Investors Always Want to Be The Coolest Kids in the Room

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Investing in an amazing startup is like buying the hot new gadget that’s just come on the market. Just being able to lay down your cash, either for an investment or a gadget is a good social signal, telling the rest of the herd that you’re cool.

But sometimes you get the iPod and sometimes you get the Microsoft Zune. (Here’s a Wikipedia link in case you don’t remember the Zune, the necessity of which may just drive home this particular point.) One tells the world that you have taste and money and one of them tells the world that, well, you bought a gadget that turned out to be not nearly as cool as something else on the market.

Venture Capital Works the Same Way

There’s not really a good way to predict precisely what investment opportunities are going to do better than others: putting your money into a company that has barely an idea of what they may offer customers, let alone any source of revenue, is risky. If it wasn’t risky, after all, we’d all be startup billionaires.

But that means that investors still have to make a decision to invest in this opportunity but to pass on that one.

Investors can weed out some of the options on the table. Details like potential audience size and the relative spending power of that audience can help an investor exclude anyone that can’t make the risk worthwhile. But there’s still far more startups looking for capital than there are investors ready to put money on the line.

That leaves gut instinct to guide an investor through choosing where to invest. Gut instinct, more often than not, takes you to the company you want to see in the world — the seriously cool offer.

The Cool Factor Minimizes Diversity

Choosing companies to invest in based mostly on what seems cool — on what will signal to your friends that you are awesome — limits investments dramatically. What’s cool right now? Well, that depends on your friends. If your friends each have their own bucket load of money and they all live in San Francisco, though, they’re going to define ‘cool’ very specifically. Buying things online is cool, hence all the Bitcoin startups. Being able to pay someone else to deal with the sucky parts of life is cool, hence the appeal of getting things done by Magic. Wine, beer, and whiskey are all cool, hence more startups around those beverages than non-alcoholic drinks.

What’s not cool? How many apps have you seen get funding for simplfying divorces? What about effective logistics management? What about anything for the unexotic underclass?

The lack of diversity isn’t just a question of picking startups with ideas that seem cool to the right people, either. What people are most likely to have ideas that you think are cool? People who are very similar to you across a spectrum of characteristics.

Is There a Solution?

The venture capital system is based, ultimately, on gut instinct. There’s no real way to predict that one startup will succeed or another will fail, which means that investors have to decide based on whatever criteria they choose. Coolness is no better and no worse than any other decision-making tool, especially when someone is deciding how to invest their own money.

Want to see a dramatic uptick in diversity among venture-backed startups? Get investors with a much wider collective definition of cool — more women, more people of color, more parents, more military veterans, and so on. Of coures, there’s a chicken and an egg problem that people who do not already match investors’ ideas of good founders are less likely to have money to invest. That’s a harder problem, though I can see some options (though all come with their own particular problems):

  • Figure out a way to encourage more people to bundle small investments together into startups
  • Add more diverse decision makers at investment firms
  • Use governments and non-profits to come up with investment capital

A more practical option may be to look for more opportunities to opt out of the venture capital system in general. There are plenty of arguments for other strategies: venture capital is likely creating another bubble, it’s creating businesses focused only on exits, and it’s definitely driving price wars.

Bootstrapping, or taking only a small round of investment from friends and family, is the fastest route away from venture capital. It won’t work for all companies — anything needing a big upfront investment in research or equipment is out — but bootstrapping is always worth considering. And the number of ideas that can be bootstrapped today is surprising; 3D printers, marketplaces offering time on expensive equipment, and amazingly cheap software tools have brought down the cost of building anything.

Image by Flickr user Got Credit

Berkshire Hathaway’s Annual Report Remains Well Worth Reading

The 2014 Annual Report from Berkshire Hathaway came out recently. I always look forward to reading Warren Buffett’s letter to shareholders, but I found this year’s report especially worth reading.

2015 is the fiftieth anniversary of Buffett Partnership Ltd. taking control Berkshire Hathaway (then a faltering textile manufacturer). The textile manufacturing part of the business has been gone since the 1980s, but Buffett seems to be doing just fine.

A few points specifically stood out while I was reading.

  • Buffet doesn’t like a lot of the standard numbers used to calculate a company’s worth (even though the companies owned by Berkshire Hathaway tend to be successful by those metrics). He’s clearly comfortable with all sorts of financial metrics, but keeps score by his own numbers. That’s a set of characteristics well worth copying.
  • Berkshire Hathaway owns nine companies that, if those companies were independent, would be members of the Fortune 500. Berkshire Hathaway also owns BNSF, which transports about 15 percent of all intercity freight in the U.S. (more than any other company in the country).
  • Airbnb got a mention as a viable option for travelers to Omaha for Berkshire Hathaway’s annual meeting, which drew 39,000 people last year. I wonder just how much that mention is worth to Airbnb — and how many of Berkshire Hathaway’s shareholders were willing to use Airbnb before that subtle endorsement.
  • Berkshire Hathaway’s federal income tax return runs 24,100 pages. The company files an additional 3,400 state income tax returns. Even more impressive? Those documents are prepared by the Berkshire Hathaway office in Omaha, which has a staff of 25. The same 25 people are responsible for setting up an annual meeting for 39,000 attendees and a few other minor matters.
  • That huge stack of paperwork, however, would be far larger if all of Berkshire Hathaway’s subsidiaries operated independently. Buffett’s approach to running companies is as bare bones as possible. I expect that sort of lean leadership to be a major trend in years to come.

In honor of the 50th anniversary, Buffett wrote a more extended look at Berkshire Hathaway’s past then he normally does in these letters. He admitted a few crucial mistakes that he learned from, making this letter perhaps more valuable to read than most years. Berkshire Hathaway’s annual report from 1964 is also included at the end of this year’s.

If you’re an entrepreneur who hopes to grow your business beyond just covering your own expenses, read this year’s report — and maybe check into some of the past reports.

The Writer’s Bundle Returns; Act Fast!

The Writer’s Bundle is back — for the next three days. I’m a fan of this bundle and you may remember me promoting it in the past. There’s always books or courses in here that I love or want for myself. Here’s a quick rundown of this year’s bundle:

  • Kindle Launch Plan: $1,400 in 30 Days & an Amazon Bestseller, from Nick Loper (retails for $99)
  • Content Strategy for Thought Leaders, from Sarah Kathleen Peck (retails for $300)
  • Learn Scrivener Fast, from Joseph Michael (retails for $179)
  • Book Proposal & Manuscript Template, from Joel Friedlander (retails for $27)
  • The Momentum Kickstarter Kit, from Charlie Gilkey (retails for $47)
  • Authority: A Step-By-Step Guide to Self-Publishing, from Nathan Barry (retails for $39)
  • Turn Your Side Hustle Into a Full-Time Business, from Alexis Grant (retails for $47)
  • Video Idiot Boot Camp, from Katie Davis (retails for $297)
  • Write for the Web, from James Chartrand (retails for $23)

Basically, if you’ve been thinking about buying any of these courses or ebooks, this is the time to do it. You’ll get nine courses for less than what several of these courses usually cost by themselves. It’s a great deal.

Click here to use my affiliate link to buy. You can also go to Google to find this bundle if the idea of affilaite links bother you on any level.

Either way, you’ve only got until Wednesday, March 11th, at 11:59 p.m. EST to make up your mind.

IFTTT’s Do Apps Are Pretty Cool

IFTTT released a new set of apps that have kept me pretty entertained lately as I’ve worked on figuring out just how to use them. The apps are:

  • Do Button
  • Do Camera
  • Do Note

All three are available for iOS and for Android. Each app allows you to set up a certain action that happens whenever you hit the Do Button, take a photo with the Do Camera, or write a Do Note. With IFTTT’s endless connections to other apps, as well as hardware, the possibilities are pretty near endless.

Sure, a lot of the connections you can make aren’t much more than streamlining tasks you can already do from your phone. Consider this Do Camera recipe that sends receipt photos to a specialized Evernote notebook:

IFTTT Recipe: Save Receipts to Evernote connects do-camera to evernote

You could open up the Evernote app on your phone and fiddle around with it. But if you’re just trying to capture a receipt as you’re winding up lunch or grabbing office supplies, the Do Camera integration is going to be a lot faster. For a busy entrepreneur, IFTTT just made it that more likely that all of your business receipts will be available when you go to do your taxes next year.

Accounting for Ripple Effects

I get emotional about accounting. That’s probably a personal problem — some sort of deep-seated issue dating far back in my history as an entrepreneur. But the more time I spend thinking about accounting in general, and tax returns in specific, the more emotional I get.

The accounting industry is having a very good year as we’re all pushing to get our tax returns completed. As an industry, accountants tend to do well and can expect repeat business. But this year is something special, as we all scramble to figure out just what the Affordable Care Act means for our personal tax returns.

Don’t get me wrong: I’m ecstatic to have a way of getting health insurance that doesn’t require a marriage or an employment contract. I’m willing to spend a little more time with my accountant in exchange. But the ripple effects really drive home just how much of an out-sized impact the US approach to health insurance has on our economy. With a presidential election next year, I’m sure that we’ll see even more unintended consequences in the near future.

A New Use for Hemingway: Ghostwriting

I’ve been finding Hemingway surprisingly useful when working on ghost-writing projects lately. It’s a useful sort of a writing hack to get some quick insights when you’re trying to mimic someone else’s writing style.

Of course, Hemingway is fundamentally intended to help writers sound more like the man himself. But it does that by highlighting certain characteristics of writing:

  • passive voice
  • adverbs
  • vocabulary

By putting in writing samples from a client who I need to mimic, I can see pretty quickly how they use words. I can do that sort of analysis by hand, but it’s tedious enough that I don’t actually do so except on really well paying projects.

If you’re trying to mimic the style of someone’s writing, I suggest looking at several examples of someone’s writing through Hemingway’s lens, not just one. Getting the style right on a ghost writing project is hard enough when you’ve got multiple samples — getting style right off of just one sample is impossible.

Putting in several samples can be time-consuming, though. I do wish Hemingway had an API so that I could integrate it with some of my other writing tools, as well as automate the process of putting writing samples into the app. But I don’t absolutely need an API to keep finding new ways to use Hemingway — it’s just something that would be nice to have.

How To Level Up

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Stagnation is a very real threat, especially when you do creative work every day. Clients are only ever interested in what you can already do and repeats of what you have already done. (While I can’t speak from experience, I assume the same is true of employers.)

Doing just what is expected of you is an option, I suppose. But if you’ve already decided to go out and read blog posts about creativity, you’re probably not the sort of person to be forever content with the status quo. You want to level up, preferably on a regular basis.

It’s certainly possible to force yourself to level up creatively. You need to invest some time and take some risks.

  • Force yourself to launch new personal projects on a regular basis.
  • Find a way to work on the projects above your pay grade, even if it means acting as an assistant to the primary creative on the job.
  • Tell people what you’re doing so that they’ll hold you accountable.
  • Do work that scares you (in the risk-taking sense of the word, not in the working-with-bad-clients category).

Right now, I’m gearing up to launch something that will stretch my abilities in whole new ways. It’s pretty intimidating. But I keep telling more and more people about the idea, so it will be a whole lot scarier for me if people think I’ve given up than to actually finish the work.

Image by Flickr user williamcho

Why Freelancers Should Embrace Dwolla

Payment processing is something of a pet peeve for me. Getting paid through a site like PayPal is very convenient, but I have to give up 2.9 percent of my income (plus an added 30 cent fee) on every transaction. Consider what that means I’m paying:

Income Payment to PayPal
$100 $3.12
$1,000 $29.30
$10,000 $290.30

That amount doesn’t seem like all that much, but it only ever goes up even as the expense of having a bank account remains the same. I don’t feel like I get all that much for my money, especially since PayPal doesn’t always protect service providers from scams.

The real reason I still use PayPal at all is because all of my clients are familiar with the company. They mostly have accounts already and don’t have to think about the process of making a payment. I generally ask clients to pay with a check over sending a PayPal payment, though, or use Stripe’s integrations with invoicing tools to pay with a credit card.

In an ideal world where clients are willing to try new things, though, I would ask everyone to use Dwolla. Dwolla costs 25 cents per transaction (look at that adorable flat rate!) and has real humans in charge of customer service. Unlike both PayPal and banks (including my nice, local credit union), I’ve heard almost no stories of problems and even those seem to be either resolved to the customer’s satisfaction or be the results of misunderstandings. The main exception seems to involve using Dwolla to purchase Bitcoin, so I’m not too worried. About 35,000 businesses were using Dwolla as of June, along with several state governmental agencies.

Now I just need to convince some clients…

HabitRPG is My New Favorite Productivity Tool

A few friends convinced me to join HabitRPG a few weeks ago. Since then, I’ve become an enthusiastic convert!

The idea behind HabitRPG is that we can treat our to-do lists like a game. We can get points for knocking items off the list, level up, and even help friends defeat bigger monsters. HabitRPG offers a little motivation for the things we know we need to do.

For me, the biggest win is that I’m ‘playing’ in a group. If I let down my party — if I fail to complete my tasks, leading us to take damage as a group from whatever monster we’re currently fighting — I feel like a jerk. I definitely recommend playing with a group (preferably people you see regularly face-to-face), because the accountability HabitRPG offers is masterful. It’s even an improvement on traditional accountability models in some way, because no one else can see what your tasks are: you get the positive reinforcement from your friends without having to explain any embarrassing tasks you’re struggling with.

HabitRPG is not a task manager or a to-do list in and of itself, though. I’m using it alongside Asana (I’ve forced the rest of my household on to an Asana workspace and I won’t give that up). I would love to see an integration between the two, but I don’t expect that to happen any time soon. And that’s okay: HabitRPG excels at adding a little bit of motivation, not at nagging you about a missed deadline. I’ve found it beneficial because some of my time-insensitive work would normally get ignored, but HabitRPG treats all tasks equally.

HabitRPG is available on a freemium basis and I’m currently on the free plan. So far, I’m not feeling any great push to move over, though I expect that I’ll pay for a plan in order to support the makers. Unfortunately, HabitRPG does seem to have a lot of downtime. However, the underlying software is open source, so you can go fix it if you’re emotionally invested enough.

HTML is the New Latin

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Latin is a strange language. No one speaks it as their first language and few people speak it regularly outside of Vatican City. Yet many schools still offer Latin classes and most of us know a few words (even if we aren’t always aware that we do). We still use Latin roots for forming new words, even in English with its Germanic heritage. Kids studying for the SAT or GRE learn Latin roots to score well on what may be the most important tests of their lives.

We have a certain respect for the language that united scholars and politicians across Europe hundreds of years ago. Latin provided an underlying structure that allowed key ideas to pass communication barriers. Whether or not Latin is regularly spoken in the future, it will still have a lasting impact on the words we use for centuries to come.

The digital age requires a new connective infrastructure. Markup languages, including HTML, are that communication tool. Markup languages are systems of annotating documents in a way that’s both visually different from the text itself and recognizable by computer programs. Learning at least a few HTML tags is rapidly becoming a necessary step to sharing information across borders. HTML, by the way, stands for “HyperText Markup Language.”

The Words Themselves Aren’t So Important Today

As a writer, I hate myself for even suggesting that words themselves aren’t so important. But with translation tools constantly improving, my choice to use English words is far less important than it was even a few years ago. Even the specific words I use are exchangeable for something simpler: I can drop a blog post like this into Hemingway and see where I can change my diction.

I read web pages written in foreign languages every day. Google translates those pages for me automatically. I don’t need a human to translate their work into Latin or another shared language for me to get the gist of it.

But I do need those foreign texts in a format that Google can access. They need to be web pages, written in HTML, so that a machine can access and process the information they contain. Markup languages make our work accessible to the world — the same purpose Latin served centuries ago.

Of course, machine-based translation isn’t perfect. It’s improving, however, especially as the systems handling such translation get access to more text and can learn from experience. The algorithms used to process language are improving every day. In the long-term, it’s possible that we really could have real-time translations whispered into our ears as we talk. In the meanwhile, we can make our work easier to access, both by machines and by humans.

A Little Formatting Makes a World of Difference

Formatting is crucial. When we speak, we can convey our emotions through eye rolls, upbeat tones of voice, and other non-verbal communication. But with the written word, we’re limited to sharing information through words and formatting. Boldness, bullet points, and other visual cues have to do the heavy lifting.

This sort of formatting also conveys information to non-human readers. When a machine processes a document without any formatting, it can guess what the title and topic of the piece are based on comparison to other documents. But if the writer of a document puts a couple of H1 tags around that document’s title, a computer can tell the title of the piece immediately. Doing so also helps human readers focus on the title quickly, as an added benefit.

Unfortunately, formatting isn’t always a simple matter. There are many ways we can share text with the world — a shared Word doc, a WordPress blog post, a plain text comment, and many more. But each of these methods brings its own formatting woes. Our reliance on rich text is to blame. Different tools implement formatting in different ways, making it difficult to copy and paste between systems. These proprietary systems don’t talk to each other as well as they could. Don’t get me wrong. The situation has improved over the past few years: You can copy text from a Microsoft Word document into a WordPress blog post without your formatting going all wonky now (provided you’re using a recent version of WordPress). But there’s still plenty of room for improvement.

Writers Need to Learn Markup Languages

The need to make our work more accessible for both human and machine readers seems like a question of improving technology. Our tools are continuing to evolve. But, as a writer, choosing to learn HTML or another markup language can push your own work much further.

On the most basic level, offering an editor or a publisher a plain text file formatted with HTML can help your career. An editor can get your work published online far faster if you hand them a prepared file. You have a far better shot at being the editor’s favorite writer when you know HTML.

On a deeper level, however, the ability to correctly format your writing in HTML can increase its reach. Search engines have a harder time ranking an incorrectly formatted blog post or web page than one with correctly written HTML. You don’t have to dive too far down the rabbit hole: just being able to format your writing and add a little meta data is enough to make your work much more accessible. Adding in the right HTML is the modern day version of translating your work into Latin so that the folks in the next country over can actually find and understand your work in their library.

I’m not suggesting that you learn how to program. I may personally think that’s a good idea, but I’ve seen other writers get anxious at that sort of suggestion. Rather, writers need to be able to annotate our work to ensure our meanings are clear — we need to add formatting tags and a few other details. It’s possible to get by with using a tool that generates your HTML for you. I actually write in Markdown using a cloud-based word processor that can transform Markdown files into all sorts of other formats. But it’s worth your while to learn some HTML first, if only so you’ll notice if an automated system gets something wrong.

HTML is a Tool of the Cultural Elite

Through the seventeenth century, getting any attention at all required translating your work into Latin. It didn’t matter if you were a member of the Catholic Church or not. Latin was your only choice of languages for communicating with the cultural elite. Even Isaac Newton, who lived in the Protestant country of England, wrote his mathematical treatises in Latin.

Today, reaching the cultural elite means publishing your work online. Online doesn’t mean just tossing up an essay or an article on your blog, by the way. If you want to have any sort of reach, you need to be able to push your work on to a variety of platforms, like the Kindle. Just as writing in Latin meant that any European with a good education could read Newton’s work, marking up your own work with HTML makes spreading it easier. You can immediately push your work out to all the different platforms your readers might use. (The only way to use what Amazon refers to as ‘advanced formatting’ in a Kindle ebook, as it happens, is to format your book using HTML.)

There may always be print versions of particular work, but we’re fast reaching a point where publishers of all stripes push work online first and create a physical copy second. And since HTML, with a little help from CSS, can format text for printing, we should expect the online-first mindset to become even more common.

So Where Should Writers Start?

It’s not uncommon to meet writers who are only interested in perfecting their craft. Personally, I find that mindset to be problematic: If you want to lock yourself in a room all day to write, how can you guarantee that anyone will ever read what you’ve created? If you want to opt out of the world and focus on writing to the exclusion of all other things, though, you do have the option.

But if you’d rather ensure your work reaches an audience, there are a few easy starting points to help you learn a markup language.

  • Start by writing in a rich text editor, such as the one built into WordPress. Write as you would normally, but make a point of switching from rich text to HTML. In WordPress, you just need to click between tabs at the top of the text box where you’re composing your latest magnum opus. Once you see your HTML, you can make a point of checking your formatting against the HTML your editor generates. You’ll pick up simpler formatting, like bold or italic quickly.
  • Consider going through a tutorial or a class. There are hundreds of free tutorials online for HTML and related topics. I’d suggest searching for how to handle specific questions, like ‘how to format a block quote in HTML‘. You can also take more in-depth classes, like those offered by Codecademy.
  • Learn more about markup languages — but only if you really want to. I realize that I’m already bumping up against the limits of what the average writer cares about by writing 2,000 words about why you should care about HTML. If I went down the rabbit hole into topics like metadata, Markdown, and the wide variety of markup languages out in the world, I’d probably lose most of you who have read this far. But for the one or two of you who have an interest, there are all sorts of opportunities out there for writers who really understand markup languages.

You can also consider your tools. We don’t always get the option of choosing how we write. The muse may only strike when you’re looking at an entirely blank screen or even if you’ve just got a pad of paper and a pen. But if you understand your own workflow, you may be able to upgrade your tools so that you’re able to deal with HTML questions and the like with only minimal effort.

At the bare minimum, choose word processing programs capable of exporting HTML without screwing up your carefully planned formatting. Scrivener, for instance, has a much better export track record than Microsoft Word. There are any number of word processors and other tools that will help you write, as well as add HTML to your work in an efficient manner.

Right now, I’m using a tool called Beegit. It gives me a way to share projects with a team, as well as the ability to write with visible markup in my documents. However, Beegit is based on Markdown, rather than HTML, so it’s not necessarily a good switch if you’re still learning about markup languages.

Your Obligation to Experiment

The written word is becoming ever more important: We spend more time with text today than any of our ancestors ever did. But we still haven’t perfected a way of ensuring that a given document is accessible to every single person who wants to read it. Language and cultural barriers still slow down how quickly we can share new ideas, as does issues as simple as file formats.

But the more that we writers can tackle the question of accessibility on our own, the wider our own work will spread. If reaching readers is one of the reasons you bother to put words into a row, take the time to experiment with markup languages, just scholars in centuries past invested the time necessary to learn Latin.

Photo credit: iStylr