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The power of Exponential: Your math teacher never told you about this

Last fall on a cloudy Saturday, I attended a talk that changed how I see certain things. Why nobody showed me this thing before?

Every Tuesday, I post  a new story for this blog. If you read it regularly, you know that I am obsessed in finding how to make things work better and faster.

On that Saturday talk, the speaker showed us this formula:

1.01^365=37.8

If you make something 1% better every day, it gets 37.8x better ain a year. Isn’t that fascinating?

The Instagram story

Let’s look at Instagram. They launched the app in October 2010 and started with maybe 10-20 users at day 1. In December 2014, the app had 300 million users. Is this some crazy rocket-speed growth? No. The compound daily growth was just 1.09%. Yes, that’s right. Instagram grew only 1% a day.

My story since then

Wen come to work, I ask myself these questions: „What can I do today to grow the company 1%?“ „What can I do to improve 1% in something today?“

Yes, I admit that this principle is not 100% applicable to real life. But it helped me understand one thing: The growth is usually driven by small and persistent improvements rather than big jumps.

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6 things I was horribly wrong about when I started an online business.

When I joined the eHotel.cz team more than 2 years ago, I thought it would be a piece of cake. Huge market. Product almost ready. We’re smart guys. That sounds like imminent success, doesn’t it? In reality, things work differently. I was horribly wrong.

#1: Lets get a tiny part of this huge market. It should be easy.

It should, but it is not. If you build a hot dog stand in front of a McDonalds, you probably get enough revenue to keep going. It does not work like this in competitive online markets. If your product is not a superstar or a great niche player, you get nothing.

The good thing is that we figured this out soon enough and starte working. Currently, we are already gaining market share.

#2: There is competition, but we’re smart guys, we’ll be ok

The competition is hard. Much, much harder than I ever expected. We need to play an A game in all the aspects to keep up: Product design, UX, SEO, Advertising etc.

Many authors and mentors discourage startups from entering competitive markets. For example Peter Thiel in his great book „Zero to One„. However, look at Uber, Tesla, Apple and the other superstars. They all entered a very competitive market and were able to transform it.

#3 If you can grow revenue, you can grow profit

No, you can’t. Getting evenue is easy. It is just a function of money your going to invest into your product and advertising. Getting profitable is a completely different game. This is the hard part.

#4 Online retail is great because you do not have to deal wih the customers

Oh God. Online bussines is a fiction. The barrier between online and offline business is gone. The website (online hotel booking engine in our case) is just a tip of an iceberg. There is a huge amount of customers request that cannot be handled automatically. People call you, e-mail you and you have to have a big enough team to deal with it. The good thing is, the better the product is, the less request we have to handle by hand. But still. The difference between an online booking site and a physical travel agency is much smaller than we thought.

#5 You can easily say what campaigns will work 

If it was that easy, all hollywood movies would be blockbusters. Still, there are a lot of movies with millions invested and zero success. The same goes for advertising campaigns. It is impossible to predict what will people like and engage with. The only thing we can do is test many ideas in small batches.

#6 People will remember us and like us

Until you get big and famous, nobody gives a shit about your company. Nobody trusts you. Nobody remembers you. It is not possible to use the same marketing techniques like lovebrands use. If brands like Apple, Google or Uber say something, everyone listens. If a „no-name“ company says something. Nobody listens. Until you build your brand name and authority, you’re nobody.

It is challenging, but we love it

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The Offline CEO: Can you run a startup without a computer?

No, this is not a joke. I do believe that a CEO can run a company without using a computer. I am not talking about printing e-mails, but spending more time offline with people and pen&paper. What if working offline helps you be more effective?

I haven’t ditch my computer. I still keep using my computer for most of the day for now. But I already tried spending a day at work without a computer couple of times. I was just working with people, pen and paper and my smartphone. It was great.

Reasons why it is a good idea.

I am not advocating for all CEOs ditching their laptops for all the time, but let me present few ideas why would it help to use it less:

#1 You don’t need it for the most important management roles:

My  key roles as a startup CEO:

  • Creating and sharing a vision
  • Setting goals and strategy
  • Building a motivated and talented team
  • Training individual team members
  • Investor management
  • Solving hard problems

The most effective tools I use:

  • 1-on-1 meetings
  • workshops
  • flipchart
  • pen and paper
  • mind maps
  • sticky notes

Does computer help me for my key management roles? Not a lot.

#2 80% of online time is waste

Imagine Elon Musk, Tim Cook, or Barrack Obama in their daily work. Do they write lenghty e-mails, shuffle files and folders, compose complex presentations or check random things online? Probably not. Yet, sitting in front of a computer leads us towards these actions. This time is usually not very valuable for CEOs.

# 3 Mobile e-mail is better

Why mobile? Because people keep the answers short and to the point. They pick up the phone if it is faster. It makes writing long e-mails harder.  Smartphones just make everyone e-mail lives better.

My offline workspace
My offline workspace

Reasons against staying offline:

# 1 Startup manager should keep a maker role

Founders usually spend around 80% of their time making and 20% managing in early times. The managing part gets bigger as the company grows. Running a team of 15 people, I spend about 60%-70% managing and 30-40% making. I do product design and review, I deal with customers, I manage budgets and cash flow. I believe that as the team will grow, my maker role will go down to about 10%. But I do not think it is a good idea to ditch making and be 100% manager. I would lose the connection with the core of the business.

# 2 There are few things that are just better with a PC

Managing cash flow, analyzing data or preparing decks for pitches. These are examples of work I do that would be much less efficient offline.

 

Meeting With Socialsharks
Meeting With Socialsharks

Summary:

Ditching your MacBook is still not on the table. Leaving it at home 1 or 2 days a week is certainly a good idea. T will give you more time for people, for thinking, for drawing and creating.

However, I strongly believe, that not bringing the laptop to work at least 1 or 2 days a week would make a CEO’s life much more focused and productive.

 

 

 

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1 short life. 5 questions to make the most of it.

Life is short. Everyone wants to be happy and live a meaningful life. Life is messy and complicated. Sometimes it is hard to say if you’re spending your time right. These 5 questions collected from great leaders help me stay on track:

1. If you had a hard attack and can only work 2 hours a day, what would you do?

This question comes from the Four Hour Workweek by Tim Ferris. I love this book. It is partly inspirational, partly crazy. Everyone should read it take the most of it.

I am a CEO of a startup company. I would be able to fill my day with 200 hours productive work, but I only have 24 hours as everyone else. This hypothetical situation helps me pick the most important tasks and do them first.

2. What would you do if money was no object?

This is a title of an amazing 3 minute video by writer Alan Watts. How would you really enjoy spending your life? Students want to be painters, writers, ride horses. But then they say no, let’s do something where I can earn money:

When we finally got down to something, which the individual says he really wants to do, I will say to him, you do that and forget the money, because, if you say that getting the money is the most important thing, you will spend your life completely wasting your time. You’ll be doing things you don’t like doing in order to go on living, that is to go on doing things you don’t like doing, which is stupid. Better to have a short life that is full of what you like doing than a long life spent in a miserable way

Alan Watts

What If Money Was No Object ~ Alan Watts from Edgar Alves on Vimeo.

This is a tough question for me and for everyone.  One of things I would do for sure is to continue writing this blog. I do it because I love writing and sharing and I don’t care if I get paid for that or not.

3. If this was my last day, would I be doing what I am about to do today?

This comes from Steve Jobs‘ 2005 Stanford commencement speech, one of the best talks I have seen so far.

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.

Steve Jobs

There is nothing to lose, except the time. It is worth asking the question every day.

4. Would my worries matter in sub-Saharan Africa?

I don’t know who asked this question first. We often worry about a lot of things. The Uber is 5 minutes late. My business is not performing as expected. That pizza tasted awful. I like to ask myself: Would that matter if I lived in a poor village in a sub-Saharan Africa? If yes, it is a real problem. If no, there is a great chance that it is just a „first world problem“ and I should reconsider worrying about this.

5. Imagine you’re retired and just sitting on a porch with couple of friends. Would you be happy spending this time with people you spend time with now?

This is called „The Porch Test“ and comes from Lilly, a character in How I Met Your Mother. This is a great thing and it works not just for friends, but for colleagues as well. Life is too short to spend it with people you don’t like, even at work.

There is a pattern in all these questions. Only thing that we have is time. We have nothing to lose, except for the time. If you have more questions like this that helps you stay on track, please share it in the comments.