weekend. Several take-aways that I discussed with the boys this morning:

- The spotlight is not for everyone. It is not just a matter of talent or effort. Some of the back-up singers in the film are as talented and hard-working as any lead singer. But it takes a certain kind of person to succeed in and enjoy the spotlight.

- Of the dozen or so featured singers only one succeeds in becoming a lead singer, and after decades of trying. Several were still trying when the film was made. Others had given up. My favorite one concluded that doing back-up singing was just fine for her. She tours with the Rolling Stones and seems to have a terrific time doing so. Ale observed that touring with the Rolling Stones is by itself a huge success. I agreed. The point is that, for some people, succeeding as a back-up singer is a better fit than succeeding as a lead singer.

- Being in the spotlight has its downside - this is one of the reasons it is not for everyone. It is much more stressful & risky, not to mention other aspects such as the loss of privacy.

- Cindy mentioned there is an analogous situation in many other fields: theater, music, dance, science, business. This got me thinking that I've become a back-up singer. I work with entrepreneurs who are on the spotlight but I remain on the sidelines. I like it this way. A good chorus can make a big difference and I get to perform in many different stages with lots of talented lead singers!

Friday, March 14, 2014

Hold back the offer letter

Paco gets his high school application replies today. Some schools also send emails and I was asking the boys what they thought would work better: to be the first school to reply or the last. Their initial reaction was that it wouldn't make a difference. I told them that I thought it would, but I didn't know what would work better. This got us talking about A/B testing. It also got me thinking about offer letters in competitive situations (where the candidate has multiple attractive choices).

I explained to the boys that I don't simply give candidates an offer letter that they can take, maybe shop around, and ponder upon. Instead, once I am ready to hire someone, I ask them if they are ready to join. If they are, I negotiate their compensation package, get them to agree, and only then give them the offer letter to sign on the spot. If, they are not ready to join, I find out what is holding them back, and try to address it before giving them an offer letter. If the candidate wants time to think about the offer, maybe discuss with their spouse, I give them the info they need, but not an actual printed offer letter - nor necessarily a final best offer. The problem with simply giving an offer letter is that you allow another company to give them a better one. To have the "last word". You want to be in that position.

High schools don't negotiate, but colleges do. I've heard of colleges that offer applicants they are trying to recruit better scholarships than the ones other schools are offering them. They can only do this if the have the last word.

Thursday, March 6, 2014

Great White Sharks in Lake Michigan

I went to hear a shark expert yesterday talk about sharks in the SF Bay Area. His opening remarks were music to my (kitesurfing) ears: the risk of dying from a shark attack are minuscule. More people die every year from accidents involving toaster ovens, furniture or lightning than from sharks. Yet, as reassuring as this statement sounds, it is a profoundly flawed. I asked the boys about it and they immediately saw the problem: what is the denominator? What matters is not the absolute number of people who experience shark attacks, but the percentage of those who swim in areas with sharks that have incidents. Someone at the event asked this specific question and the expert said he had no statistics. But it is safe to say that more people in the world have furniture and toaster ovens than those who swim in "sharky" waters (we obviously don't want to include in the denominator the swimmers of Lake Michigan).

The expert acknowledged this point later in his presentation when he said he wouldn't go surfing at Wadell Creek in the fall. Oooppss. That is one of my favorite kitesurfing spots! The risk remains VERY low, but probably orders of magnitude higher than that of a soda machine falling on top of me or a lighting strike. A few interesting tidbits:

- There has never been an incident inside SF Bay. While great whites occasionally wander into the bay, they don't stay long. An incident inside the bay is beyond unlikely. Other species of sharks live in the Bay, but none are dangerous.
- Great whites take a single bite of their prey then wait for the prey to die before eating it. This means that if you get out of the water after the initial attack and get medical assistance you are likely to survive (only 10% of shark incidents result in a fatality). To get out of the water you need help, so don't swim/surf/snorkel alone in sharky waters.
- Most attacks involve someone on the surface that looks like a seal. The shark is looking up from the bottom and only sees a silhouette.
- Great whites migrate all the way from California to Hawaii every year. While there have been attacks in every month of the year, the most dangerous months in Northern California are August and September - and the least dangerous are March to May.
- Areas with lots of seals and sea lions are the most dangerous (Wadell Creek is right next to the Año Nuevo seal reserve).

While the population of great white sharks has been steady, the overall population of sharks has been decimated by 90% due to overfishing. Don't eat shark fin soup!!!


Wednesday, March 5, 2014

Good decision for the wrong reasons vs. bad decisions for the right reaons

The boys like to play a game they call "Would you rather". They give you two choices (usually each choice includes something good and something bad) and you have to choose one. I gave them such a choice today: would they rather getting a good outcome for the wrong reasons or getting a bad outcome for the right reasons. Before responding they asked for an example. I gave them one from my work: I sometimes get involved with companies that turn out to be very successful, but I do it for the wrong reasons. Other times I get involved with a company for all the right reasons, but it fails.

Alejandro's first reaction was that what matters are the reasons, since we can't predict the future. All we can do is to make decisions based on our best judgement at the time. I agreed with his sentiment, but clarified that I wasn't asking him how to go about making decisions. I was asking, if they could wave a magic wand and get outcome A or outcome B, which one they would prefer. We agreed that the good outcome is preferable, even if we got it for the wrong reasons.

My point with this exercise was to emphasize that, at the end of the day, it is the outcome that matters the most, regardless of whether we got it by good luck or brilliance. Or, in the case of a negative outcome, by bad luck or stupidity.