November 29, 2014

Give up or learn how to live in the jungle for 30 years

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The map above shows the Lubang Island, which is a small island (25 km by 10 km) in the Philippines. Maybe the most famous citizen of the island is Hiroo Onoda. He lived there for about 30 years. 

You might have heard of the Japanese soldiers who never wanted to surrender. The Japanese soldier who held out the longest was Hiroo Onoda, who surrendered in 1974. He came to the Lubang Island in 1944 with the goal to blow up the airfield and the harbor. The Japanese had about 200 soldiers on the island when he arrived, but most of them would die or surrender when the US Marines invaded the island in 1945. But Hiroo Onoda and 3 other soldiers escaped into the jungle and became guerrilla fighters.

The war in the pacific ended in September 1945. Hiroo Onoda, who was an officer, trusted nobody except his superior office who never gave him the order to surrender, so he and his 3 fellow soldiers continued to live in the jungle. They were not fighting anyone - they thought they were too few to do that - so they decided to hide and wait for reinforcements.

The first of the four surrendered in 1950, but the rest of the soldiers never trusted him when he came back and told them the war was over. The second of the four was killed by gunfire in 1954. The two other would held out the longest. This is how and why they did it.

How:
  • People lived on the island so they could steal food and kill the villagers cows. They killed about 6 cows per year.
  • They moved around the jungle and no matter what they did they were very careful. For example, they washed the upper body in the morning, and the lower body in the evening, to minimize the risk of being discovered.
  • Fortunately, the were living on an island that was warm (except during the rain season) and they could find both bananas and coconuts.
  • They took care of themselves. Hiroo Onoda was sick in bed with fever only twice during 30 years.

Why:
  • The Philippine Air Force used a part of the island for target practice, so they thought the war was still going on and the planes were bombing them.
  • They got photographs of their families, but they thought the photographs were fake. Remember that all Japanese citizens had orders to die for the country. If the war had really ended, the photographs were fake because then all Japanese would have been dead.
  • Both the US Air Force and the Philippine Air Force dropped letters. But they analyzed the text and came to the conclusion that everything was made-up. This is a common psychological trait and is called confirmation bias.
  • They made up their own world-story by reading the newspapers they stole from the villagers on the island which suited their world-story. For example, they came to the conclusion that the Vietnam War was a part of World War II.
  • When they found a radio and heard about the Tokyo Olympic Games, they thought "After all, people were always saying there were no national boundaries in the world of sports." 

Sounds interesting? Then you should read the great book No Surrender: My Thirty-Year War. But what the book will not tell you, but Wikipedia will, is that Hiroo Onoda had killed several of the villagers on the island. 

November 26, 2014

Random Show Episode 26

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A new episode of the Random Show with Kevin Rose (founder of Digg) and Tim Ferriss (author of The 4-Hour Workweek) is out! This is episode 26.


Lessons learned
  • According to Tim Ferriss, a lot of would be entrepreneurs follow this quote: "Everything has been done and there's nothing left." But that's not true, because there's so much left to invent. 
  • Tim Ferriss's favorite market that you should target if you are building a company is very precisely defined, relatively easy to target, and price-insensitive high-end.
  • You don't have to be a large public company and follow the traditional "Silicon Valley way" of building a company. The Swedish furniture company IKEA could do it on their own
  • Both Kevin Rose and Tim Ferriss seems to be burned out from the current "tech" hysteria in Silicon Valley. Tim Ferriss argues that we have a tech-bubble and the companies that will survive are the lean companies that are not in a rush.
  • Take some time to be thankful and make a list of those things!

Recommendations

If you want to watch the rest of the episodes, you can find them here: The Random Show with Kevin Rose and Tim Ferriss

November 22, 2014

Peter Thiel analyzes Tesla Motors

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While Peter Thiel was born in 1967 in Germany, his family moved to California when he was young. Stanford was the school of his choice before he began trading derivatives at the Credit Suisse Group. In 1996, he founded the hedge-fund Thiel Capital Management, and he's also famous for being the first outside investor in Facebook. 

Peter Thiel has also donated $3.5 million to the Methuselah Foundation, which is a life-extension-research organization that believes humans will one day live to be 1 000 years old. One of the founders argued that the first human to live a 1 000 years is already born.

In 2005, Peter Thiel created Founders Fund, a San Francisco based venture capital fund. In the fund, you can find companies like SpaceX and Spotify. He has also written a book called Zero to One where he talks about his strategies. 

Peter Thiel is a venture capitalist (VC), who invests in new technology companies. It's generally difficult to follow the rules a VC has if you are investing in the public stock market, but I still believe you can learn something from some of the rules.

Venture capitalists aim to identify, fund, and profit from promising early-stage companies. But most of these companies will fail, and so will the fund. According to Peter Thiel, the biggest secret in venture capital is that the best investment equals or outperforms the entire rest of the fund combined. If you don't want to fail, then only invest in companies that have the potential to return the value of the entire fund. However, even if you find a successful company, you may still fail. For example, Andreessen Horowitz made a 312 times return on their investment in Instagram, but that wasn't enough to cover the rest of the fund because their investment was too small. 

Peter Thiel has two main rules
The value of a business today is the discounted sum of all money it will make in the future. That's why it may seem that new technology companies are extremely overvalued compared with older companies. For example, when Twitter went public in 2013, it was valued more than 12 times the Time's market capitalization – even though each employs a few thousand people, each gives millions of people a way to get news, and the Times earned $133 million while Twitter lost money. While investors expect Twitter to generate cash flows in the future, they don't believe in more traditional ways to read news.

Monopoly is the condition of every successful business. Under perfect competition, no company makes an economic profit. On the other hand, a monopoly owns its market, so it can set its own prices. Each monopoly is unique, but they usually share the following characteristics:
  1. Proprietary technology. It's impossible to replicate the product – like Google’s search engine. 
  2. Network effects. You have a network effect if a product is more useful as more people use it – like Facebook. 
  3. Economies of scale. The company gets stronger as it gets bigger. 
  4. Branding. Creating a strong brand is a powerful way to claim a monopoly.

Peter Thiel has seven questions he asks before he's investing in a company
  1. Can you create breakthrough technology instead of incremental improvements? As a rule of thumb, the technology must be at least 10 times better than its closest competitor. PayPal was 10 times better because it took 10 days faster to let buyers pay. Companies must strive for 10 times because smaller improvements end up meaning no improvement at all for the end user. 
  2. Is now the right time to start your particular business?
  3. Are you starting with a big share of a small market? Huge trillion-dollar markets mean ruthless, bloody competition. Facebook began with a big share of the small market "Social networks for Harvard University." The initial markets are often so small that they often don't even appear to be business opportunities at all. 
  4. Do you have the right team? One of the single clearest patterns Peter Thiel has noticed from investing in hundreds of startups is that a company does better the less it pays the CEO ($150,000 per year is enough). Real technologists wear T-shirts and jeans, so never invest in a tech CEO that wears a suit. 
  5. Do you have a way to not just create but deliver your product? Selling and delivering a product is at least as important as the product itself. 
  6. Will your market position be defensible 10 and 20 years into the future? For a company to be valuable it must grow and endure – even though many entrepreneurs focus only on short-term growth because growth is easier to measure. The most important lesson learned from Steve Jobs has nothing to do with design. The greatest thing Steve Jobs designed was a long-term vision. Many companies have failed because they didn't answer the question "What will stop China from wiping out my business?"
  7. Have you identified a unique opportunity that others don't see? Great companies have secrets: specific reasons for success that other people don't see. 

Let's apply it on Tesla Motors
The value of a business today is the discounted sum of all money it will make in the future.
Tesla's stock market value is high compared with other car manufacturers like General Motors. But that's because the investors believe more in Tesla's future profits than what they believe in the future of General Motors.

Monopoly is the condition of every successful business.
  1. Proprietary technology. It's not yet as difficult to replicate a Model S compared with what it takes to replicate Google. 
  2. Network effects. If more people drive cars from Tesla, the infrastructure around the cars (like charging stations) will improve, so more people will drive cars from Tesla because of the infrastructure. 
  3. Economies of scale. It's easier to lower the price per car if the factory is bigger, and Tesla is also building their own battery factory. 
  4. Branding.


1. Can you create breakthrough technology instead of incremental improvements?
Tesla's technology is so good that other car companies rely on it. Daimler, Mercedes-Benz, and Toyota are all using technology from Tesla. Moreover, the Model S was rated higher than any other car by Consumer Reports and the Model S became the car of the year by several magazines.

2. Is now the right time to start your particular business?
The original founders of Tesla founded the company because they saw that people were driving the hybrid Toyota Prius only because they cared about the environment and they couldn't find a true electric car. The world will also begin to run out of oil in a few years, so now is the time to sell cars not dependent on oil 

3. Are you starting with a big share of a small market?
Tesla started with the small market "high-end electric sports cars" when they designed the Tesla Roadster. They now had a little more money and a brand they could use when they designed the Model S.

4. Do you have the right team?
The current CEO of Tesla Motors, Elon Musk, described his team: "If you're at Tesla, you're choosing to be at the equivalent of Special Forces. There's the regular army, and that's fine, but if you are working at Tesla, you're choosing to step up your game." Elon Musk is also a big believer in electric cars. 

5. Do you have a way to not just create but deliver your product?
Tesla want to own the entire distribution chain where they sell and service the cars themselves without any traditional car dealer. 

6. Will your market position be defensible 10 and 20 years into the future? 
As the world is running out of oil, and Tesla believes electricity is the weapon of choice when there's no oil, there will be a big demand for electric cars in 10 and 20 years. But what about China? It's true that the Chinese are building several electric cars, but the question is how good future models are compared with a future Tesla?

7. Have you identified a unique opportunity that others don't see?
Tesla has identified that 100 percent electric cars belongs to the future. Other car companies tend to believe in hybrid cars or cars powered by fuel-cells, but Tesla will not sell any of those cars.

Key points from the book Zero to One by Peter Thiel

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I've read the book Zero to One – Notes on startups, or how to build the future by Peter Thiel. When I wrote a biography on Elon Musk, I gave a brief introduction to Peter Thiel’s life because he and Elon Musk used to work in the same company. In his new book, Peter Thiel also talks a little bit about his life so I thought it would be interesting to see if I could learn something new.

The book's title originates from Peter Thiel's view that you should always create something new (from 0 to 1) and not copy someone else (from 1 to n). Therefore, the book is about how to build companies that create new things, which is difficult because it requires doing something nobody else has ever done.

Peter Thiel knows what he's talking about because he has founded (or co-founded) both PayPal and Palantir, and was and early investor in both Facebook and SpaceX. All these companies went from 0 to 1. The problem today is that most entrepreneurs want to go from 1 to n because it's easier even though our world is in a desperate need of innovation.

In a world of scarce resources, globalization without new technology is unsustainable. Not many years ago, we looked forward to vacations on the Moon. The computer in a modern smartphone is more powerful than the computer that landed on the Moon, but we are only using our smartphones to fire birds against pigs. While in the 1950s, people welcomed big plans, today is a long-range plan considered as hubris. Moreover, the number of new drugs approved per billion dollars spent on R&D has halved every year since 1950. How can the future get better if no one plans for it?

According to Peter Thiel, these new technologies can only emerge from startups. A startup is the largest and smallest group of people you can convince of a plan to build a different future. Larger organizations are too inefficient, and you can't do it on your own.

From Zero to One is a short book (380 pages on my iPad) but it is filled with knowledge and is easy to read. Among others, here are some important key points from the book:
  • Today's "best practices" lead to dead ends – the best paths are new and untried.
  • Technology is miraculous because it allows us to do more with less.
  • There's no formula for success because every innovation is new and unique.
  • Ask yourself the following question: "What important truth do very few people agree with you on?"
  • In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancements than actually doing work.
  • How much of what you know about business is shaped by mistaken reactions to past mistakes?
  • The most contrarian thing of all is not to oppose the crowd but to think for yourself. 
  • Monopoly is the condition of every successful business. Under perfect competition, no company makes an economic profit. On the other hand, a monopoly owns its market, so it can set its own prices. 
  • Higher education is the place where people who had big plans in high school are stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. 
  • Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past. When PayPal wanted to copy Square the only difference they made was a triangular card reader.
  • Competition can make people hallucinate opportunities where none exist. 
  • For a company to be valuable it must grow and endure – even though many entrepreneurs focus only on short-term growth.
  • You are not a lottery ticket! If successful entrepreneurs were just lucky, then entrepreneurs like Steve Jobs and Elon Musk wouldn't have created several billion-dollar companies. But there's no way to find out if that's really true because companies are not experiments. 
  • Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. 
  • China is probably the most pessimistic place in the world today because they know there's no way Chinese living standards can catch up with those of the richest countries – because of lack of resources. 
  • Avoid the lean startup where you iterate a minimum viable product. Making small changes to things might lead you to a local maximum, but you will miss the global maximum.
  • The most important lesson learned from Steve Jobs has nothing to do with design. The greatest thing Steve Jobs designed was a long-term vision. 
  • Less than 1 percent of new business in US receive venture funding, but ventured-backed companies create 11 percent of all private sector jobs and generate revenues equivalent to 21 percent of GDP. 
  • If you think something hard is impossible, you'll never even start trying to achieve it. 
  • The best startups might be considered slightly less extreme kinds of cult. 
  • Poor sales rather than bad product is the most common cause of failure. Engineers know their jobs are hard, so when they look at salespeople laughing on the phone with a customer or going to a 2-hour lunch, they suspect that no real work is being done. What engineers miss is that it takes hard work to make sales look easy. 
  • Computers are complements for humans – not substitutes.
  • Big data is usually dumb data.
  • The most valuable companies in the future will ask, "How can computers help humans solve hard problems?"
  • The best problems to work on are often the ones nobody else even tries to solve.
  • Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best work from everybody at his company.

November 12, 2014

No wheels and an electric motor

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We now have cars with electric motors, and we also have bikes with electric motors, but what about the boats? I don't know if this thing can be defined as a boat, but at least it behaves like one:

The "boat" you see in the image is a Q2A Electric manufactured by the Slovenian company Quadrofoil. Here are some basic data:
  • Price: From 15,000 Euro ($19,000)
  • Range: 50 km (31 miles)
  • Speed: 30 km/h
  • Seats: 2
There's one limited edition, but this data is from the standard edition. The difference between the two versions is the speed and range and thus the price.

According to the manufacturer, the Quadrofoil (the company name is also the name of the boat) is unsinkable because the hull is hollow. And it also comes with a built-in anti-collision system that absorbs the collision forces. When the Quadrofoil is not moving, the depth of the water you are operating in has to be at least 1 m. But when it's moving, the depth can be much shallower as the draft of the boat is as little as 0.15 m. 

Looks interesting? You have to wait until Q2 2015 before you can buy one.

November 9, 2014

Why you are helping Google each time you sign in

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I've read the book Big Data - A Revolution That Will Transform How We Live, Work, and Think. The book promises to give the reader a brief introduction to the world of big data. While some say big data will revolutionize the world and transform it in ways we've never thought of before, others say that big data is just another bubble. I guess only time will tell us the answer.

The basic idea behind big data is that if we analyze gigantic amounts of data we will discover what we otherwise couldn't have discovered. The book is filled with examples from the world of big data, ranging from how to discover flue trends with the help of what we search for in Google to new alarm systems that analyze the seat-position of a car driver and sends a signal to the police if the car doesn't recognize the driver's position. It also discusses what might be possible in the future. Will we be able to jail criminals before they committed a crime if the data said they would commit the crime in a near future?

The company the book talks the most about is Google - a company that has access to gigantic amounts of data. Each time we search for something in their search engine, they save the data and are improving their systems with the help of that data. But we are also helping Google in other ways each time we sign in. As you probably know, Google has been driving around in their cars and photographed heaven and earth. The result is Street View.  But they have a problem. The images they took are not accurate enough so they can determine the street number of all buildings. That's where you and me are expected to help them each time we sign in somewhere using their system. 

At the height of the tech bubble, in 2000, a guy called Luis von Ahn was tired of automatic computers who wrote "spam" all over the Internet. He came up with the idea to force you and me to write numbers and letters that are difficult for a computer to read automatically. He called the system Captcha. But what if he could use you and me to also do some useful work and not just write random numbers and text each time we sign in. Google had the same idea and acquired the technology from Luis von Ahn's company in 2009. 

So in 2009, we were all hired by Google to translate text. Google has scanned almost all books in the world and they are now searchable at Google Books. But to make them searchable by you and me, Google had to translate the scanned images to text. Their computers could translate some text, but not all, and it would be too expensive to hire translators, so Google began to send out images to you and me each time we signed in. If maybe 5 of us translated the image of text the same way, Google took the translation and added it to the book they scanned.

I believe Google has run out of books to translate, so they now need help to translate street numbers. That's why you and me now have to write a number each time we sign in:

November 6, 2014

Top words in top selling books

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Last year I wrote an article showing the Opening paragraph of top selling books. A while ago I read an article that talked about the top words in top selling books. I've lost that article so I decided to use my data mining skills and make a similar research on my own. The books I've included are a few of the top selling books from the last article:
  • A tale of two cities
  • And then there were none
  • The Hobbit
But since all of the top selling books are not available in the correct format needed to analyze the words, I've also included:

This is the result:

Alice Two cities Hobbit And then Bible Engineer
the the the the the the
and and and a and to
to of of of of a
a to to to to and
she a a and that of
of in he he in in
it his in was he was
said it was said shall he
it that they I unto Elon
in I it it for that

But, as you can see, most of the words in the results above are so-called stop words, so I've also tried to see what happens if these words are removed. This is the result:

Alice Two cities Hobbit And then Bible Engineer
said said said said shall elon
alice mr bilbo lombard unto said
little lorry dwarves blore lord car
know man came vera thou tesla
like defarge like armstrong thy like
went little long rogers god company
thought time thorin mr said electric
queen hand time know ye rocket
time miss great went thee space
did know did little man didnt

If I recall that old article I read on the top words in top selling books, I think the words were "and" and maybe "but." Anyway, it was interesting to see that the words in my own book matched almost all of the words in the other top selling books. But I think we will need more books to come up with any real conclusions.

Bonus!
As a bonus, I've also calculated the average words per sentence in each book. This is the result:
  • Alice: 27
  • Two cities: 18
  • Hobbit: 20
  • And then: 9
  • Bible: 28
  • Engineer: 20
...and average length per word:
  • Alice: 4.09
  • Two cities: 4.33
  • Hobbit: 4.17
  • And then: 4.21
  • Bible: 3.94
  • Engineer: 4.46