Resource Constraints

Most of the companies I work with tell me that they are resource constrained and do not have enough capital and engineers to do everything they want to do.

I tell them that is a blessing not a curse.

They look at me like I am crazy and rationalize it as me being an investor and not an operator.

I will plead guilty to both (being crazy and being an investor) but I am extremely confident that being resource constrained is a blessing in the hands of a great operator.

I have seen companies do amazing things with no money and tiny teams.

I have seen companies do absolutely nothing with all the money in the world and hundreds of engineers.

This experience, built up over thirty plus years in tech and startups, has convinced me that resources are never the limiting factor to doing great things.

The limiting factors are;

  1. having great management that can make the right decisions and drive exection
  2. knowing what to do and what not to do
  3. playing your game and not someone else’s

Resources, measured in available capital and headcount, often make #2 and #3 more challenging.

Organizations start to feel that they can do more than they can and should.

They start looking around enviously and counting the size of the fundraises and engineering teams of their competitors.

They stop knowing who they are. And that is death.

I believe that excess capital makes companies weak and unfocused.

I believe limited capital makes companies strong and focused.

And I don’t believe capital has ever helped a company win a market. Many have tried that approach and it always ends badly.

So I encourage all of you entrepreneurs out there to embrace being resource constrained and learn to love operating with less.

It will serve you well.


Comments (Archived):

  1. Abdulhamid Hassan

    I couldn’t agree more Fred!Great content

  2. Twain Twain

    Disagree because if I had $500,000 I’d be able to do what I definitely cannot do right now — principally hire a technical team to deliver my systems invention to market.

    1. William Mougayar

      well, in your case 500K may be the right kind of money to get you started. This post was mostly about excess money and resources. i suggest to refine your pitch and narrow down its focus. Raising 500K in the present environment shouldn’t be extra hard.

      1. jason wright

        depends in part on which nation state economy TT might be trying to raise in. England is in my opinion not a great place to get funded in web tech or any other entrepreneurial space. the culture is wrong.

        1. Twain Twain

          I love the UK but with my product+engineering hats on and knowing what I do about Natural Lang AI, cloud provision, design mechanics and the ecosystem in Bay Area having been embedded there for months …It needs to ship from SF / Palo Alto.

          1. jason wright

            the tribe running the UK are very resistant to change. what i call the Wessex mob.

          2. Twain Twain

            Why Wessex?

          3. jason wright

            Northumbria, East Anglia, Mercia, and Wessex, the four kingdoms of Anglo-Saxon Britain. Only Wessex was not conquered by the Vikings. Its unbroken lineage has survived through in contemporary social, economic, and political power. There’s even been a genetic-based study that shows irrefutably that the people who govern Britain today are directly descended from the Wessex kingdom of Anglo Saxon England.

          4. Twain Twain

            A-ha, thanks, now I know some more British history!

        2. Vendita Auto

          Re the UK agree. India $250k goes a long way to bootstrap.

    2. Kirsten Lambertsen

      Have you been trying to raise investment? What’s that been like? It would be interesting to know your experiences with that.

      1. Twain Twain

        I’ve been bootstrapping. I went to an NY incubator in Q4 2010 and got a $5 million valuation guidance from Jill Stelfox who was one of the mentors. Other mentors included a co-founder of Razorfish and the CTO of Powerset (acquired by MS and now part of Bing). The Program Lead nominated me as President of the graduating class.However, I dropped out because they’d asked me to pivot to a Disqus-clone.I simply wanted to build the system that’s now patent-filed and passed prior art, including citation comparisons with MS and LinkedIn. Yes, I invented a system that’s different from theirs!!!So I have LOTS of stories of scars, investor whiplash etc LOL.A year ago, I got another valuation guidance of $8 million pre-money.I do now want to raise $$$ and I do know my system does what Google doesn’t know how to do … https://uploads.disquscdn.chttps://uploads.disquscdn.c…@wmoug:disqus — I need investors who really understand DEEP technology.

        1. Kirsten Lambertsen

          No doubt you’re a lot wiser after the incubator experience, even if it’s not for the reasons they intended 😉 You got this.

          1. Twain Twain

            Thanks, Kirsten. We roll with the punches, fall down, get back up, stand firm for the people and principles we believe in and build towards better futures for everyone.Mentors can be game-changers when they have the relevant expertise and I’ve benefited from mentors like that and greatly appreciate their steer. Sometimes, though, founders need to mentor themselves and simply solve hard problems no one can tell them how to.

  3. jason wright

    financial capital is a resource, is a measure of other resources, but is not those other resources, and crucially can never become the most important of those other resources that are necessary to create something good and of lasting value for the many. i’m talking about innate human creativity, ideology (or values), will, and spirit. capital does not buy those things. capital has strict limits. people forget that, and i think i see that forgetfulness (if they ever knew it in the first place) in the blockchain space at the moment.

  4. William Mougayar

    Such a timely post, given that most ICO companies are flush with money, and many of them are first time entrepreneurs who are clueless about having discipline and focus.Many ICO companies think that startup laws don’t apply to them because they have something like 30 years of runway and lots of time to get to their markets. They think that network effects will take care of themselves, just because decentralization is a trend that will catch on, and not because they need to be deterministic in their go-to-market approaches.Sadly though, much of the advice in this post may fall on deaf ears, because it covers the kinds of mistakes that one has to experience in order to better understand or appreciate them.

    1. Twain Twain

      Steering clear of ICOs.

    2. jason wright

      30 years of runway? good one.

    3. Vitomir Jevremovic

      Many accredited investors are pouring money in ICOs like startup laws don’t apply to them.It looks like in the blockchain world people think real-life companies don’t exist and that there is no competition to decentralized models. User acquisition and retention are not on their minds. Business models are non-existent.Should we blame only blockchain startups, or also investors that are backing them?

      1. William Mougayar

        Most investors take a portfolio approach to their investments, so they don’t really “care” which ones succeed as long as some of them do.So, the onus is on the entrepreneurs to do what they have to do with the money they have, and to surround themselves with real advisors and mentors to help them along the way.

        1. Vitomir Jevremovic

          Well, these investors that don’t “care” are also the ones fueling the hype and scammy ICOs. Of course we cannot blame them, as their own model has been disrupted with blockchain, so they are just utilizing these new opportunities.We’ll just need to get used to a fact that startups can raise 10x or even 100x then in the old VC model. New rulebooks will be created and new history is the making.

        2. Vitomir Jevremovic

          ..and don’t get me wrong, I do believe that entrepreneurs are responsible for their startups, and their job is to pick the right advisors and also bring quality product on the market. Only difference is that advisory models and strategies now need to change.It is different to advise someone that has a runway of one year, and a startup that has 10 years runway, and a lot of resources for development, marketing and promotion from the day one.

          1. William Mougayar

            You’re right that the runways being different may require a variation on the advice, but the lifecycle evolution of companies is similar. The only difference is they don’t need to raise multiple times.

        3. sigmaalgebra

          Right, the individual investments all suck, but W. Sharpe’s work shows that on average the portfolio will return the risk-free interest rate anyway?

    4. JLM

      .What you describe is the business equivalent of a trust fund baby or a lottery winner. It will have predictable and disastrous results.JLMwww.themusingsofthebigredca…

      1. sigmaalgebra

        > trust fund babyYup, story of the American experience, “Rags to rags in three generations.”!

    5. Vasudev Ram

      >Sadly though, much of the advice in this post may fall on deaf ears, because it covers the kinds of mistakes that one has to experience in order to better understand or appreciate them.Ha. “Good judgement comes from experience. Experience comes from bad judgement.”

    6. Rob Underwood

      Two thoughts:1. I worked at Pandesic from ’99-00. It’s literally a business textbook case of having too many resources. It ends badly.2. Outside of the bubble (in more ways than one) where companies can raise 30 years of capital and investors have so much cash to spare that they can invest it without regard to whether it’s lost or not, there are a lot of people, at lease in the United States, under-employed or permanently departed from the work force, in mid life at their peak earning years.This is not today’s topic, but the economic fear and frustration that animates the President’s base is rapidly spreading beyond high school educated “blue collar” workers in the middle of the country to the coasts and the “professional” class. The political result may not be support for Trump, but it certainly won’t result in support of the status quo.Perhaps I am overly tuned in to it – I have found it at times challenging to make a living let alone build wealth in this economy, despite what on paper should be a very compelling set of both deep strategy and deep technology skills. With that caveat in mind, I personally know 12-15 people, all men, between ages 40-60 who simply can’t find work that pays them enough to support their families, despite their own technology skills, graduate degrees from Ivy League schools in a number of cases, great references, and pristine work histories of making money for their clients and employers.Workers are being displaced and that’s not just coal miners in West Virginia. (And as much as we romanticize the “gig economy” as the future of work, it’s lumpiness and unpredictability are a big challenge for those with kids).Again, this is not today’s topic. But with last night’s speech of rage fresh in mind, and the animus that animates it in mind as well, I would urge the folks on this board, many of whom are flush with cash and may think I sound crazy, to hear me that there are many people across demographics who are struggling. Be mindful of all this as 1st time entrepreneurs are able to raise “30 years of runway” and mass huge warchests while many others in the economy, perhaps less skilled at linear algebra but with many skills nonetheless, are wondering how they’ll pay rent. I don’t know what a crypto-pitchfork looks like, but they’re coming.This may be all about decentralization in theory but this sure sounds like an acceleration of capital being further amassed in the hands of an ever fewer few. I hope one of these new ICO companies figures out how the great unwashed of the rest of us are going to eat, as it seemingly feels like that’s not particularly important to anyone on either side of the political ledger.

      1. BillMcNeely

        Rob your comment is spot on. I’m living this. It’s not fun being college educated with some skills and then the music stops at 36 and you can’t provide anymore. The gig economy was nice when it was. Like you said it can be lumpy but at the same time makes more sense than going to work at a fast food place for minimum wage.It’s easy to get angry and frustrated when you see others maybe less qualified doing awesome. All you can do is grind on and not give up. That what I try doing

        1. Rob Underwood

          The music stopped for me at 40 in 2012.I was partner track at a large name brand consulting/audit firm. In my capacity at the time as Chief of Staff for the media sector in the US I pressed a point to the Vice Chairman for our industry that I thought our industry (TMT) should be doing more to build relationships with the new wave of technology companies as well as VC based startups. I argued that our future consulting revenues, not just accounting/audit revenues, were not going to come not from the old HW tech giants, who were already starting to die off, but from these new companies. Specifically I table-pounded that we were spending too much of our marketing & event budget at CES and not enough at SxSW (again, as context, this was 2012). For internal political reasons that I was not aware of at the time this was a very unpopular view (right though I may have been, and this is the exact strategy that firm has since pursued). Angry at being presented with a contradictory view, the vice chairperson (who has since passed away) eliminated my job. He gave me the option to find something else in the firm (which is essentially impossible as having your job eliminated make you damaged goods) and so I resigned (which was what he wanted me to do of course).So, in a way, it sounds like my experience is like yours. Since 2012 I have actually had a fair bit of really positive things happen in terms of my personal brand, accolades, and overall accomplishments, a couple of which were a function of CS Ed work I’ve done with our host. But I’ve never fully restored that salary and it’s scary every month to wonder if I’ll have enough project work to pay our mortgage. So far it’s worked out, but the anxiety and worry that this will be the month when it doesn’t work out is always right there. Such is the “gig economy” — constant worry. And saving for the future – college and retirement? Forget about it — all on pause.This experience also underlined things I suspected then and know now:1) failure of any sort is nearly always bad and often fatal to careers, despite what all the self-help career blogs say,2) at least in large companies the successful executive must be risk adverse and at all costs minimize the chances of being associated with anything that reeks of failure — no amount of internal success in a large company can unring the bell of being even loosely associated with one failure. When you look at how many corporate execs behave, and why they are so wary of internal risk taking, this should come as no surprise, and3) you must make your bones – have a big success both for your personal brand and your wallet – by 30, 35 at the latest OR be certain that you’ve locked in a high paying executive position by that time. People pay lip service to late bloomers, but the truth is that we are youth obsessed and if you have not had your big win by 30 the marketplace will wonder why not and view you as suspect.But I consider myself lucky. I have a good network and a lot of friends. I am making it. I have also tried to do the “right thing” such as keeping my skills fresh and learning new things — for example I did 3 semesters of graduate level computer science through the Harvard Extension school.But making it is not the case for some of other friends who I allude to in my note. One is an Ivy League grad (and, to be clear, I don’t think that entitles anyone to anything – just it’s noteworthy) who worked for 20 years as an advertising creative on Madison Ave. Since the music stopped for him 10 years ago, he’s struggled to find stability and recently had to give up the small apartment he had in the city to move up state where he now rents a room in a house with 4 other people as that’s all he can now afford. Other friends are similarly skating on thin ice, always wondering what they’ll do and how they’ll support their family if the next gig doesn’t come in.Again, maybe my experiences and those of these friends and colleagues is not representational of what’s really happening. Maybe everyone is killing it and getting rich and we’re just the economic reject pile. But I don’t think so. Rather I think structural displacement from automation is starting to happen. Moreover, middle aged people – Gen X – demand higher salaries/day rates both commensurate with our career experience and our need to support families. Conflated with actual age discrimination – especially acute in the tech sector in places like NYC – this puts middle aged people (and at 36 you’re middle aged Bill and absolutely elderly if you’re in tech) at a disadvantage again the younger generation.My point remains that as a handful of ICO companies are amassing huge wealth for their fledging enterprises this feels like the very opposite of decentralization and more like the further consolidation of extreme wealth in the hands of a tiny few. The economic fear that is driving much of the politics in the United States is, I think, spreading. ICO investor beware.

          1. JLM

            .OK, I am not arguing with you, but I want to tell you something.YOU CAN MAKE YOUR OWN MUSIC.I’m 66, can outwork people a third my age, and I’ve always heard a different drum in my head.It is not IQ. It is I WILL.I wish you loud music and you can do it. You can do it. This is the greatest time to be alive.JLMwww.themusingsofthebigredca…

          2. Rob Underwood

            I don’t believe that – that it’s will alone.Or, to put it another way, I think that’s confirmation bias.I don’t doubt what you say is true. But there are other 66 years olds who had the will, outworked people a 3rd their age, and are eating cat food. Both outcomes are possible. Nothing is guaranteed.Hard work and will are not enough to get ahead. Luck, timing, network/personal connections matter too. So does having a great idea once, and good ideas along the way.The American myth is that with hard work and will alone will guarantee you at least a comfortable middle class lifestyle – maybe not affluence but comfort and stability. That this is just that – a myth – is what is animating many of the people who voted for Trump. I think the discovery of this myth is starting to spread to the coasts too and I don’t think the political fallout of that will be enjoyable.I work 14-15 hours every day – I get to my co-working space at 8:30am or so and usually leave at about 10-11pm. During that time I deliver work for my clients. I also hustle work each day, prospecting for leads and working opportunities. Any who has worked with me, our host included, will attest to my hard work, will, and hustle.I can code in 5 languages, do systems and network administration both on premise and cloud, and did business strategy for 12 years in the tech and media sector which left me a solid set of skills in areas such as route-to-market strategy, channel management, and business valuation. I have led organizations and have fundraised for both for- and non-profits. I have a lot of hard skills. I have great references. I write and do content marketing. I have a broad and deep professional network across industries. I have political connections on both sides of the aisle. I host dinners 3-4 times a year to further build and deepen that network. I continue my CS studies at Harvard. I run a Tezos node in a sandbox to help further my crypto skills by developing a bit on and thus learning one of the emerging and well supported tokens. I do all of the stuff and more that Tom Friedman, John Hagel, or half dozen other self-help career workplace gurus say to do, especially for older workers like me (I turn 45 next week).@JLM, You’ll have to take my word that, at least for some people, it is very hard to find work right now, whether that’s W2 or 1099 work. And it’s not just me who is experiencing this — other folks have commented along these lines here today and as I’ve said I can point to a dozen other people going through similar circumstances.So, I get your point and don’t disagree with the intent. You may respond “Make your luck”. Ok. But please don’t discount my real life experience either, or those of my friends. Because they are no less true than yours.

          3. PhilipSugar

            I am fortunate. I hear you. I have seen it happen at companies I have restructured.It is moving up the chain.It is why America first is such a powerful message.Please nobody go political on this post, let’s save that for a truly political post, and I have my next message for one of those saved up.

          4. Rob Underwood

            Yes. “It is moving up the chain.” Exactly. It’s why it’s so important to put a lot of points on the board before you’re 30. Even if you don’t get a $$ windfall, having some big win before 30 that you can hang you hat on can carry you a long way in terms of reputation. People like to associate with people who have put a big win on the board. I had hoped for me that would be Pandesic but it wasn’t to be.And this should not be political. In fact that’s part of my point — I am hearing people who are politically very liberal saying “I get the feeling of hopelessness in mid age that animates many Trump voters.” What I wonder about is what this looks like in 5-10 years if/as this trend continues. And, to the topic at hand, how does further and further concentration of wealth, now perhaps with ICO entrepreneurs and crypto-investors, further animate and aggravate the frustrations of those who are struggling. Once ex-communicated after 35 or 40 or so it’s very very hard to get back up and it’s no less harder to go out and do a startup (because of kids and the need for a stable salary). There is absolutely a ton of age discrimination in tech and that makes it much harder still.I share all of this and am being transparent about my situation not for pity but simply so people are aware that there are other dynamics out there than just the dominant narrative of easy cash and easy wealth.

          5. LE

            having some big win before 30 that you can hang you hat on can carry you a long way in terms of reputation. People like to associate with people who have put a big win on the board.This is very much on target. It’s known as the halo effect. I have some definite thoughts on some other things you have said (and also what I feel you could do that you aren’t doing now) and if I have time I will tell you what they are.But one thing I suggest that pops out is removing the following from your linkedin profile: [1]** Please contact me only if we have met and know each other in real life (i.e., in person). No anonymous connects. No “online only” contacts. Thank you. **The above is right below “Summary” and it’s literally the very first thing you see.The other simple thing is if you are going to take the time to make what appears to be a impassioned plea or maybe a impassioned point about what you can do and your history and qualifications you might as well make it easy for people to find you. I took the time to track you down (part of what I do so it’s 2nd nature) but most likely anyone else who may have a mild interest or need would not.[1] I get tons of these as well. I wouldn’t ever try to tell anyone not to contact me. Getting a phone call for sure is interuptive getting random linkedin requests is just something I feel you look beyond so you don’t appear to be not approachable. Very simple to me.

          6. Rob Underwood

            yeah, I probably should change it. [EDIT: Changed. I am going full “LE”]. I used to get a lot of random inbound on LinkedIn and I ended up losing track of who I had met in real life, as I met a ton of people doing consulting, and who has just a random person online.And I just generally was (and remain) very cynical that social media, LinkedIn included, is anything more that political debates and shared articles from Tom Friedman about how the labor economy does (not) work.But you’re the 2nd person in a week to tell me to give LinkedIn a chance so I guess I will.

          7. LE

            Oh don’t get me wrong I think linkedin sucks but it’s a necessary evil when people want a quick take on what is going on with someone they just met. I just think you need to shape your image in the best possible light. I am not even saying to use linkedin to get business (I never have) just to make sure there is a shiny car in the showroom if someone comes by. That’s all.

          8. Rob Underwood

            My friend Gregg (of Financial Revolutionist fame) was urging me to approach LinkedIn less for its classic use case and more for its feed and content marketing capabilities — “approach it like Twitter” he suggested and even w/ a couple toe dips since his counsel last Monday it has generated a bit of value with that approach.

          9. PhilipSugar

            I’d love to see your assessment of mine.

          10. Rob Underwood

            I’d like to take you up re your other thoughts if you’re game. I’m rob(at)ttmadvisors(dot)com. Thanks in advance.

          11. LE

            Ok will do that. A bit busy this week (luckily) but will try to do so!

          12. PhilipSugar

            I don’t know where you live. I will say this: It is what makes it so hard in NYC, BOS, SF, LA.I can pay in the low $100s and then a bonus and you a wife and kids can have a good life. When you can buy a nice house for $300k taxes on that are $3k and the kids can go to a good public school and then University of DE, MD or Penn State for cheap or you stretch and sacrifice for Ivy League…..doable.In any of the other areas… are poor.

          13. Rob Underwood

            I live in Park Slope, Brooklyn. Not cheap. For a family like mine – one income supporting a family of five (my wife, me, 3 kids), I need to earn $200k, and at least $175K. That sounds like a lot to folks outside NYC but it’s really what you need to both afford a home, pay taxes, pay for health insurance ($2k/month), eat, pay for after school, etc. and put a little (emphasis on a little) away each month for retirement and college. It is not an income on which you can take fancy vacations – maybe a ski trip or two upstate but that’s it. NYC is very expensive.

          14. LE

            How essential is it that you live in NY Metro at all?

          15. Rob Underwood

            Very. My wife will only live in NYC unless we want to move back to Japan. Boston maybe but that’s probably it. It’s a limiter for sure. (I am avid snowboarder so if it were to to me I would live somewhere near skiing).

          16. PhilipSugar

            Yup just support my point… is a choice……as our famous singer from Delaware said… woman no cry. Don’t cry.Worked on the assembly line walking distance from my office now the Star Campus.

          17. PhilipSugar

            And understand that was a happy post, not a nasty one.

          18. Kirsten Lambertsen

            Hey, Rob. I have no idea if you’re interested in picking up freelance coding work, but I am involved with a good pipeline that pays U.S. rates (aka livable). React is the big demand right now, of course. But feel free to dm me on Twitter (@mspseudolus) if you would like me to share more info.

          19. Susan Rubinsky

            “Luck is what happens when preparation meets opportunity.” — SenecaI know exactly what you are talking about. I worked in a startup in Tech 1.0. When I lost my job, the only “opportunities” I found were working at higher level jobs at lower pay in NYC. This was 2002-03. I turned them all down. I was a single Mom with a mortgage. The salaries offered would be eaten up my housing, commuting, childcare costs and taxes. I would have no extra money for things such as food, insurance, utilities, etc.I then worked to build a consulting business (I had already partnered in two consulting businesses in the 1990’s) because at the time of the job offers in NYC, I was also being contacted by people in my network about consulting. The way I saw it was that the consulting would enable me to climb back to my earning potential and also give me the freedom to be more involved in my son’s day to day life (he was five at the time). I bootstrapped that business and just as I was nearing my true earning potential again, the recession of 2008 happened (though, I saw declines starting in 2007 and recall spending a lot of time talking with other people about the dip I was seeing/experiencing in the market).True, I have hussle and will and intelligence and marketable skills, but I’ll never have those years back. In some of those years I had to borrow money from family to get by. In some years I didn’t pay my taxes (I recall one year that I earned just under $30K but had to pay 33% of that in taxes. I just couldn’t do it. I chose to put bread on the table instead.) $30K doesn’t go far in Fairfield County, CT.It has now taken me 10 years to return to what I would consider my minimum earning potential. So, in a nutshell, almost all of the last 15 years have been me under-earning. The way back from that is a very long road. I am just now getting close to the place that I call the “break even.” I’ve paid back all the loans from family and am in the process of hiring an attorney to negotiate for me on my back taxes. Once that’s done, I will be at ground level. But at least I won’t be underground anymore. THE only reason I am at this level, compared with some of my friends and family, is because I have bootstrapped my way here, plowing through with sheer force of will that has, luckily, also intersected with opportunity. It could easily not be so.As the child of a mechanic and housewife, I understand what the blue collar people think about the current economy. They think it sucks.I am not writing this to be a pessimist. I’m definitely an optimist. But I do see the things that privileged people often don’t see. It is the underlying economic situation which is the root of the unrest in our nation.

          20. Rob Underwood

            Thanks for the post. You sound like an optimist and a fighter. Sounds like we have some shared experiences too.I think kids make things much harder in terms of career decisions too.

          21. JLM

            .@brooklynrob:disqusIt feels like you’re trying to pick a fight with me when I was trying to encourage you. Nobody is trying to discount your real life experience — maybe you should consider mine.I’ve only eaten what I could kill for the last 40 years. It worked OK for me. Probably the smartest thing I ever did was to move to Austin, Texas. Luck hangs around on street corners in the ATX.A guy who is as talented as you describe and who is working as hard as you should never be sitting on the bench.If you were in the ATX, I could point you in a lot of good directions.I don’t get the political angle of your comment. We are all responsible for our own careers.We do make our own luck and there is such a thing as luck.I do want to give you a little hard love — you sound a little like you enjoy being a victim. Never let the bastards get you down. Attitude determines altitude.One of the best bits of wisdom I ever received is this, “When you’re in a fight, remember to fight.”Good luck and I’ll be pulling for you.JLMwww.themusingsofthebigredca…

          22. Rob Underwood

            Nope, no fight here. And no victimhood or politics either.Back to the topic at hand – resources and whether a young company can have too much – and William’s comment about ICO companies with a 30 year runway, I simply wanted to present the view that crypto companies amassing huge war chests of both cypto- and fiat currency seems more an example of further consolidation of wealth than the great democratization and decentralization that some crypto advocates are predicting (I am also very curious about how wealth and returns will be returned to coin holders, but I digress).I truly appreciate your suggestions and tough love. Like I said, I am making it – I am getting by. I simply wanted to offer a view, as have a few others today have as well, that all is not well not only for coal miners in WV but for all sorts of folks across demographics and geographies, no matter what the media and Bureau of Labor Statistics says.The only political point I sought to make is that the “Trump demographic” – white, male, middle age, working class, and extraurban – may be the canary in the coal mine of the frictions that come from widening income inequality. I wonder if a bunch of newly minted bitcoin billionaires might not cause more economic angst among those who are not seeing a windfall. I think there was hope that crypto could spread the wealth better but it somewhat sounds like the opposite could be happening if companies are amassing 30 years worth of runway (and I know William was probably engaging in a little hyperbole).

          23. JamesHRH

            Rob, I will only say this.People like Jeff are terrible at coaching attitude, because their personalities are their greatest attribute. In particular, people like Jeff decide to accomplish something and then decide that nothing will stop then from completing that objective.You are not Jeff.You are clearly very bright, likely a highly analytical problem solver type. The problem with problem solvers is that they see the world as problems to be solved. Even your wants are seen as problems (not a shot, just a fact re; mindset).You need to be more ego based. You should stop gigging and pick the best professional outcome that you want next, one that you think you have a 80% chance of getting and do whatever it takes until you get it.Tell yourself 100 times a day: I want that & I am going to get it.Before you choose that job, make sure that the outcomes is what you need and want.When you chase that job, don’t ever compromise your integrity but don’t let your ego stop you from succeeding – do whatever it takes.I have been where you are, in a way. Your biggest issue is that you are looking at your results and at others, but you are not truly looking at yourself and your possibilities.Go for it.Happy to chat about this if it helps.

          24. Rob Underwood

            Three mistakes I’ve made generally:1. Create successes (first) for others internal in your org. This was my default operating assumption the afore mentioned large professional services firm – my assumption was if I was selfless with my time and creating success for the partners above me and the other managers around me that would help me. It did not. Just the opposite — I ended up taking on too much and getting too little credit for the work I did while others basked in the glory for comparatively smaller contributions.2. I focused on doing objectively what was right for my clients — i.e., helping them developer strategies to make more money, increase shareholder value, etc. Since I’ve been on my own that’s been the right approach but when I was in the professional services firm I was misguided to now see that that was not the point but that our real role was to be an insurance policy for the middle managers — we were not there to really help think through business and technology strategies.3. I do work first and then figure out how to get paid. Not worked out well.My instincts have always been to be very generous with my time and overall I think that’s been a really bad strategy. My instincts now are to literally do nothing unless I have a contract in place that ensures that it’ll be paid. Maybe that’s the ego part you suggest above but that’s no not my MO. My approach is always to jump in, take on whatever the worst and hardest task is, and then go from there. Not good of course.

          25. JamesHRH

            I could write that comment for you.Go back to my post – it’s about what you want . Your reply is about your mistakes.What do you want?If you want to work, you should be happy – you are doing work.If you want a career, you won’t have one until you value it and think about it as a being separate from you ( ‘my career needs’ ).If you want to own a business, you have to think about the business and your ownership of it ( now, you have 2 other separate beings to care for, outside of just you doing work ).Jeff thinks like this without realizing he thinks like this. That’s why it sounds impossible. Different personalities.Note the verbs:- do work- have a career- own a businessYou need to committ a greater amount of yourself to achieve the last 2.Like me, you are a learner. But, you can earn from your past learnings and people like Jeff earn while learning.It’s about commitment, confidence ( you should just wake up tomorrow w 10x confidence, based on your intelligence and ethics ) and belief ( you don’t really think you should get paid big $, do you? Or at least, why you? – I guarantee you Jeff always did).You end up being what you believe you deserve.

          26. Rob Underwood

            Would love to take this offline if you’re game. I’m rob(at)ttmadvisors(dot)com

          27. JamesHRH

            That’s why I persisted.I moved to Hosuton a month ago……we are dry but things will be sideways for a week or so.

          28. cavepainting

            Loved your post and the intellectual honesty behind it. I want to make a couple of points from my own experience.1.I do believe that people do best at things they love to do.When someone is looking for work, there is the tendency to gravitate to “what is hot” in the market.But, the truth is that each person and the life they represent has a meaning and a purpose. Some times, we have to search hard to find it. But the search itself can present an opportunity for growth in multiple dimensions.When careers are aligned to this purpose, things are in flow.2. Better to not think too much about lost years, earnings, etc. Life happens in the present. There is no happiness when the mind is evaluating the past or speculating on the future.Thank you again for the thoughts. This has been one of the better discussions in recent memory on AVC.

          29. Rob Underwood

            Great points and thank you.As I was going to mention to @susanrubinsky, I think consulting, which I’ve done a lot of in my career, is a blessing and a curse. It can pay well and keep the lights on. But it also tends to result, at least in my own case but I think in others as well, in chasing opps and one looking back 5-10 years and feeling like one’s career is missing a compelling narrative (i.e., a specialty). This can tend to compound on itself and you send up being a jack of all trades trying to be all things to all people. I think the market right now rewards specialists not generalists and consulting tends to create the latter (even if we think we’re the former).

          30. JamesHRH

            People end up loving the things they can do extremely well.

          31. cavepainting

            That is true. But also hard to do something very well without some level of affinity for it even though you might be resisting at the outset.But yes, there is a bit of a push and pull and both are needed to get to a tipping point.My wife for example hated dancing when she was young but she eventually became so good at it and started loving it so much that she now does it for a living and is a world class Indian classical dancer.My point is there is a deeper meaning and purpose behind every life and it might reveal itself if you are open to it.

          32. JamesHRH

            Meaning is built into life, more than revealed.It’s a virtuous circle: do it well, care more, do it even better.

          33. sigmaalgebra

            at least in large companies the successful executive must be risk adverse and at all costs minimize the chances of being associated with anything that reeks of failure — no amount of internal success in a large company can unring the bell of being even loosely associated with one failure. When you look at how many corporate execs behave, and why they are so wary of internal risk taking, this should come as no surprise,Yup, nice confirmation! I’m counting on that! Their fear and ignorance are much of my opportunity!For computing, if you are running your own shop, then notice that not even Windows 10 knows how old you are, just how good you are with the mouse and keyboard! For software development, .NET will work just the same no matter if you are 6 or 60! On the Internet, no one knows if you are a dog, how you are dressed, anything about your handshake or golf game, etc.

          34. Twain Twain

            Rob, at UBS, I wrote some strategic analysis about the risks of mortgage-backed securities and recommended we look towards IP securitization like Goldman Sachs instead. Being the youngest person in CEO-Chairman’s Office (I was in my mid-20s), everyone thought they knew better.I left and became Director of a startup VC/merchant bank.A few years later, UBS ended up writing down $35+ BILLION in value from their MBS strategy. That’s how much my strategic know how is worth: $35 BILLION.As an inventor-founder, I’ve seen $millions being flung at teenagers building silly apps that crashed and burned within a couple of years.I’ve stayed focus on my mission and invented a system that Google, FB, Apple, Amazon, IBM Watson’s brightest have no idea where to begin to even think about solving.I was speaking with a Berkeley cognitive sciences grad in his early 20s yesterday and he said he’d read my patent and the change my system would bring about is “RADICAL”.Yeah, because it only changes 2000+ years of Aristotlian ideas on reasoning, 350+ years of probability, 150+ years of linguistics theory, 90+ years of advertising, and 60+ years of machine intelligence and information theory.

          35. Twain Twain

            Part of me hears you (get big reputation wins under your belt before 30 — check; I started in my teens) and part of me hears @JLM:disqus.I made a decision to invent and build my system and get it patented because I saw that as an important USP and reputation win — even more than being able to point to successful ad hoc consultancy projects and clients. It was a REALLY PAINFUL PROCESS but it’s added to my skills set N-fold.There are lots of guys I’ve met in tech in SF who are 35+ years old with strong technical skills now listening to 21 year old guys who just raised $5 million from YC for something that those 35+ year olds could do in their sleep.In a way, you need to think less like a consultant and more like a CEO.

          36. Bruce Warila

            Hey Rob, I am a daily AVC reader and an occasional commentator.. Read this comment and the one above. It shouldn’t be this hard. I am crazy charitable with my time, and this gets me more opportunities than I can shake a stick at. I am busier now than I was twenty years ago. I don’t use Linked In, I barely network, and I live in the middle of nowhere (my neighbors have cows). I am in KBP a couple of times a year. Happy to meet for a coffee sometime. ~Bruce

          37. Rob Underwood

            Thanks. Not sure how I could be any more crazy charitable than I am now — it’s yielded next to nothing except more and more unrealistic expectations from people wanting (demanding) me just do more and more work for free. It’s actually become a bit of a running joke among some of my professional friends just how much work I give away — I think if anything I’m guilty of the adding too much value for too little (or nothing). May take you up on the offer sometime.

          38. Rob Underwood

            Would love to take this offline if you’re game. I’m rob(at)ttmadvisors(dot)com. I am in Brooklyn Sept-June, and then try and spend as much time in Maine during the summer (and where I’m at now though heading back to Brooklyn tomorrow).

      2. Salt Shaker

        I know many folks in this camp too. I’ve occasionally preached a similar message on this blog. In fact, this blog is a bit of an implicit endorsement of risk, though certainly not Fred’s goal. (Managed risk, def yes). There’s an opportunity cost in seeking the Holy Grail. Not saying one shouldn’t chase it, they certainly should when/where appropriate, but one needs to understand and appreciate the consequences by doing so. If your compensation is heavily skewed towards options, and your company is revenue challenged, then perhaps that’s not a good place to be. The notion that you scale and the revenue will follow is often fraught w/ peril. Metrics matter. Fundamentals matter. There’s a reason why many companies falter upon going public when all can look under the hood. Risk assessment isn’t an exact science, and it varies considerably by one’s opportunity, age and life stage….all part of the evaluative criteria….but one can easily and unintentionally piss away their peak earning years in pursuit of high risk success.

      3. sigmaalgebra

        The US has about 94 million people out of the work force, all for no good reason at all. One reason a lot of those 94 million and many more listen to Trump is that he mentions the 94 million and ways to put them back to work.

        1. Vasudev Ram

          94 mil? Last I read somewhere (recently), the total US population was what, ~300 or 350 mil? if so, 94 means a third or close to that, are out of work? Is this something to do with different ways of counting? Because in the past I’ve usually read about US unemployment rates being in the single digits – say 3 to 5 to 7%.

          1. JLM

            .Check the definitions of the US BLS (Bureau of Labor Statistics). What you are talking about is U-3. There are several other measures of labor and unemployment.JLMwww.themusingsofthebigredca…

          2. Vasudev Ram

            Thanks, I will.

          3. sigmaalgebra

            @JLM knows the names of the official US Federal Government employment statistics.The unemployment rate, “say, 3 to 5 to 7%,” is one of those but, IIRC, only counts people currently unemployed but still essentially in the “work force”. Someone who sent 2000 resume copies over 2 years and gave up is no longer counted in the “work force” so is not counted as “unemployed” in the sense of the 3-7%.The unemployment rate, your 3-7%, makes sense, is useful, only with the implicit assumption that everyone who wants a job can get one. Maybe at one time this was true, but it hasn’t been true for some decades now.At one time apparently essentially every man who had a college degree, and a lot of men with just a high school diploma but some time as an apprentice, could get a job and right away buy a house and support a family with several children and a stay at home wife. That also hasn’t been true for a long time.Why? I can only guess based on just gross observations. The newsies won’t publish any data better than just my guessing, and I don’t have time to dig into better data. But my guesses are:(1) In a lot of ways, what we regard as the minimum necessary to have a house and support a family is much higher than it used to be in the sense that a lot is better now than then.Now we take for granted that a new single family detached house will have good water, with a water softener if necessary, central heat, central air conditioning, good insulation, high quality windows, stove 36″ or so wide, microwave oven, dishwasher, washer and dryer for clothes, store bought ready to wear clothes, a lot of ready to eat foods, frozen, canned, carryout, fast food, a car with air conditioning, lots of lights, buzzers, safety stuff, platinum in the exhaust pipe, modern medicine (not cheap) including dentistry (braces for the kids, not cheap), etc. And the schools try much harder than they used to meaning more school taxes.Or it used to be that a stay at home mom was darned busy sewing clothes, repairing clothes, cooking food “from scratch”, hanging wet clothes on a clothesline, washing dishes by hand, maybe with a vegetable garden, etc. Now if she just buys goods and services for such work and does not earn money herself, then that needs one big step up in productivity by the husband.E.g., once I saw a photograph of a wife and mother with her three young daughters. The daughters were smiling, happy, healthy, pretty in all spotlessly white, cute dresses, and the mother looked tired and had hardly a pound of fat in total on her body; she’d been working really hard.It used to be for an angel food cake, the mother got the eggs from the hens she kept in the backyard, and she beat the egg whites by hand. Later she got the eggs at a grocery store and used an electric mixer to beat the eggs. Now her kitchen has a high end Kitchen Aid mixer, good enough to run a small restaurant, and she buys her angel food cake ready to eat! “Eggs? What’s an egg?” :-)!(2) US military expenditures, WWII, Korean War, Cold War (e.g., B-52s in the air 24 x 7), Viet Nam, Gulf War I, Gulf War II, Akrapistan, war on terror, etc. My guess is that these expenditures really add up.(3) Too much importing of cheap goods and cheap labor.(4) Too much giving away US business as part of US foreign policy.E.g., IIRC, the US essentially gave Pukistan the US cotton terry cloth towel business, no doubt without asking all the people in N. and S. Carolina, sure, under the assumption that all those people would soon get much better jobs with Microsoft.The biggie give away was from when “Nixon went to China” and let them have a lot in foreign trade. The idea was foreign policy, give China a carrot, many carrots, get their economy addicted to carrots, and threaten to take away the carrots if they misbehaved. Okay, China, do something about Dung Dong Jong Ill Uno III in Ping Pong Yang or we will clean up our $400 billion or so annual trade deficit with you that you want to use to challenge the US Navy in the Pacific, get super close and friendly with Pukistan, start a modern version of the Silk Road, do the valuable mining in Akrapistan, etc.And that way, that is, keeping our carrots from China, for what we don’t import but do export, we will put a lot of those 94 million people back to work, have less in safety net expenditures, more in tax revenue, more in spending and earning all across the economy, and get the US going again.(5) A lot of automation that put a lot of people out of work.(6) Lots more in safety, food, medical, environment, work place, etc.(7) Lots more in regulations that raise prices, reduce number of units sold, reduce employment.(8) Too many law suits.

          4. Vasudev Ram

            Thanks for the info. Sad scene.

      4. Anne Libby

        I don’t think you sound crazy. In p4, it sounds like you’re describing people I know from b-school.

      5. Vasudev Ram

        What speech was that?

        1. Rob Underwood


      6. Matt A. Myers

        Anyone putting money into any crypto-assets is funding all of these ICOs …

    7. Kirsten Lambertsen

      As a refugee of Internet 1.0, this comment put a chill down my spine.

    8. Kevin Hill

      Yeah, it is also an odd disconnect with how bullish Fred is on cryptocurrencies. How does his statement that Bitcoin is ‘The largest, most successful startup in history’ (pardon, I couldn’t find the exact quote. I wish twitter had better search!) jive with this view?

      1. William Mougayar

        I don’t think that Fred was singling out blockchain companies, but I’m the one that made the inference. Notwithstanding that, that doesn’t negate being bullish on the sector.

        1. Kevin Hill

          That’s the thing with cognitive dissonance. You never mean to implicate the other model, but once you take a step back you realize something isn’t matching up.There’s no way you can be internally consistent and both believe this post and not see it has a negative indicator for the blockchain sector.Maybe you still believe there are compelling other positive indicators that override this one, but that’s a separate argument.

    9. cavepainting

      More than the question of too much capital being a curse or blessing,the more relevant question is: does the entrepreneur have the right mindset to convert capital to value with the highest efficiency?As you rightly say, some things are learnt only through wisdom that can come only from making bad decisions.

    10. JamesHRH

      DnF is a good acronym.

    11. jer979

      A bit late to this game given travel, but not surprised that @wmoug:disqus brought up the ICO funding point!I struggle with this as well re: the ICOs.From my days leading the marketing team at Sprinklr I know, firsthand that, while annoying in the moment, the resource constraints we had really forced us to think deeply about where we would put our efforts and to justify our decisions. It’s the proverbial “pick your beach on which to land, not the entire coastline of France.”At the same time, the common enemy of the decentralized projects are the “winner take all” network effect centralized companies with infinite money. Naval talks about this a lot. So, given that, why not give these start-ups the massive war chest they are going to need in order to even have a chance to fight the entrenched incumbents?And, remembering the pain of some of the board meetings with top-tier VC’s like Battery Ventures ( I love Neeraj Agrawal but there were moments where I was dreading talking to him ;-), there’s a part of me that says “if you raise a boatload of ICO money, you get to avoid that.Of course, having a top tier VC is probably a feature, not a bug, and I’d rather have Fred all over me than being able to make stupid decisions without his guidance because we have $150mm in the bank.Still, in this market, it’s really difficult to “just say no” to the opportunity to give yourself the breathing room.To Fred’s point, however, maybe that’s a bad thing.I suppose the question we need to ask and answer for ourselves (and this applies to politics as well) is: are we really in unusual/black swan times or is this just another cycle and many of the fundamentals continue to apply?

  5. Robert Heiblim

    I have to agree with you on all counts. Raising money while often critical is not an accomplishment for the business. My experience is also that the stress of limited resources forces choices, necessary choices to get the most for the least.

  6. Vinish Garg

    Every new resource (a cheque or an engineer) means another node in the strategy chain (if they are not strategic and aware enough) which raises next constraint. And they are trapped in the cycle. The best bet is to have a process and strategy (measurable goals), and then invest in people to realize it as best as you can.

  7. Piotr

    Concluding on what you and William mentioned, basically most ICOs will go to waste. Such a waste of precious capital.

  8. Guy Lepage

    Some really really great advice here.

  9. JimHirshfield

    Like the children of wealthy parents that make bad decisions.

  10. Laurentiu Victor Balasa

    I think this following quote from Notorious B.I.G. fits in nicely with the theme of this article: Gotta try to stay above water, y’know?Just stay busy, stay workingPuff told me, like, the key to this jointThe key to staying on top of thingsIs treat everything like it’s your first project, nomsayin’?Like it’s your first day, like, back when you was an internLike, that’s how you try to treat things like, just stay hungry

  11. joahspearman

    Thoroughly enjoyed this post because it’s my experience running Localeur from day one with just over $3 million raised all from angel investors, no VCs, and seldomly with more than a few months of runway in the bank yet we’ve outlived and outexecuted VC-backed companies like YPlan, Sosh and countless others in the process.

  12. Pointsandfigures

    Coach Herb Brooks to the 1980 US Olympic Hockey Team, “Play Your Game”. All great upsets happen when you play your game and not someone else’s

  13. Tom Labus

    There is that unknown element that exists in all successful ventures. I just wish I knew, for sure, what is is!!!

  14. Adam Sher

    Fred, I agree with 1, 2, and 3! Having excess capital allows you to make mistakes and figure those three items out. It’s not always about hoarding engineers. Knowing where your next meal comes from helps you focus on the important things that will drive success.

  15. JLM

    .Leaders acquire capital (resources) for their endeavors based on a vision driven plan.Managers (often the dual role of a founder/entrepreneur in the early days) allocate the available resources.Smart investors ask, “What will you do with this much money? Where will you end up?”There is a very simple tool to govern this resource and resource allocation discussion: DOLLAR WEIGHTED ORGANIZATION CHARTS.I have used this with great success in assisting CEOs plan the growth of their companies. It is incredibly easy to do. I used it myself when I was a CEO.1. Make a functional and personnel org chart of your company as it exists today.2. Make the same functional and personnel org chart of your company as you plan it to exist six, twelve, eighteen, twenty-four months from today.3. Weight the org charts with the cost of the personnel. Summarize your costs by department and function. All of this is on the org chart.4. Calculate the appropriate levels of KPIs — as an example: $revenue/salesperson. This is where a lot of CEOs run out of patience and persistence.Calculate the relevant percentages v gross revenue. [If you don’t have any revenue for twelve months, just do what you can, but do it.]Tinker with your plan and wiggle into the numbers.5. Reduce the dollar weighted org chart to a spreadsheet. Calculate your “dynamic burn rate” — the burn rate on a monthly basis until you get to break/even and start to generate cash.[You will be surprised as to how your burn rate changes as you add people and expand functions. It is not a static function. It is very dynamic.]I have done this with companies who have begun to make money and it is like Christmas watching the burn rate disappear.6. Run high, low, middle scenarios. Pick the most likely outcome, but do not abandon the others. They are Plan B.7. Identify the resources that are required at each level of progress. Compare that to what you have and identify what you have to raise and when. Get way out in front of your fundraising. Time is never your friend in fundraising.When you do this, you force yourself to start with the plan and walk the cat backwards into the resource equation, rather than focusing on some arbitrary amount of money and trying to figure out how to spend it.I cannot tell you how many entrepreneurs who I have sat with who say, “I’m going to raise $1.5MM for 20% of the company.” When I ask, “Why?” they say, “Because somebody at TechStars told me that’s the market.”A seed can only use so much water before it chokes itself out. Too much of anything is a problem.This is a rational approach and it works. It is a bit of work, but I have worked with multiple CEOs who have turned this into the most important growth management tool in their toolbox.I only recommend it because it works.JLMwww.themusingsofthebigredca…

    1. JLM

      .In looking at the financial health of a company, here is an idealized list of financial KPIs which may be useful.1. Gross profit margin2. Net profit margin3. Monthly (annual) recurring revenue4. Return on equity5. Current ratio6. Working capital ratio7. Accounts receivable turnover8. Runway, burn rate (two different things)9. Revenue per full time equivalent employee10. Revenue per customer11. Revenue growth rate12. Cash conversion cycle <<< nobody ever understands this13. Cash on hand — double check balance sheet v bank statements v checking accountGraph all of these things on a monthly basis and you can look at the graphs and see where you are headed.Do not feel like this is a hair shirt or an extraordinary effort. This is what companies who are at the “walk” phase of crawl, walk, run should be doing.It is also an area in which VCs are woefully inadequate in supervising their investments. The other day I had a chat with a VC who had an investment in a company of which I was advising the CEO. The VC had just seen the graphs from the company on this — financial doodah — and sales KPIs.He reacted as if he’d never seen such a thing before in his life. What are VCs receiving from their portfolio companies?Many VCs are not financially sophisticated enough to “get” this because they’ve never been operators. More will say that at the current stage of their investment, it is unnecessary, burdensome, etc.I say, “Practice like you intend to play. Get this stuff set up at the beginning and it becomes a habit, a damn good habit.”JLMwww.themusingsofthebigredca…

      1. sigmaalgebra

        WOW! Two keepers in a row — read, saved, abstracted, indexed!I’d wondered just what a DOLLAR WEIGHTED ORGANIZATION CHART was and what to do with it. Now I know! Fine. Should usually be darned useful.Gee, working within “resource constraints” is an old problem!One such problem was how to do USAF logistics moving stuff from here to there so that everything arrives in the right, or at least a suitable, order, resource constraints are honored, and time is minimized. In the late 1940s, a bright guy, G. Dantzig worked on this at USAF funded Rand Corporation. So, have some variables such that if their values were known, we would know what to do; in terms of these variables write out what is to be minimized and the resource constraints, and then hope can find enough in applied math and computing to find the values of the variables. If all the equations are linear in the variables, then what Dantzig did can work well — linear programming (project planning). And often it’s still possible to do well if the equations are not linear or if some or all of the variables have to be integers. There are valuable applications in, say, mixing feed for livestock and operating an oil refinery. With integer variables, quickly though, we want an algorithm that shows that P = NP — see below.Curiously, one application is getting the work done on big projects, e.g., as in PERT charts.Of some significance, if in fact the linear problem is least cost flows on a network, and many practical problems are even if they don’t look like it, then we have a version of Dantzig’s work that is astoundingly fast and commonly can honor the integer requirements for no extra effort.With “Plan B,” “walking the cat backwards,” there are connections with parts of the applied math of the case of optimization, best decision making over time under uncertainty.E.g., suppose a cargo airplane is to fly from A to B, C, D, and back to A. The plane carries cargo from A to B, C, and D and picks up cargo from B, C, and D and carries it to A.Cargo loads are random variables, known essentially in distribution only. Assume fuel prices and availability are known but among the stops vary widely, even wildly. On flight time and fuel burned, there will be random effects from weather and air traffic control and of course, indirectly from the random cargo loads.Now your mission is to advise the pilot on fuel to buy and vertical flight plans to use, determined dynamically at each stop along the route in terms of conditions at that stop, to honor all engineering and safety constraints, meet arrival time windows, and minimize expected direct operating costs. So, for the costs to minimize, include both fuel and flight time, e.g., if fly faster, then likely burn more fuel but, then, put less time on the engines and reduce costs of engine maintenance.Yes, a good solution is possible. Hint: Some basic software can be done in about 4000 lines of code. Yes, there is some applied math involved with some opportunities for some originality. Computer execution time can be an issue, but with some original applied math can speed up the computing by a factor of 20 million or so.Part of the core of the work is a case of “walking the cat backwards”! So, start at A and work backwards to D, C, B, and A again.Could generalize this: Suppose Joe is doing business planning for the next, say, 36 months. So he starts an Excel spreadsheet with one column for each month and one row for each relevant variable. Some of the cells have just given, constant data; some cells have algebraic expressions in terms of cells in earlier columns; some cells have random variables (typically in practice the random variables will be treated as independent, but that is not necessary); some cells are empty and for decisions to be determined, and in the bottom right there is a cell with an algebraic expression in terms of other cells to have its expected value maximized.Okay, offer that as SAAS running on the cloud.For small, simple spreadsheets, the software will run fine and often give some surprising to astounding results — the software will have the operation jumping among plans X, Y, Z, …, in seemingly brilliant and prescient ways!As spreadsheet size and complexity grow, it becomes a super computer application.Due to some applied math, some special cases are much easier.Generally without the random variables, the problem is much easier, and for problems of modest size the general purpose generalized reduced gradient (GRG2) of L. Lasdon, with software commonly, IIRC, with Excel, has a shot.Too soon we will want an algorithm that shows P = NP: The set of all problems that can have their answers checked in polynomial time (NP) can also be solved in polynomial time, worst case (set P). Our chances of getting an algorithm that shows P = NP, even with quantum computers, are slim to none.[Uh, the NP abbreviates non-deterministic polynomial. So, suppose we guess (random, non-deterministic) and check it (polynomial effort, a polynomial in the size of the problem, that is, just polynomial instead of, horrors, exponential). We keep checking random guesses and use binary search, just polynomial effort, to converge to the optimal solution. Then NP is set of problems that in principle we could solve that goofy way.]Usually in practice our problems are not worst case, and with problem specific effort we can get by without P = NP, but the problem specific part is in practice one heck of an obstacle.So, really we’d like an algorithm that shows that P = NP so that we could take such optimization, and many other, problems, just push them into the algorithm like clothes in a good washing machine, and get out perfect answers.Of course, set P is a subset of set NP. So, the question P = NP is, is checking more difficult than solving? So far, tough to say!Much of the start of the P = NP question was from the often severe challenges of trying to solve linear programming optimization problems where we also ask that the variable values be integers. One well funded, bright group trying to solve such problems was at Bell Labs — the problems came from trying to get least cost network designs. Finally they wrote a book, now famous in applied math,Michael R. Garey and David S. Johnson, Computers and Intractability: A Guide to the Theory of NP-Completeness, ISBN 0-7167-1045-5, W. H. Freeman, San Francisco, 1979.So, right, this is now old stuff. Lots of academic applied mathematicians and computer scientists have severe cracks in their heads from beating against the stone wall of the question of P = NP.Clay Mathematics Institute in Boston has a prize of $1 million for the first proof to settle the question of P = NP. They’ve had the prize offer for some years now! Gee, if a computer science prof at Stanford wins the prize, then he will be able to buy a small, fixer-upper, first house within 20 miles of Stanford!

  16. David Semeria

    Fred, of all the excellent advice you have given here over the years this is the one viewpoint on which I strongly disagree. I concur that having too much capital is harmful, but having too little is just as bad.

    1. Donna Brewington White

      Yes, a huge (maybe even life and death) difference between constrained and inadequate.

      1. JLM

        .Capital is like oxygen. Very serious implications when you are under oxygenated.JLMwww.themusingsofthebigredca…

  17. DJL

    Well timed – I agree that a small focused team can do wonders. (Remember the old software classic the “Mythical Man Month”? Adding more people to a late project makes it later.)However, organizations with lots of capital can drown out better solutions by force.

  18. creative group

    CONTRIBUTORS:Did Fred mean in 1. Drive execution verses exection?We looked at that word and thought scrabble wouldn’t allow it.We agree with Fred on the operational side. Most Operational Managers/CEO/Managing Partner’s who run private companies operate on thin margins to maintain control and profits. When people are thin on Operational efficiency and experience and rely upon outside funding and guidance they feel (not all) money will solve the problem. The money may attract the right talent to solve the problem but ultimately it is talent.We can agree with all three but not with the explanations on two and three because we have seen mistakes hidden and resolved before any investors actually knew existed until reading the 10K (A outlook of a Companies financial performance required by the SEC)

  19. Elia Freedman

    I only wanted to add that there is a difference between resource constrained and resource starved though.

  20. David C. Baker

    Over the last year I’ve really enjoyed reading/researching around the notion that “constraints enhance creativity” and the correlation is very strong. You’re talking primarily about funding, here, but I wonder if we could substitute “time” for “money” in this equation. I’m not so sure if that works, and I see the connection between time and money, but if I have 4 hours to write an article versus no deadline and just “blue sky” thinking, I tend to write a better and more focused article.This is good stuff, Fred.

    1. JLM

      .”If I had more time, I would have written a shorter letter.”Often attributed to Mark Twain.JLMwww.themusingsofthebigredca…

  21. David Intrator

    As an artist and brand storyteller, I can’t agree more that limits are what it’s all about. They’re the key to creativity. It’s all about thinking inside a box. http://www.smarterstorytell

  22. Yoram Wijngaarde

    Yes. I am learning this too. And it applies to life too

  23. Scott Belsky

    Resourcefulness > Resources

  24. PhilipSugar

    +1000We could just not agree more.My team of less than 20 people supports 8 datacenters around the globe storing information on 100mm members who record over a billion purchases, and more than 5B interactions, all done in sub 500ms response time proved by pingdom, along with a datamart for deep analysis.Yes of course people say if we just could get more employees, we could do X.The way you make good choices are by saying what doesn’t go in.When you have too many resources the answer is: everything. That is not the right decision.The same for spending money. If you think you have too much of it you spend on things that you don’t need and don’t provide a return.I think so many people have never gone through the gut wrenching process of downsizing (I used to do turnarounds)I know this post is not about anybody but look at Soundcloud. It goes from Techcrunch darling to them reporting it is a “shit show” their words not mine. When you have to lay off employees and you will if you spend too much, the good ones leave, you get rid of some good ones by accident, and the rest have horrible morale and are the political adept which are not good at a technology company.

  25. Thomas Luk

    I was asked once about my opinion on deadlines. Embrace them because they help you to get things done.

  26. Grace Schroeder

    I echo this. We have been thinly funded, and on a multi-year development path to created a low-code aPaaS. With more resources, we may have invested more heavily up to the UI. As it stands, we had to invest in hardening the core –app building tools, auto-API /Integration framework/events processing and jobs. In hindsight, a blessing because we find that in many cases we are operating behind another UI (like Slack) — and the need (and customer desire) for another mobile app has vanished. It hurt, but we have a lot more flexibility now.

  27. creative group

    CONTRIBUTORS:OFF TOPIC ALERT!We feel compelled to address the Campaign rally of Trump in Phoenix, Arizona yesterday.We pride ourselves in being Independent in thought, worldly and political views.The Alt-Right represented on this blog by a few who are definitely supported by the same rabid up vote posters is no secret. The current Conservative Party has been hijacked by Libertarians who fund whatever causes the rank and file Conservatives are cemented to support their Libertarian agenda. (Have you actually read the Libertarian Political views?)…The bigger issue we see is the desperation by the Progressives with no message and stuck in the Twilight Zone of 1960 thinking that requires twenty-seventeen (2017) solutions.Watching the CNN show with Don Lemon and panelists covering Trump’s rally in Phoenix only confirmed what Trump has outlined over and over. The bias coverage. The Progressive panel over and over attempted to passionately make the argument that they couldn’t be impartial at the expensive of lying to themselves of who Trump really is.Trump hasn’t changed one bit from years ago. (His views on minorities were always racially biased, most use racist) The Conservatives always ask the question when, how and why on showing his biases which we choose to use. (The exonerated Central Park Five that he without evidence or apology went after, Google it, no time to patronize the apologist on this blog, leading the birther false claims, dog whistles to The Neo Nazi’s, White Supremist) Offering to pardon a convicted felon of racial profiling even before his sentencing Former Maricopa County Sheriff Joe Alpaio.…The law and order promised applies to minorities only.(Deflect, lie, deflect and continue not addressing valid and factual issues, introduce unrelated points you really want discussed, lie some more playbook has been used by the Hannity, O’Reilly, Limbaugh and Ingraham wannabes ).One issue is with the Progressives in Media and not the media as a whole. The United States is a democracy and not a Dictatorship which Trump has shown to engender.The Progressives in media current view to call it how it actually is should have occurred from day one. Trump isn’t a Candidate he is POTUS. Saying he is unhinged, early stages of dementia, unfit and crazy will not get past the bar of exercising the 25 amendment.If the Progressives actually think Trump’s out right lying will unseat him this is a waste of time. This method may please the Progressive base who already acknowledged the reasons why Trump was unfit (We say skill set doesn’t fit the duties of the position).If Bill Clinton who admitted to lying couldn’t get impeached don’t expect Trump who uses double speak on statements. (I don’t know, maybe, some people say, etc) Trump is who he has always been. Progressives in the media there is no amount of soul searching that will help being conditioned a lifetime to think a certain manner will fix biases.The Republican leadership which are co-equal branches of Government who are saying to aides who inform Reporters how they are actually view Trump behind close doors don’t have the intestinal fortitude (Really need a strong phrase) to confront Trumps lying, narcissistic, race baiting and off teleprompter views. The problem isn’t Trump it is the voters who were hoodwinked into thinking Trump was something he wasn’t. The Republicans will sellout the United States before giving up power to Democrats with no message or solutions. Both parties are the problem. Term limits which will never happen. People will not vote themselves out.UNAPOLOGETICALLYUNEQUIVOCALLYINDEPENDENT

  28. Kevin Hill

    Echoes of “The Mythical Man Month” and perfectly in line with modern research about creativity.I’m not so sure about “I don’t believe capital has ever helped a company win a market”, but I think you are right if you limit “coampany” to “companies young enough that I would be involved in them as a VC”. It is pretty hard to see why eg, Budwiser won the beer market, except for a ‘virtuous’ capital-marketing cycle.

  29. laude05

    Having started two successful small business and later been a manager for 3 Fortune 500 corporations I generally agree with you BUT I have seen more good ideas fail from lack of enough cash to execute than cash waisted on mediocre ideas.

  30. Kirsten Lambertsen

    For me, the most important part of this post is, “playing your game and not someone else’s.”People will (and have in the comments) argued the money factor.As a startup, if you have too much money or not enough, your best shot is to “play your game and not someone else’s.” It’s a lot harder than it sounds.

    1. Donna Brewington White

      I needed to hear that again too. So easy to be distracted by the lack. Especially when a payroll is involved. But I am convinced that owning my game and playing it like a boss is a big part of the answer. So much easier said than done though, isn’t it?

  31. Jeff Hohner

    “I believe that excess capital makes companies weak and unfocused.””I believe limited capital makes companies strong and focused.”Great comments and advice overall Fred. What jumps out at me is how important it is to have the lucky matching of the founder/team and their investors wrt to the values held about money (i.e. the how’s/when’s/why’s about how money should be invested). Coupling a founder/team who has bootstrapped/self funded (and has become laser focused on how to spend the next dollar and whether it is a smart and/or needed spend), with an investor who respects and nourishes this to grow wisely into a large market, seems to me to be the only way to go. If both sides share the same values and approach (e.g. careful and thoughtful spending in all stages of growth, founders/teams respect of the privilege of using opm and investors respect for their LP’s) then you should have a good shot at staying strong and focused in good times and bad (and ultimately successful if you have some lucky breaks along the way).It seems very easy for many to spend someone else’s money without putting in the same rigorous analysis as one would do if they were having to pull it out of their own pocket (especially if it comes easily and you are told to spend it). I don’t get it.

  32. Paul Sanwald

    As someone who’s always balanced a career in music with a demanding day job, I’ve often been asked how to juggle both. The answer I give is that you create art despite your circumstances, not because of them.

    1. JLM

      .You create the art that you know. Your circumstances and your imagination inform your art.As a writer, I am often admonished to “write what you know.”The correct direction is, “Write what you can imagine based on what you know.”The ratio of “know” v “imagine” should be 1:10.JLMwww.themusingsofthebigredca…

  33. Thor Snilsberg

    Many artists and creatives will credit limited resources and constraints as the source of their greatest works.

    1. Susan Rubinsky

      Because we all want to die like Van Gogh, penniless and unrecognized in our lifetimes.

  34. sigmaalgebra

    This experience, built up over thirty plus years in tech and startups, has convinced me that resources are never the limiting factor to doing great things.Gee, that’s a really strong, unqualified statement!For a qualification, the need for capital can vary a lot depending on the project being attempted. E.g., at FedEx, they needed some capital. Without it, the project would totally flop. Twice I did hurry up work, once in computing with a little applied math, once in some simple applied math and a little computing, that kept the company from just such a flop, and both times it was work I did that got selected members of the BoD to go along, cough up the capital, and keep the company going. Yes, something like FedEx was necessarily going to be capital intensive.But, I can agree, that it’s possible to do projects that need nearly nothing in capital and can be wildly successful. Let’s see: Microsoft, Apple, Cisco, Google, Facebook, which of those did/did not take equity investments to get capital? My guess is that they all did. Heck, there is even a movie about Facebook taking capital, Zuck doing poorly with a girl, etc.! For Google, IIRC, early on a Stanford prof wrote them a check for $100,000 to get the basic legal work done, etc.But, I’m short on big success examples that clearly didn’t take some capital; by “capital” I mean equity investments and not just commercial bank loans, bonds, etc.Still, I believe that big success with zero equity capital can, at times, be done. Indeed, it’s curious that (A) some information technology startup trying to be worth $1+ billion does take equity capital but (B) some guy can start an auto repair shop, a labor intensive business, super tough to scale, likely never worth as much as $1 million, just with his own, thin checkbook. Or, if case A is such a good business project, then just why does it need equity funding? Sure, the answer is easy enough in practice, but there’s a seeming incongruity there in principle!Resources, measured in available capital and headcount, often make #2 and #3 more challenging.I can see that such things might happen. To me, an equity check for $5 million in the bank could sink my company: Why? (A) I’d have a BoD with the many considerations on BoD care and feeding long explained at and by @JLM. That new work looks like nearly a full time job that, then, would keep all the directly important work from getting done. (B) There would be pressure and/or temptations to spend the money, and making the decisions to do that would take time away from, again, the directly important work. (C) Some of the pressure would be to hire and then manage some people, and there is no end of the time, money, and effort required to do that; the time would take away from, yet again, the directly important work. (D) With the money and spending it, would need more time for bookkeeping, accounting, auditing, internal controls, real estate lease deals, business insurance, office security, office cleaning, the telephone system, the computing setups and computer security, … and dozens more. Could be busy, busy, busy, all the time, the money could run out of the bank account like water runs over Niagara Falls, all before any attention to the directly important work.Sure, once have a business with some significant revenue, say, $1 million a month, then can consider growing people, office space, etc.. But will want to rush to revenue of, say, ballpark, $10 million a month and with a C-suite! So, have a COO — he/she stays really busy hiring, firing, checking lease deals, talking to the lawyers, care and feeding of the BoD, handling problems, e.g., really good data base administrator (DBA) Rafe Testosteroni making the cute, teenage receptionist feel “uncomfortable,” etc.! Then for the money handling, have a CFO. For the computing, a CIO. For care and feeding of the customers, a CMO. Etc. Set up some reports, weekly, monthly, quarterly, so that just in minutes the CEO can confirm that the work is getting done well and otherwise the CEO is out of the work and spends his time getting exercise to stay healthy and thinking about getting to monthly revenue of $1 billion. But that’s not how to get to monthly revenue of $1 million.And I don’t believe capital has ever helped a company win a market. Many have tried that approach and it always ends badly.You mean many have gone before, startups in 2017 are not the first, weren’t the first to have sex (@JLM) either!Good to know. A common remark is that one of the biggie reasons a startup needs equity capital is to “win” their market. E.g., buy a bunch of Super Bowl ads? Another common remark is that one of the biggie reasons to take equity funding is to be able to compete with well funded competitors where everyone is trying to “win” the market. Heck, there is even an associated “metric”, CAC or “customer acquisition cost”. And there’s the old “Gotta spend money to make money.” and “No guts, no blue chips.”.”Always ends badly”. Gee, that’s an unqualified, absolute statement! Okay by me! Spending money to buy market share — check that one off the TODO list!Got any great ideas how a new Web site can get, say, the first 1000 people to connect, try the site, in Paul Graham’s word, “love” the site, and start viral growth and, then, grow, mostly just from fairly routine publicity and virality, to an average, 24 x 7, of one user a second? Alpha test? Beta test? Hacker News? Articles from tech journalists? Tech Crunch? Twitter? Facebook? Make a sign, put it on a stick, and carry it near noon in Manhattan from Midtown to Wall Street? Often when in public, e.g., for the Manhattan walk, pass out cards with the site domain name?

  35. jason wright

    your Sunblock post reminded me of the Goldilocks zone principle. apply that to capital.

  36. Pete Griffiths

    If you want something done, give it to a busy person.

  37. Sara Chipps

    Thank you for writing this, shared with the team. Lack of capital can be the quickest excuse, it’s not one.

  38. Derrick Oien

    I couldn’t agree more. One of my previous companies raised a bunch of money, hired a ton of people etc. My current company has 11 people, we have been modest on our raise and we are covering over 12,000 local sporting events each week which recently landed us a big deal with the Associated Press. Our constraints make us only do the most critical things to accomplish our mission –

  39. Donna Brewington White

    This is a variation on one of the key themes I’ve picked up here over the years: focus.The message never grows old.

  40. amyjokim

    Every great designer knows and appreciates this principle. Constraints are your friend.

    1. Kirsten Lambertsen

      Yes! Creation requires containment. Otherwise, it just disperses endlessly until it’s indistinguishable from nothingness.Reminds me of the study where they observed that preschool kids played more freely and creatively in a fenced area than in a wide open area, where they huddled together to create a sense of safety.

  41. Chris McCoy

    Loved this post Fred. Will always be my ethos.

  42. matthughes

    All the money in the world = fat & happyThat’s never a good thing.

  43. Tima Anoshechkin

    Depends on the industry. If you in health or hardware at some point you have to get capital. Maybe not out of the gate, but you can’t just expect Tesla to Instagram it for 500k and achieve comparable impact.Not that concerned with ICOs. Smart founders will conserve cash, because they know, no new round is coming and they most likely need to pivot couple of times to get going.The downside of limited capital is that founders do focus, but on wrong things and make decision which will hurt long term and short term value just to be more attractive to potential investors. Also the quality of investors founders are ready to work with goes down the toilet, because value of money at the time is way higher then long term value of any future investor, hurting current investors.I feel that market should determine the round size, but it is part of the value add of advisers/investors to help founders focus on important things and bigger round gives both parties time to nail this relationship down.

  44. Giuliano Iacobelli

    Fred this is spot on. With a team of 4 engineers and less than $1M we’ve been able to build a product (a Zapier on steroids) that goes head to head with companies that have +$15M in funding. Despite that we’ve been able to secure customers such as Box, Cisco and partners like IBM.Without so much capital you need to be very resourceful and resilient, the downside is the pace you can afford in finding the best go-to-market and secure customers.On my experience this strongly narrows down the type of VC fund that you can approach. Most VCs look for hockey stick graphs and time it took to get to X in revenues and they tend to ignore the strength of teams that have been through several storms in their journey. Which is actually a missed opportunity on both sides.What do you think?

  45. Matt Kandler

    Fantastic post! I love the way you summarize the three limiting factors.If you look at posts on Indie Hackers – just one person can sometimes do the same amount of work that others have raised hundreds of thousands of venture dollars to do.I might add that patience is a key theme behind those limiting factors. Seeing others’ success can make you impatient on your own work which leads to losing your focus and killing your ability to make the right decisions and keep the ship steered in the right direction.It’s been probably the hardest lesson I’ve learned!

  46. notes

    I can relate to this as i am a currently-bootstrapping founder who is yet to raise $. The other thing is, people forget that if you take VC money there are only two possibilities: you win in a given market, or you don’t . In which case you’re fooling yourself by thinking that if you add X engineers you are definitely going to get Y. If your metrics aren’t great you are not going to be able to fundraise optimally. Reading the post made me think that the companies Fred is referring to, are dead in the water, they are refusing to acknowledge this somehow.I subscribe to what I describe as (music business pundit) Bob Lefsetz’ hit theory. It’s a hit (with your market) or it’s dead. There is no way around this. Changing the bridge or the second verse, or adding a string section (akin to hiring more engineers) is not going to suddenly make the “almost” a category winner. Time to consider something else.

  47. Frag

    Great point Fred. Lack of resources encourages optimisation. It happened to me just all the time. As an ultra marathon runner I learned it the hard way, when I had little water, little energy, little oxygen and still 30 miles ahead. The only way to make it was to stay focused and looking forward to the next 2 miles. I realised such an approach worked in my professional life too, when I had to deal with little money, little programmers, little time, and high objectives. Keep writing.I’ll keep reading.

  48. Shawn Faison

    This rings true to me from my experience creating things and seeing the response of people. I’ve seen them fall in love with an interesting idea, even though the product wasn’t perfect. If the product isn’t valuable or interesting, more resources just means a mediocre thing gets amplified. Maybe if it had more time to develop and with the time and feedback through a relationship with some passionate users, it would be better off in the long run.

  49. PhilipSugar

    Again and this in no way is being negative, because I agree with his point but if Fred is advising you, you have enough capital.There are many people he is not advising that are absolutely starved for capital.I agree if you have no money it is very hard to make money. Not impossible, but very hard.

  50. LE

    What it’s like for most people (non funded by VC)? Pretend right now you take all your assets (whatever it is from when you sold your company) and you put it ALL on the line for some new idea. [1] If it doesn’t work you lose that money all of it and your kids don’t go to college. If it works you just placed the bet on the right event and everyone thinks you are a genius. Now take the same case where you get a VC’s money which isn’t secured by anything. Obviously a huge difference not even a close comparison.[1] So if you have no money as you say ‘very hard not impossible’. If you have money easier but you stand to lose what you have saved up. No question way way way less risky for you to take OPM even with what everybody whines as the drawbacks. I mean seriously I would love to spend all day buying real estate (or some other things I buy) and have only time and reputation as the downside risk.