The “Strategy” Exercise.

Some startups write down their “strategy,” the same way they write down their “mission,” “vision” and “values.” These buzzwords are boxes on a list that need to be checked, published and used for marketing! Bah. That is not thinking.

Thinking is returning to this exercise, over and over again, as long as the company shall live, treating these metaphysical entities as real, relevant and powerful, and allowing dynamic reality to deepen our understanding of them.

So here I am, in Q2 of 2020. How did I get here? (And how could I have gotten here faster?) I started this business in Q4 of 2015. The initial strategy was to build a $10K/m Virtual Chief of Staff service for CEOs. There was demand but we couldn’t supply the demand efficiently. So we shut it down after six months, then spent the next eighteen months building Processes, a Digital Assembly Line, and a Labor Network, so we could do the work efficiently. Then we relaunched with a new business model and have spent two and a half years iterating on our pricing, positioning, targeting, operations and product…

We’ve now evolved into a Business Process Outsourcing & Automation service, for medium and large companies, willing to spend at least $2K/m on their digital operations. We can build any custom business process within 24–48 hours. Our clients delegate on Zoom, show us a project, process or workflow they want us to run for them, then we make magic happen on the back-end, and voilà, they get results. We provide Results Based Pricing for every delegation’s unique unit of work. We provide Automation Discounts for our enterprise clients, so their unit prices continue to decline.

Is it working? Our business performance trajectory for 2020 is exciting. By the end of last quarter (Q1'20) we were at a $2M run rate, 37.5% contribution margins, resulting in a Net Income of -$100K (burn). By the end of this quarter (Q2'20), we are set to surpass a $3M run rate, with 42%+ contribution margins, resulting in a Net Income of -$70K or better. By the end of next quarter (Q3'20), we are targeting a $3.6M run rate, with 45% contribution margins, resulting in a Net Income of -$50K or better. By the end of the year (Q4'20), we would like to surpass a $5M run rate, with 50% contribution margins, resulting in a Net Income of +$1K or better.

Pause. Wow. That’s great. Let’s get to profitability by the end of the year! That would be HUGE. FREEDOM!!! Not just freedom, but strategically, profitability by EOY’20 changes the game. We can reinvest profits in the business, with internal competition for capital as we decide to fund the highest ROI projects. If our metrics are steady and we demonstrate consistent cash flows, we will eventually qualify for debt financing, and can lever up to 3–4X EBITDA, which is far cheaper than equity financing. We will no longer be dependent on the goodwill of equity investors for our existence, our ownership will no longer be in decline, and we will have validated our business model.

2020 Strategy

Our strategy through EOY’20 is straightforward. On the sales side, we’re focused on hitting the targets above. Our salesops machine is closing about 6 deals a month. By the end of the quarter, we should be closing at least 10 deals a month. In Q3, to grow from $240K/m to $300K/m of revenue, that’s all we need to do: add 10 deals/m to generate $20K/m of growth. Actually, that’s more than we need, because our net churn is trending negative due to expansion, so we may exceed target. But in Q4, to grow from $300K/m in revenue to $415K/m in revenue, we need to figure out how to add $33K/m in revenue, or 20 deals per month — while, of course, supporting our existing book. To do that, we’re betting on upgrades to our salesops machine. Every week, it’s getting more powerful, so I’m confident we’ll be able to meet and maybe significantly exceed that target. We’re also betting on marketing continuing to provide more lift. Last quarter and this quarter the focus has been collateral and email campaigns, and it’s already starting to pay off.

On the product side, the main question is supporting increasing scale without increasing headcount: growing revenue per agent and revenue per partner. By EOQ2, revenue per partner should be ~$10K/m, by EOQ4, revenue per partner should be ~$15K/m, as we’re only planning on hiring net 1 new partners. For agents, I’d like a similar rise: ~$1.2K/m by EOQ2, ~$1400 by EOQ4.

Our front-end client app is going to become increasingly self-service, which should reduce our support costs significantly, and make our conversations with clients less tactical and more strategic. Our Digital Assembly Line should continue to reduce indirect labor (management) costs, driving margins. Results Based Agent Pay should also drive performance and margins. Our Process Builder should structure 80% of our work by the end of the year, and 20% of steps should be fully automated — excluding custom or ad-hoc automations. Our hiring and training systems are already able to support our scaling plan this year, but they should continue to upgrade as well.

2021 Growth Strategy

I’m still fuzzy on how we hit our 2021 growth targets, but I’m not bothered about it. It’s good to try to see around corners, but isn’t always possible. Tactics, ideas and breakthroughs tend to emerge organically at each stage... If we hit our 2020 targets, we’ll naturally have ideas in Q4'20 for how to attack Q1'21, etc. However, let’s do the exercise and think through the targets…

On the sales and marketing side, the targets will be much more aggressive: scaling from a $5M run rate to a $10M (low), $15M (mid), and $20M (high) run rate by EOY’21.

Enterprise contracts will help: each one is worth more than $1M ARR, so if we close at least 1 per quarter, we’ll pick up at least $5M ARR... To hit EOY’22 targets, by EOY’21 we need to build a machine that can close 3 or more per quarter — but to be conservative, let’s only count on 1.

To hit our high target, even with one enterprise deal a quarter, we’re going to need to close an average of 38 standard $2K/m deals — which is nearly adding $1M ARR a month. Even then, we’re still counting on net negative churn to get us to the high target.

So we need to keep scaling our salesops machine from 20 new sales deals per month to 30 deals per month, and invest in content marketing for the other 8.

Again, given the rate salesops is upgrading, and the amount of lowhanging fruit, I’m confident we can hit this target.

On the content marketing side, I’m inclined to lean-in to our competitive advantage: start hiring writing agents, use SEO-optimization software to target keywords and score posts, then build digital operations processes to crank out content like a machine... This is a classic high-ROI use-of-profits, because payback is predictable and evergreen (organic search traffic is the gift that keeps on giving) but not immediate, so I think of it like a capital investment.

By EOY’21, my hope is that our content marketing machine is positioned to carry us through our EOY’22 targets, which will be more aggressive (2–4X EOY‘21)…

2021 Product Strategy

Like our growth strategy, our product strategy in 2021 should follow naturally from 2020.

Again, the main question is supporting increasing scale without increasing headcount: growing revenue per agent and revenue per partner. By EOY’21 in the “mid” scenario, revenue per partner should be ~$35K/m, as we’re only planning on hiring net 10 new partners. Per agent is harder to predict, but I’d like it to grow from ~$1400/m to ~$2000/m.

It is also important to show continued margin expansion, as proof of efficiency and automation gains. I would like to grow our contribution margins from 50% in EOY’20 to 60% in EOY’21, while steadily growing our marketing budget.

Our front-end client app experience should be full-on consumer quality at this point, with fully self-service delegating. This is the only way we can reach this scale without hiring account management team members. Our team’s time should only be invested in building strategic relationships, prioritizing our highest potential accounts...

Our Digital Assembly Line should run by itself, with close to zero Indirect Labor costs. Our hiring and training systems should be incredibly scalable at this point. Robust training within the DAL should be an increasing product focus. Agent incentives should be incredibly aligned. Our agent community should reinforce our values and reduce management time.

Our Process Builder should structure 90% of our work, but 40% of steps should be automated, and another 20% of steps should have 3rd party or proprietary operator tools to drive efficiency. Video and screen recording data should be structured data, eventually useable for automation of the remaining 50% of structured steps in 2022 and beyond.

Oh, and one more thing… The entire back-end should be beautiful. Coherent, integrated, streamlined. Beautiful. I want to show off the factory to the world. The factory as art object. The factory as symbol of power and pride.

Baby Dragons: Strategic Accelerators That May Lift The 2021 & 2022 Trajectory

Invisible’s baseline trajectory is already exciting, but with a few key accelerators, it becomes… more exciting.

By EOY’21, I expect Slack-style bottom-up and viral growth, as incentivizing sharing should drive internal and external referrals. Although our EOY’21 growth targets don’t factor this in, to multiply the business again in 2022 will require this kind of lift.

Other network effects should emerge. I outline 10 of them in the “defensibility” section below…

We are feeding three baby dragons. Our Executive Support Line is in beta, generating ~$15K/m of revenue and growing. It should be profitable by EOQ3. By EOY’20, it should be generating at least $25K/m of revenue, although I’d like $35K/m. By EOY’21, it should be generating at least $100K/m of revenue, although I’d like up to $250K/m… Oh, and it also runs my life. Once it reaches even 25% of its full potential, it will be a game-changing product and executives everywhere will pay thousands of dollars every month to receive a service like this.

Our Engineering Line also just moved to beta, with one other client using it. We’ve used it internally to continually increase engineering velocity over the last six months. By EOY’20, it should be generating at least $10K/m of revenue; and by EOY’21, it should be generating at least $100K/m of revenue, although I could imagine $250K/m or more, if the right client comes along…

Our SalesOps Line just moved to beta as well, and is in high demand, as it powers the novel outreach process by which they first come to hear about Invisible. By EOY’20, it should be generating at least $25K/m of revenue, or up to double that; and by EOY’21, it should be generating at least $100K/m of revenue, or up to $250K/m of revenue.

So anywhere from 15% to 45% of our high-scenario EOY’21 revenue could come from these baby dragons. Let’s say we under-hit and it’s only 10%… fine. As long as these baby dragons are alive, going in the right direction, and profitable… we’re going to keep investing in them.

Understanding The Game We’re Playing: Early Game, Middle Game, Late Game

In the long run, you’re only limited by capital, talent and ideas. That’s the “late game.” It is surprising how many large companies stagnate — Boeing being the case du jour. Reasons include failures of succession planning, incentive design, corporate structure, R&D models, culture and vision.

But we can’t reinvent the late game until we build a profitable, defensible, scalable monopoly… We’ve survived the brutal early game: financed the company, built a team and product, found customers, validated a business and sales model, and achieved a reasonable scale. Now we’re entering the middle game. What is the middle game about?

It’s easy to get stuck in the middle game. If progress comes in s-curves, plateaus are dangerous, so you shouldn’t coast, because there’s no guarantee that you won’t be stuck there forever — you need growth, because you don’t have a monopoly yet. But, on the other hand, if you grow too fast, you can over-heat, your team can burn out, your systems can break, you start making mistakes, rushing…

You’re always three mental models away from the next level; one disaster away from death; one lucky break away from victory…

But, by definition, you don’t know when the next intellectual breakthrough will come. You’re like a dog chewing on the bone of your known knowns and known unknowns, just in case you missed something… But you’re also like a dog sniffing for unknown unknowns… intellectual breakthroughs drive performance breakthroughs…

Paradox: pronoia is healthy, paranoia is healthy. On the one hand, we have to hold each other accountable, look for blind spots, analyze our weaknesses, not tolerate poor performance, be impatient with problems, post-mortem mistakes to their root cause… On the other hand, too much stress creates toxicity and kills creativity. Organizations, like individuals, develop pathologies. Healthy organisms are self-aware and self-correct.

Ownership, Control & Team Size (Density) As Determinants Of Middle & Late Game Strategy

In the early game, you start out with full ownership and control, but no cash, no team, no product, no nothing… Put another way, startups are equity rich, but cash and asset poor, so they need to trade what they have for what they don’t have...

But in the middle game, if the team size gets too large, and if the overall team equity drops below critical ownership thresholds (below 50% is dangerous, above 70% is healthy) the culture and behaviors change. And if the CEO loses control, both legally and politically, then investors take over. More commonly, the CEO loses legal control but retains political control by playing to investor interests and following investor playbooks… In a contested control situation, the CEO and investors might block each other both legally and politically, resulting in paralysis. Legally: a split board, plus preferred shareholder voting agreements, which effectively act as an additional veto on any significant corporate action. Politically: the board may disagree on strategy, and we cannot underestimate how boardroom pathologies may translate to bad strategy, negative signaling to other investors. And, if the CEO’s legal control drops below a threshold, and his political control internally and on the board drops below a treshold, there is the risk of a coup.

As I explored here, investor, founder/c-level, and team game-theoretical incentives do not necessarily align: and what has emerged is essentially a VC industrial complex. And as I explored here, and here, and here, this financial/political/legal “capture” can result in intellectual “capture” which can result in strategic blindspots. These blindspots, in my mind, are some of the biggest opportunities in the world today, secrets hidden in plain sight. Even if you see them, you cannot act on them, cannot arbitrage against consensus, unless you maintain ownership and control, because the very reason that those blindspots exists is that decision-makers are captured by the existing industrial complex.

This becomes more obvious in late game strategy.

For example, the CEO of a public company is captured by the pathology of the Public Market Industrial Complex. His overwhelming incentive is to increase quarterly earnings to maintain and gain the confidence of The Street. This makes long-term thinking and long-term investments harder to make. Not to mention the inherent limits around information sharing, which prevent public companies from taking advantage of either full transparency or full secrecy.

Peter Thiel’s formula is that great companies capture a portion of the value that they create, but it is neither possible nor desirable for them to capture 100% of the value that they create. The metaphor is similar to the Laffer Curve for taxation. There is an optimal “tax” to be levied on your customers. Increasing value might increase revenue, even without increasing the tax rate. Any good late-game strategy for a profitable, defensible, monopoly should have a healthy amount of business-building and investment activity that isn’t oriented around short-term profit maximization, but around overall value creation, especially if the value is created in currencies other than dollars (currencies like knowledge, access, power and fame).

For example, Yahoo! “gives away” Yahoo! Finance, one of its best products, because of network effects. Google “gives away” Google News. Jeff Bezos bought the Washington Post. These are strategic moves that are equally difficult for VC majority owned/controlled companies and public companies to execute.

Of course, all three examples just used are public companies, and there are not many examples of privately held majority owner/operator owned/controlled companies: that is the best counter-argument. But on first principles, it seems to me to be obvious that CEOs who preside over “democracies” which have checks and balances cannot be as creative as “dictators” who can take full advantage of the ethical (values dependent), intuitive (n-dimensional, cannot be reduced to processing power) and paradoxical (less is more, losses are gains) natures of strategy.

Of course, the problem with (both corporate and nation-state) dictatorships is decision-makers (succession planning and incentive alignment) and the problem with democracies is decision-making (consensus thinking, diffuse ownership).

For Invisible, I want the partnership to own at least 70% of the company in the middle game, and in the late game, we may decide that we want to own more, although it may always be wise to transact in the equity market to maintain a market price and strategic partners. We’re at 55% now, but 70% is both doable given the sell-side desire for buybacks and likely capitalization by EOY’21. 70% would result in incredible average and median equity and equity dollar value per partner by EOY’21, which should result in incredible team motivation, retention and alignment.

On the control side, we want to maintain board control and unwind most, if not all, of the preferred voting blocks. Investments in the company should be purely economic and not strategic instruments, from the point of view of the investor. The board should control the company and the CEO should control the board. The chaining of Leviathan is unnatural, and unitary power is a stable element.

Over time, I’ve come to realize how team size is as important a variable as ownership, although control is more important than both, because without it, you can’t fix mistakes on the other two. Team size is the other side of the ownership coin, because the team’s ownership is obviously divided (unequally, meritocratically) across the team. Team size also is a performance factor, as mentioned elsewhere in this piece: smaller teams have higher unit cohesion, coordinate better, and are more agile. And last but not least, it is a strategic factor: it is far harder to do anything truly innovative with a huge army, than it is with a small, highly motivated, highly trained, elite unit. For all these reasons, revenue per partner, absolute partnership size, average and median equity per partner, average partner tenure, and individual partner performance metrics like performance reviews are all measures of density: if density keeps increasing over time, our strategic agility increases.

“What type of culture do we want to build? What type of team do we want to build?” > A dense one. Dense cultures are easier to manage, easier to train, easier to build a hive-mind with, easier to share values with, easier to incentivize, easier to debate with. In the early game, we didn’t have a player in each position so we had the opposite problem: there was a desire to grow the team, because having a partner in the seat was often better than nothing, and we were willing to take a chance on any partner crazy enough to accept our early partner pay models. But in the middle game, now that we have partners in every seat, the game is about maximizing the leverage per partner, building systems, and increasing revenue without adding partner headcount.

The scaling order of operations is: if you can’t solve the problem with third party software build proprietary software, if you can’t solve it with proprietary software use agents (i.e., use Invisible, eat our own dogfood), if you can’t solve it with agents use productivity & management tactics to increase partner productivity, but if you absolutely can’t solve it with any combination of the above procedures then add a partner.

Control. Ownership. Density.

Post-2021 Strategy: ROI Investment Analysis, Corporate Structure and The Talent Challenge

Where do we want to take the business beyond 2021? What do we want to optimize for? If we were a venture backed business, we would have to optimize for growth at all costs, even at the risk of adding unnecessary leverage and fragility. With profits, we “control our own destiny.” But what does that mean? What do we want our destiny to be?

I read William Thorndike’s Outsiders several months after writing Use of Talent, Proceeds and Profits… and it reinforced my original thinking. Once we’re profitable, we’ll need to learn a few new tricks.

First, ROI investment analysis. As we amass profits, we’ll have to decide what to do with them, given this set of options: keep them on the balance sheet as cash, reinvest them in the business, start a new business, invest in a business, acquire a business, buyback shares, or distribute dividends… Dynamic strategic analysis precludes answering this question in advance, but we should have the following bias in our order of operations: optimize warchest (cash on balance sheet, 18 months of runway in the event of a large loss of revenue is a good time horizon), optimize growth (micro ROI investment analysis for internal capital investments, primarily in marketing and engineering, until reaching diminishing returns), maximize ownership (buy back investors to increase partnership stake), prioritize investments (new business lines, new spin outs, new investments, new acquisitions), then maximize warchest (liquid optionality so that we are never limited by capital again), lastly, dividends.

Second, corporate structure. If we create new lines of business and new spinouts, they will require innovating on the corporate structure. A mature line of business is like an enterprise, and should not be managed in the same way as a new line of business, which is like a startup. Each line of business needs its own General Manager or CEO. This may require us moving to a Matrix Organization, such as Andy Grove describes in High Output Management: with horizontal functions like hiring, training, and our core technology platform as separate units, and each line of business as a separate vertical unit. Complexity will grow exponentially as the partnership grows linearly (Metcalfe’s Law), and our partnership’s per-partner ownership and the culture that emerges from that will also be diluted as the partnership grows… now add to that the natural emergent complexity of moving to a holding company structure with a matrix of vertical business and horizontal functional units! This is the Coasian friction that partially explains why big companies fail at innovation. But I, perhaps naively, feel that we can do it right, through a combination of incredible density (revenue and ownership per partner), incredible structure & incentives (minimizing complexity while maximizing alignment, achieving elegance), and incredible culture/vision/strategy.

Thirdly, growing, rotating and transitioning talent — this is the ‘talent’ part of Use of Talent, Proceeds and Profits. Succession planning (transitioning talent) is the reason why most monarchies fail: I want to keep abstracting myself out of daily/weekly/quarterly operations until my role is purely creative, strategic, analytical, and high-level problem-solving. I have a long way to go: as things currently stand, I’m still necessary to the day-to-day running of the sales machine, and too many of the big decisions we’ve made this year originated with me. We’re already working on decentralizing network operations, so I’m not business-critical for sales, but I anticipate that I will need to keep grinding through 2021. For the other stuff, my hope is that after profitability we can get serious about building a decision-log, building strategic systems, and ‘investing in the talent and the culture.’ But transitioning talent needs to occur at every level: when a new level of the pyramid is invented and talent moves up, then talent needs to move up at every level below it. So to successfully transition talent up or over at the top, you have to also be good at rotating and growing talent. Rotating talent means moving players into different roles, so that each partner is a flexible queen on the chess board, as opposed to a rigid pawn (specialized employee mindset). Growing talent means both hiring talent, training talent, creating opportunities for talent to lead, and making sure that they succeed in these leadership roles. Most companies run out of opportunities as they scale, unless they also innovate, and create a matrix holding company, with all the complexity that comes with that.

Downside Minimization: Existential Risk Vectors & Vigilance

Risk is natural. It is impossible to eliminate all risk, and attempts to do so absolutely tend to backfire. However, Sun Tzu said ‘Don’t worry about victory. Remove the possibility of defeat, and then afterwards look for victory.’ He also said, ‘He wins who makes no mistakes.’ My interpretation is: once you’ve optimally minimized downside, you are well positioned to take upside risks. In other words, the point of risk management is not to eliminate risks, but to put yourself in a position where you can take more risks than everyone else. So you win if you make no existential mistakes, so that you can run as many experiments (failed experiments > mistakes > progress) as possible.

Here is an incomplete list of existential risk vectors to be vigilant of. All of these things can kill the business:
— Choosing the wrong capital partners
— Losing ownership and control
— Following a formulaic playbook, instead of evolving a strategy from first principles analysis, not just based on theory, but reality…
— Losing client/revenue diversification
— Losing agent diversification
— Security risks
— Not having a big enough warchest
— Overextension: too many products, too many lines of business…
— Loss of talent…
— Loss of culture / values / vision
— Overcompensation and misaligned incentives

Let’s add to this list and maintain healthy paranoia. Last summer we made an enormous and premature time investment in strategic systems, which included risk management. We achieved impressive results, but the amount of effort made it unsustainable, so we’ve dropped it. After profitability, it would be smart to pick it back up, and become systematic about risk management, roadmaps and strategy again. Although, there may not be anything higher tech than an essay. Think about it.

Building A Research & Strategy Function

Because VCs don’t operate, but instead review deal flow, they have an incredible visibility advantage relative to startups. But over time, a startup should be able to reverse that dynamic, master its market, and know its place in it.

‘In the land of the blind, the one-eyed man is king.’ In the last four and a half years, we’ve learned a lot about our market. We’ve learned that our target customers are usually 50+ person companies. We’ve learned that our customers want end-to-end digital operations solutions. We’ve learned that it is relatively hard to deliver executive support than it is to deliver business processes. We’ve learned about the strategic weaknesses with labor marketplaces, traditional BPO outsourcing companies, and various automation solutions; and we’ve evolved a strategy that leverages all of our strengths to exploit those weaknesses. This is the land of the blind, and I think we are the one-eyed man, so I hope we’ll become king.

But I don’t know for sure. I would like certainty. ‘Know thyself, and know thy enemy, and you will not fear the result of a thousand battles.’ That’s certainty. To achieve that certainty, I want to build a research and strategy function. As I mentioned in the last section, last summer we made a premature, impressive, but ultimately time-cost prohibitive attempt at this. I would like to return to that as soon as possible.

The scope for research is writ-large: understand the labor and outsourcing markets and industry players, understand the various automation players and trends, understand every industry in the economy… and more broadly, understand financial markets, understand geopolitics, understand the world… The better we understand the world, the better we’ll be able to navigate.

For strategy, the scope is connecting sprints with quarterly objectives, quarters with annual goals, annual goals with long-term strategy… without losing sight of grand strategy which is n-dimensional. As many strategy “dashboards” (managing risk, managing the org chart, managing partner strengths and weaknesses, etc.) that we can build, the more insight we’ll have in understanding the business.

Thinking In Decades, Sketching An Empire: Actual, Specific Ideas For New Businesses

How about thinking in decades: timescales longer than a few years, but shorter than centuries?

In Zero to One, Peter Thiel makes a cultural critique: in the 1950s and 1960s, we used to have specific ideas about the future that made us optimistic, but over time, our optimism has become vague and indeterminate — we think the future will be better than the present, but we don’t know how. On the one hand, there is a humility to this approach: managing around unknowns, letting evolution emerge with surprising breakthroughs that you could never have designed in advance… On the other hand, it is frightening an abdication of sovereignty and absence of creativity, commitment and confidence that we’re unwilling to even do the exercise.

Just for the hell of it, to sketch what a matrix corporate structure might look like, after we’ve made the first business profitable, scalable and defensible:
— Division 1: The Process Line (our current business, operations as a service)
— Division 2: The Engineering Line (engineering-as-a-service, AWS for scalable, unitized, engineering-on-demand)
— Division 3: The Executive Line (an Iron Man suit for your personal productivity… we are the ultimate gatekeeper: your interface for all technology… you purchase everything through us, we manage every aspect of your life… a single touch point for unlimited delegation… we allow you to delegate unlimited everything so that you can be all-strategic, all-the-time…)
— Division 4: The Access Line (“SalesOps” becomes “NetworkOps” becomes “Access,” unlimited access to anyone, an unlimited meetings machine, could turn into our own CRM…)
— Division 5: The Analytics Line (analytics-as-a-service… we build data warehouses and dashboards to answer business intelligence questions)
— Division 6: The Research Line (qualitative research-as-a-service, combined with data operations from the Process Line, building and analyzing research databases as long-term assets, publishing research)
— Division 7: The Content Line (SEO-as-a-service, writing-as-a-service, design-as-a-service, any content production that can be commoditized)
— Division 8: Cheeky (we build the biggest structured, networked database of ideas in the world, we reward members for top-ranked ideas, customers pay for access to our ideas database, publish a certain % of ideas/content)
— Division 9: Visionary Ventures (Invisible as the sole LP of a flexible investment vehicle for making any investment we want to make… Combine with services… Combine with investment banking… Combine with debt financing… Build a marketplace for buying and selling companies… Combine with M&A activity… When we have large cash balances, also makes sense to have a prop desk, and occasionally there will be strategic reasons to invest in public equities too…)
— Division 11: The Folder (organization-as-a-service, using proprietary workflows and information architecture, we organize all of your files and folders on Google Drive, Dropbox, etc. for you, so that everything is easy to find, standardized, archived and indexed… eventually we build our own interface/app… “your brain on paper…” this could be the B2C arm of Invisible as automation drives down unit prices for commodity productivity processes…)
— Division 12: Elemental (consulting-as-a-service, we build a database of case studies, decision-logs, principles and playbooks to reinvent strategy & management consulting for the 21st century…)
— Division 13: “By.” (The ultimate education & training company. Teach a combination of classical education — thinking, decision-making, wisdom, knowledge; books and quotes and art by dead people — with practical apprenticeship in digital skills. Duolingo for education writ-large. Increase the number of polymath/conquerors doer/thinkers per capita in the world… The price of education is going UP not down in our society, and that is evidence of regress not progress…)
— Division 11: Unorthodox. (A media company built around contrarian thinking. Across every aspect of our society, we seem to be frighteningly consensus in our thinking, and few contrarians feel safe thinking-out-loud anymore. This results in bad decision-making, fewer ideas, and overall intellectual poverty. Like Cheeky, this may not be the best direct moneymaker, but it may be an incredible indirect value generator, through network value, talent discovery, idea-generation, strategic insights, etc. What is the value of a single insight? Also hard to price the value of restoring a culture of debate in a democracy that seems to have forgotten how to think…)
— Division 12: Everest. (I want a do-over. I think I can do it better this time. The idea of content+tools+networks+services to support people towards achieving their goals wasn’t bad. The business model was bad and the execution wasn’t fast enough. The brand was good. Good way to lead a global renaissance around human potential. Like other divisions, this may not be a direct moneymaker, but an indirect value generator… )
— Division 13: Fusion. (If I had a warchest like the FANG stocks, I’d start creating futuristic hardware — I have a lot of ideas)
— Division 14: Camelot. (If I had a warchest like the FANG stocks, I’d start building buildings and cities and infrastructure and hospitals… going after the prices in our society that are going UP not down, and the things in our society that are ugly and seem to have stagnated in the 20th century…)
— Function 1: Hiring & Training
— Function 2: Finance & Analytics
— Function 3: Product & Engineering
— Function 4: Sales & Marketing
— Function 5: The Digital Assembly Line & Process Builder
— Function 6: Client Portal & Website
— Function 7: Vendor Network (Aggregate buying power, drive discounts, pass savings on to customers… Assistants are the ultimate interface, more powerful than marketplaces or search or social… This makes us the ultimate gatekeeper / app store… We should use that leverage to be a best practice / best tools / market-maker, build a network effect…)

I accept the criticism that building an empire this vast and tightly integrated is a trick that maybe on Google, Apple, Amazon and Facebook have accomplished — and even then, this seems different somehow. This may be an Icarus folly, an exercise in hubris… but it’s as daunting as it is motivating to me, so I like reminding myself of it every so often, when I want to zoom out from the trenches…

In defense of this way of thinking, in The Hard Thing About Hard Things Horowitz mentioned thinking about building a great company as an “end in itself,” a kind of platonic ideal to strive towards. If you don’t know what your utopia is, you may never make progress. But if you actually think you’ll arrive in utopia, then maybe you’re naive. Ideas have optional value. Even the abandoned ideas of past inventors were picked up again, sometimes hundreds of years later: da Vinci’s helicopter, the steam engine first invented in Alexandria Egypt in the 1st century, gunpowder in ancient China…

Best of all, to do the astonishing feat: Mars in Musk’s lifetime, the entire Apple ecosystem before Jobs died… Let’s not deny ourselves a mature romanticism: the belief that a determined group of partners might accomplish something great over many decades.

The Talent Challenge & The A-Mortal Organization

The Talent Challenge mentioned in an earlier section is perhaps the most challenging late game problem of all. I expect we will take a decade to mature our corporate structure, but the talent challenge is never fully resolved.

Even if, in a decade, we’re a multi-billion dollar company with a thriving partnership and the model has “worked,” there are all the challenges of long-term, truly long-term, thinking: can the culture sustain itself, the model evolve, the vision expand, the organization both maintain and innovate… will politics kill meritocracy and transparency… will incentives erode alignment… will leaders at every level make the right decisions, and when they make the wrong ones, will they be held accountable, and will the organization learn? So many unanswerable questions. Wise mechanisms and sound principles can only help. Ultimately history must be lived, and there is no substitute for the agency of individuals acting in their historical moment.

If organizations are a-mortal, why do most never survive longer than a century? Some organizations like the Roman Empire or the British State, have survived for a millennia, and some companies have survived longer than a century, so it is possible…

Let’s indulge in very very long-term thinking for the sake of the exercise… When humanity becomes a sprawling interstellar civilization, my hope is that Invisible will still exist, not merely to exist and achieve existential continuity, but something of the values, vision and spirit of the organization will survive, and stand the test of time and relevance. Even one of our biggest ideas, perhaps best stated by Heidegger in The Question Concerning Technology — that human potential and technological potential do not conflict; that we have barely begun to express our human potential, and that the measure of technological potential will be the increase of human potential, and that a measure of human potential will be the increase in technological potential — that idea may even be small, on the scale of millennia. If, as I anticipate, the AI singularity never comes to pass, but instead, there is a kind of synthetic continuum; where The Wand does not replace The Wizard, but The Wizard and The Wand become One… this may someday be ancient history… maybe the new challenge will be the merging of the Wizards, without the loss of their individual identity within the collective… maybe the challenge will be the ending of war without the triumph of a single sovereign will dominating all others; reconciling expression and peace…

But, if civilization retains continuity over the millennia, then the truth to respect is that even the farthest thinking must surrender itself to the unknown. But how the hell do you design a strategy for an unknown future?

Preparing For The Unknown

We must prepare for an unknowable future. We don’t know what crises we will face. But we can prepare for any crisis we can imagine in advance. That should yield a strategic profile optimized for: 1) resilience, 2) defensibility, 3) optionality.

Resilience? Resilience means things like having a warchest (ie. a strong balance sheet), diversifying our revenue across industries, companies, roles and use cases; diversifying our agent base across geographies… But most importantly of all, resilience is an attitude, a mindset, a psychological trait, a quality of individual and corporate identity. It is extremely difficult to build a culture around ownership, leadership and partnership; difficult to build long-term commitment to the company and its vision, mission, strategy and model… But a company like this, once built, cannot be easily broken, as long as it maintains its culture.

Defensibility? Defensibility means being the best in the world at what we do, so good, in fact, that it is impossible to compete with us. Impossible because: the more clients use it the better it gets, the cost of a client switching would be too high, the more processes we build and the more we run them the better we get at each, the more industry use cases we discover the more we can replicate success, the more structured data we generate the easier it is to automate with great returns, the more we upgrade our platform and processes the harder they are to reverse-engineer, the more user-friendly the front-end experience becomes the more addictively convenient it is to delegate, the better we get at delivering value the more virally we grow, the more profitable, scalable and well-known we are the more desirable it is to work here, the more enterprise contracts we get the easier it is to get past procurement, etcetera… It takes many years to build network effects like this.

Optionality? Sun Tzu used the word shih. Shih meant potential energy: like a drawn bow-string, or a boulder poised on a cliff… As we amass capital and talent, we gain a natural optionality. Research increases optionality: the better you understand the world, the better you can operate within it. Leverage lowers optionality, so we should be wary, and pay down debt and buy back equity as fast as possible. Insurance increases optionality. Building a horizontal technology platform increases optionality. Building vertical-specific features increases optionality within that vertical, and may even increase overall optionality if success in that vertical generates opportunities in other verticals, but makes it harder to pivot away from that vertical (can be a depth trap). Operational competence, especially agility, increases optionality: if your team is able to think on its feet and respond rapidly to new ideas, information, and plans — you can turn volatility to your advantage. All of these things build shih. But a drawn bow-string is only useful if you know where to point the arrow, and when to fire…

‘In times of peace, prepare for war…’ so taught the ancient Romans. Although it is difficult to anticipate the next crisis, the ancient Greeks prized this quality in a leader, this ability to anticipate and pre-empt a crisis, and they had a word for it: pronoia. Imagine the company as a polygon: what shape do we need to take in order to have the optimal profile minimize weaknesses and threats, and to maximize strengths and opportunities; how do we morph into that shape; and how do we know when to change our shape to fit a new set of circumstances? Resilience, defensibility and optionality are not rewarded in a long, stable bull-market. Indeed, the optimal strategy in such a market is sequenced vertical saturation — i.e., go after the largest and most profitable vertical you can win in first, saturate that vertical, then move on to the next — combined with extreme leverage, in a winner-take-all race. While all the vertical hares race to the finish-line, horizontal turtles like Invisible will plod along, feeling slow and heavy… But when a Darwinian Event like coronavirus wipes out the hares, the turtles inherit the earth.

Smart hares are smart enough to know when they’ve gotten lucky: after saturating their first vertical, they either sell the business and get out of the race, or they collect rents, turn profitable, then use profits to pay down their leverage and develop the three classic turtle advantages of resilience, defensibility and optionality, in order to build a long-term monopoly, capable of systematically saturating new verticals…

From necessity, rather than planning, we’ve been a Turtle from Day 1, primarily because our horizontal product requires us to sell custom services across verticals. Now that the macro economy is going through a Darwinian Event, we’re thriving even more than before, investors are noticing that our many long years of hard work are paying off, and they want us to raise $5–10M instead of focusing on profitability and capital efficiency… In other words, they want us to take advantage of this favorable moment, become a hare, grow as fast as possible, and capture the market. Although they argue that this is in our best interests too, their business model is built on investing in hares: in most cases, that’s all they know, and although most hares die, a few succeed, so it’s worked out pretty well for them so far… The more successful we are, the more tempting it will be to become a hare, but we must remember: WE ARE A TURTLE, AND TURTLES STAY TRUE!

Turtles play the long game, and they look for long-term partners. Until we find a long-term capital partner that will give us everything that we want, we should not compromise. A relentless focus on profitability should minimize, then ultimately eliminate, the need for outside capital. Until then, it’s in our best interests to raise capital with SAFEs to protect our control rights.

Turtles are contrarians. They understand the contrarian advantage: if you’re right, and everyone else is wrong, and you can patiently exploit that arbitrage economically, eventually you will be richly rewarded. When turtles are right, nature rewards them, but society punishes them. When turtles are wrong — as inevitably, they will be wrong sometimes — not only society, but nature, also, punishes them. And they have to accept that, as a way of life. That’s what their shells are for; that is why they cultivate resilience, defensibility and optionality…

Over time, breaking with consensus gives us an advantage, and will pay off. Turtles have shells so that they can take risks. Shells lower the cost of running experiments. The cheaper it is to run experiments, the more experiments we can run, the more ideas we can have. When one of them works, we’ll double down…

One Last Thought: Maybe We Don’t Want To Be Big

What’s the goal of building this company? Not just any company, but this company. And how does size play into that?

Abstracting that… What’s the point of progress, past a certain point? Once you’re a ten billion dollar company, maybe there’s a good argument that you’re uniquely positioned to make an even bigger impact on the world by growing into a trillion dollar company. But after a trillion dollars, is the goal really to grow to a quadrillion?! Is valuation the only measure or the true measure of success? Market prices may be as close as we can get to a subjective-objective measure, but I don’t think they’re the way that entrepreneurs think about value. Once we’ve met all of the needs on our Maslow’s hierarchy, and we’ve already created a huge amount of economic value in the world, why create more?

There’s this sense I get from Steve Jobs’ story, and his vision for personal computing as a “bicycle for the mind”, that although Apple, as a company, probably succeeded beyond his wildest dreams… his vision is still unrealized. The average human may be economically more productive because of Apple computers, but the human genius is not unleashed.

For me, teleological goals are less interesting than ethical functions and aesthetic visions. A teleological goal is like Ford’s “two cars in every garage.” Unimaginable in 1908. Powerfully motivating in 1950. In 2020… okay, now what?! But an ethical function like “Liberty” is just as relevant in 2020 as it was in 1776… to me, anyways. And I expect it will still be relevant in 3000 AD. An aesthetic vision like Tolkien’s city of the elves in Rivendell, which isn’t even sci-fi, but fantasy — outside our timeline and our cosmos — was still relevant in the 1950s, is still relevant in 2020, and may still be relevant in 2100 AD.

The concept most exciting to me is contained in the Greek word dynamis: the potential that exists within things. Humans are still the highest potential entities in my cosmos. I don’t believe that, even with all of our technology, we’ve unlocked even 25% of our potential. We are in the early days of the species. The Wizard and The Wand may become one, but the Wizard shall not perish from the earth. I’m excited about The Wand, but only to see what The Wizard will do with it…

This concept of human flourishing, human potential, thriving, eudaemonia is ancient: its imprint is in all the myths and philosophy of the ancient world. The Taoists, The Pythagorean, The Platonists and the Jews were perhaps the most mystical about it. For example, Plato’s aeon concept is less about ideas, and abstract potential, than it seems. In my reading, it’s about human potential. We are the ones that can imagine. Who can conceive of infinite worlds… Man, at first glance, is so tiny and so weak, but is capable of so much. That capacity, that dynamis, that unexpressed imagination, the glory of it — haunts us.

To me, “building the biggest company in the world” is a grossly-conceived dream. It commits the error of thinking that the Tyrannosaurus Rex was the greatest creature that ever lived. For the same reason, “building the most resilient and enduring company in the world,” while a more sophisticated parti, might be the equivalent of worshipping the nuke-proof dung beetle or e coli bacterium.

The optimization function that excites me is optimizing for human flourishing; for the expression of human potential. But this is one of those phrases that conjures up rainbows in the sky, so it is hard to talk about constructively.

I have abandoned utopia. Utopia means “nowhere.” To make progress towards human flourishing, we have to imagine a possible and desirable future, not just a desirable utopia.

To frame it as a paradox: Plato’s education dictatorship was a logical idea. You can, in theory, solve all problems in the world through education. You can solve poverty, theft, war… Like John Lennon’s “Imagine,” ‘the world would be as one.’ But in practice, it’s a terrible fascistic/communistic idea, and would result in a bloody mess.

Because of Coasian limits, one company cannot pursue all ideas. There may be an optimal size for this corporate structure. The best thing to do might be to spin out new companies, vs. keeping them in the same holding company. The best thing to do might also be to distribute huge dividends to partners and empower them to invest. The best thing to do might be to invest through our own vehicle. Who knows… I’m open-minded. Which doesn’t mean I don’t care about the structure or implementation; obviously, I do — I want it to be as elegant as possible. But I care more about culture than I do about this company.

Past a certain point of success, I care more about what this company stands for, and its extended influence within culture, than I do about the financial and product performance of the company. I want us to turn our current business line into something incredible, into one of the best services in the world — I want to make history with it, if we can. Then, of course, let’s make more greatness, more ultimate services and ultimate products. But… at some point we may hit a limit. And the only way to push past that limit is not to become a bloated gigantic dinosaur, hire too many people, and doom ourselves to extinction. The only way to push past that limit is to be a beacon to the culture. To challenge individuals, to challenge organizations, to challenge governments to be better: to express more of their potential, to not accept mediocrity, to strive…

There is something in the paradoxical Zen idea that less is more, simplify, simplify, simplify… If we can generate more ideas than we can execute in a lifetime, if executing on all of them would complicate our business, perhaps giving them away is the best thing… and is that a loss? There’s a reason why J.P. Morgan was coordinating buying in the Great Depression, beyond buying low and selling high… Ultimately the collapse of society was not in his interests; and conversely, the wealthier society becomes, the better it is for everyone. But even this is a financially oriented way of thinking. What would be revolutionary and exciting for me is to finance, hire, train, inspire (as in, literally, give ideas and books to) and unleash a new generation of philosopher kings and queens upon the world, to solve problems that are so difficult and risky that investors don’t want to fund them; to solve problems that don’t merely unlock technological potential, but human potential... “Courage is in shorter supply than brilliance” to quote Thiel. To find and empower the courageous ones… Like the Parable of the Sower, some seeds will bear a thousand-fold… Give it away, give it away, give it all away… Maybe this is the most capitalist thing ever… The prices we set express our values: I value unleashing the human spirit; not just the Keynesian “animal spirits,” those, but also, the other spirits too… why are we born free, but everywhere in chains? How did we become so unimaginative? How do we wake them up? Cicero said something like ‘the sinews of war are infinite money…’ Profits would give us the warchest we need to actually, actually, actually shift culture. We don’t need to change the entire world and solve all the problems by ourselves. A single profitable, scalable, monopoly can unleash many more. Our real contributions may be our ideas, our models, our culture, our story, our vision…

“A.I.”, “Artificial Intelligence,” is perhaps the ultimate fake news story of our time (perhaps… but I’ll leave politics out of this)… “A.I.” is not going to replace humans. Humans are the future; yes, with all of our weaknesses, with all of our strengths... Humans are the as-yet-undetermined species. Our future is just beginning. Every day, for millennia, our ancestors will be figuring out what it means to be human. Technology will expand human possibilities, co-evolve with us, but… our essential consciousness, our imagination, our potential… that will endure.

In this moment in history, for this century, the first mission is to incarnate in our lives, and advance in the minds of others, that still-futuristic dream of the renaissance, and to ensure the survival of the civilization that carries it in its memory…

We are, and are not, The Last Men. We are the ones who strive with angels.

The Last Man

And thus spoke Zarathustra to the people:

Alas, the time is coming when man will no longer shoot
the arrow of his longing beyond man, and the string of
his bow will have forgotten how to whir !…

Alas, the time is coming when man will no longer give
birth to a star. Alas, the time of the most despicable man
is coming, he that is no longer able to despise himself.

Behold, I show you the Last Man. ‘What is love? What is
creation? What is longing? What is a star?’ — thus asks
the last man, and he blinks.

The earth has become smaller, and on it hops the last man
who makes everything small. His race is as ineradicable
as the flea-beetle the last man lives longest.

‘We have invented happiness’
— say the last men, and they blink.

— By. Friedrich Nietzsche

The Man Watching

I can tell by the way the trees beat, after
so many dull days, on my worried windowpanes
that a storm is coming,
and I hear the far-off fields say things
I can’t bear without a friend,
I can’t love without a sister.

The storm, the shifter of shapes, drives on
across the woods and across time,
and the world looks as if it had no age:
the landscape, like a line in the psalm book,
is seriousness and weight and eternity.

What we choose to fight is so tiny!
What fights with us is so great.
If only we would let ourselves be dominated
as things do by some immense storm,
we would become strong too, and not need names.

When we win it’s with small things,
and the triumph itself makes us small.
What is extraordinary and eternal
does not want to be bent by us.
I mean the Angel who appeared
to the wrestlers of the Old Testament:
when the wrestlers’ sinews
grew long like metal strings,
he felt them under his fingers
like chords of deep music.

Whoever was beaten by this Angel
(who often simply declined the fight)
went away proud and strengthened
and great from that harsh hand,
that kneaded him as if to change his shape.
Winning does not tempt that man.
This is how he grows: by being defeated, decisively,
by constantly greater beings.

— By. Rainer Maria Rilke; translator, Robert Bly

I do not know what strength is in my blood, but I swear to you I will not let the White City fall, nor our people fail.

Tolkien