Book Review: The Thing Ben Forgot

Dear Ben:

I just read your book, “The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers”. I was going to write a review on my blog, but somehow it turned into a personal letter to you. So here goes.

First let me say: congratulations on writing a book! I’ve thought of doing that myself, but have not progressed to actually putting pen on paper (or, should I say, bits on display). I know it isn’t easy.

Let me start with the good stuff …

I think your message is very important, and every entrepreneur should read your book. I’ve been through many hard times myself in helping build Apple, Palm, Handspring and now Numenta. I totally relate to the notion of the “struggle”, and you describe it well. There are thousands of business books out there, so why isn’t it obvious what to do? Surely somebody smarter than me would have figured it out, so what’s the formula? You do a great job of explaining that there is no formula, particularly when you are inventing a product category. Our world is a constant whirl of experimentation, reaction, and adjustment. If you want to be a CEO, you’d better understand that up front.

I love some aspects of your book. One of my favorite parts is when you distinguish between culture and amenities inside corporations. I had this exact conversation with one of my engineers recently! I am very annoyed at the escalating amenities in our little valley, where the competition for talent is so intense that it’s hard to imagine what frills companies will offer next. Amenities are just a form of compensation. Culture, on the other hand, is much more profound and important. It’s how you treat people, what you value, and how you balance the many constituencies that touch your business.

I also love your discussion on how to select corporate executives. This is one of the hardest jobs for a CEO, yet the one with highest impact. You are your team. I especially agree with you that you should hire for today, not for some potential larger future company.

And I agree wholeheartedly with your focus on resilience and courage. I’ve had to do some very difficult tasks at my companies, such as having to negotiate out of a very expensive property lease that we signed just when the internet bubble burst. I also had an IPO road show nearly derailed because a competitor decided to mount an unsubstantiated patent lawsuit that made my lawyers jittery. I learned through this process that the great CEOs can be identified by how they behave in bad times. It’s easy to be a great CEO when everything is going well, but it’s pretty damn tough in the bad times.

Speaking of “damn tough”, here is one area where we disagree. I don’t think it is necessary for profanity to be part of the business culture. You often quote our mutual mentor, Bill Campbell. Well, let me tell you my own story about Bill.

One day, at Claris, I saw an HR manager get up on her chair, and yell out across the cubes, “Hey everybody, get the f— to work!” I found it appalling; she was setting a terrible standard for employee communications. But I knew exactly where it originated: Bill, our dynamic and inspiring CEO, was the biggest offender when it came to swearing.

I marched into his office and told him what I had just heard. I said it was time for him to stop promoting a culture that not only tolerated swearing, but had let it become a standard part of company communications. Bill listened to me, thought for a while, and then said “You’re right!” And he stopped swearing that very day. Okay, he didn’t stop behind closed doors, and our executive staff meetings continued to be punctuated with his very colorful language. But he agreed that a culture of public profanity was not good.

Bad language is not the only way to communicate intensity, and personally I can live without it. Encouraging swearing throughout the company creates a culture of lack of respect, not a culture of urgency, and can be very alienating to those employees who find it offensive.

But most importantly, Ben, there is a critical piece missing from your book, and that’s why I’m writing you this letter. You forgot to say that there are good reasons to go through this struggle. You don’t talk about the rewards of getting it right, of building a great culture, of hiring the right person, and of ultimately having a successful company.

For me, the struggle – which I still engage in — has been worth it for two reasons. (A third, the obvious financial upside, is not my principal driver but sure can be exhilarating!)

First, building businesses makes the world better, and being a CEO multiplies your impact enormously. If you do pull off a successful company, you add value to your customers, create jobs, bring benefit to your suppliers and your community, give financial return to your investors, and simply put, leave a positive mark, or – as Steve Jobs said – put a dent in the universe. Getting a company through these struggles is an act of triumph, the triumph of impact.

Second, some of my deepest friendships and relationships were formed by going through the struggle together. I just attended an Apple reunion of employees from the first ten years. We had gone through enormous trauma together, creating a bond that has remained strong many years later. My Palm, Handspring and now Numenta experiences created more relationships, more bonds with incredibly creative, talented and dedicated people. As CEO, you quickly learn that building a business is a “team sport”, and part of the great pleasure is not just winning — although that’s pretty fine — but playing on the field with a superior team.

I know you’ve experienced both these benefits as well, Ben. Perhaps you took these payoffs for granted, and so neglected to mention them in the book. But for all those entrepreneurs who I hope read your book, I want them to know this: yes, it’s a struggle, but it is worth it.


Health Insurance … An Unhappy Update

You may have read my earlier post about my analysis of my existing insurance vs. the ACA plans. There was no comparison, with my current plans being much better, at a better cost.

Well, I just got the notice of our annual increase. Both my policy and my daughter’s policy are going up over 20%, which puts them squarely in line with the ACA plans. The current plans still have slightly better benefits, i.e. a lower deductible, and a higher out-of-pocket maximum, but the monthly premium is now slightly worse.

Here are our monthly premiums since 2005, for a very high deductible plan:

    Donna Daughter
2014  625  235
2013  502  195
2012  457  161
2011  409  136
2010  285  94
2009  193  68
2008  193  68
2007  191  56
2006  156  45
2005  119  45

A simple average shows that the premiums have increased an AVERAGE of over 20% EACH year for the past 9 years.

I think this data underscores how critical it is to have health care reform. The jury is still out as to whether the ACA will provide that needed reform.

A Kodak Moment

Recently I had the opportunity to chat with Chuck Geschke, one of the co-founders with John Warnock of Adobe Systems, along with his wife, Nan. Nan and Chuck both are interested in history, and they have a great viewpoint from which to look back at the significant changes in the computer industry.

Chuck told a story from Adobe history that really grabbed my attention. His experience there with the transition from analog to digital content felt similar to my own experience in the transition from mobile telephones to smartphones. In fact, his “Kodak Moment” reminds me of my own “Nokia Moment”.

Chuck’s story went something like this.

Having participated in the creation of digital content through products like Postscript and Illustrator, Chuck and his colleagues could see that the photography business was going to migrate to digital as well. They worked to create a groundbreaking new product, Adobe Photoshop, to take advantage of that trend. In looking at the market it was clear that Kodak would suffer; after all, their business model had always been about the film – you can lose money on everything else, but you will make it up on film.

Chuck travelled to Rochester to meet with the executives at Kodak. He felt that if they could adjust while there still was time, there might be opportunities for Adobe to work with them. Kodak had been created in 1880, and had real staying power; he was sure that it would be able to cope with the latest change in technology.

Chuck couldn’t recall the exact timing of his visit, but I expect it was in the early 1990’s, after the start of digital photography and the creation of Adobe PhotoShop, but before the massive consumer rush into digital. Things were going pretty well for Kodak, and they were in no hurry to make any changes to their strategy. On the chart you can see that up to the early 90’s, when Chuck probably had that meeting, things were looking ok, at least as judged by the stock price.

An ugly picture

Chuck received a total brush off during that visit. The Kodak executive wasn’t the least bit interested in what Chuck had to say. The exec probably figured that digital images were a niche product suitable for computer geeks, but not for a wider audience. Kodak just wasn’t interested.

Jump forward to 2012, and Kodak declares bankruptcy.


I had my own Kodak Moment. It would have been around 2000 or 2001. We had been successful at Handspring in creating the Visor handheld computer, and sales were climbing. Indeed, we were the fastest growth company in American business history at the time. We had started the development of smartphones, but had not yet announced them.

Handspring was a small company. It seemed crazy to be going into the phone business against huge competitors like Nokia and Motorola, so I decided to approach Nokia to see if I could interest them in collaboration. Perhaps Handspring could focus on US sales, and Nokia could OEM the product for sale with a Nokia label in Europe.

I travelled to Helsinki to meet with a very senior executive. He was the most senior business development executive, reporting to the CEO. It must have been summertime, because I remember how eerie it was for it to be light outside when I arrived very late the evening. The next day I joined the exec for lunch in a small, private dining room, where we were served an elegant meal on a starched white tablecloth.

After some preliminary discussion, I reached into my bag, pulled out the Treo, and laid it down on the table. I told the executive that I was there to discuss the future of phones. They would be smartphones, I said, software-intensive phones with an application development environment. I suggested that we could work together with Nokia as this important transition played out. We could offer our software and computing expertise, and Nokia would contribute phone manufacturing and distribution experience.

Well, my exec, much like Chuck’s Kodak exec, showed not the least bit of interest. He didn’t even bother to look down at the device on the table! I felt I was showing him the future, and he thought I was some crazy Silicon Valley computer person who knew nothing about the phone business. To a certain extent, both of us were right. At Handspring we had no idea what we were getting into by making phones, but Nokia was equally blissfully ignorant of the computing tsunami that was about to hit them.

Nokia had been founded in 1865, even before Kodak. It had gone through several remarkable transitions in its past, from being a rubber boot manufacturer to one of the world’s leaders in mobile phones. Certainly, I thought, Nokia could adjust again to a technological upheaval.

Like when Chuck visited Kodak, things were looking up for Nokia when I went to Finland. They were just at the start of their amazing run as the world’s biggest smartphone manufacturer. The notion of smartphones as a threat simply was not viewed as remotely possible. Smartphones would be a niche part of the market, and not worth the effort for a company like Nokia. Look at the chart below; up to the mid-2000s, everything sure is looking good.


nokia mobile phoneSource:

By 2013 Nokia’s fortunes had deteriorated dramatically, and Microsoft acquired what was left of the company.

So what can we learn from these two examples?

Here are my takeaways:

1. Just because everything is going great now, it is not a guarantee that today’s success will continue. Even though your company has been around for 100+ years, there is no assurance that it will be around in the future.
2. Avoid arrogance. If someone comes to tell you about the future, at least listen. They may be wrong, but they may be right. It’s worth contemplating the input, even if it comes from people with little obvious experience in your domain. They may be seeing something that you don’t see.
3. Keep your eyes and ears open. Big trends start as small trends. Products get cheaper. Both digital cameras and smartphones were extremely expensive at first, so Kodak and Nokia saw them as niche products for the wealthy. But they didn’t project forward and see that as prices came down, rapidly, the markets quickly expanded.
4. Small companies shouldn’t be too worried about the big guys stomping on them. If the disruption is big enough, they are unlikely to be able to turn quickly, even if they want to. Be cautious, because there are some moves that are easier for big companies to make than others. But don’t be afraid to compete with established players.
5. Don’t have an executive dining room.

Donna’s Ten Tips for Personal Philanthropy

Anybody, at any age and at any level of wealth, can be a philanthropist.  Most people give money to favorite causes, but many do so on auto-pilot, or only when asked.  My definition of a philanthropist is someone who thoughtfully invests in organizations who can be a partner to improve the common good.

Mine is not the conventional definition.  First, I call it an investment in an organization, rather than a donation.  It’s not an investment in the usual sense, where one expects a financial return.  It is an investment in the sense that there is a philanthropic return, i.e. you put in money, and someone’s life gets better – a farmer gets a micro-loan, an inner-city student gets a scholarship, a new park is created, etc.  Second, I call it a partnership between the philanthropist and the non-profit organization.  Both sides need to respect each other.  The non-profit should respect the philanthropist for the role they play in providing resources, and the philanthropist should respect the non-profit for their expertise and their ability to make good things happen in the world.

I’ve expanded my own personal philanthropy over the years and, along with my husband, have developed ten key principles that guide our giving.  Not all of these will fit everyone, but I’m confident that at least some of them will resonate with you.


I was overwhelmed with constant requests for gifts, both casual solicitations in the mail and larger “cultivations” from major philanthropic organizations.  My husband and I decided to act as if we had a personal philanthropic foundation.  We accumulate requests during the year and schedule an annual meeting to review our philanthropic goals and gifts.  We moved all the payment schedules to this date in early November, and we consider all requests together, at one time.  My quick response to most requests is “we will consider it when our foundation meets in November”.  There are exceptions, of course, where decisions have to be made on a timely basis.  But we have found that 90% of what we give is now handled in that one evening.


2. Give through a philanthropic fund.

A philanthropic fund (“phil fund”) is a kitty that you set up, usually with a community charitable foundation, from which you can direct contributions.  You get the tax deduction when you donate INTO your phil fund at the community foundation, then you recommend gifts that the foundation approves and pays.  Usually the foundation’s approval is routine, as long as you are working with established charities with legitimate 501(c)3 not-for-profit status.

There are several advantages of giving through a phil fund.  First, you separate the timing of your tax-deductible donations from the timing of your charitable gifts, allowing you to be thoughtful about both.  For example, if you own appreciated stock and want to donate it, you can donate to the phil fund when the price is right, but not have to decide where to direct the donation until you are ready.  Another advantage is that most foundations with phil funds have excellent online systems.  All your previous donations are listed, so recommending grants is a simple matter of entering the numbers and, poof, you are done.  No writing checks!  Yet another positive is that the sponsoring foundation also can vet and recommend great charities.  So if you want to donate for disaster relief to Haiti, for example, you can see who they recommend.

There are many good foundations who enable phil funds.  We have funds at both the Jewish Community Federation of San Francisco and the Silicon Valley Community Foundation.  Note that the unspent balance in your phil fund usually goes to that organization when you pass away, so you need to consider the estate implications.  If you resonate with the mission of the organization, you probably will be okay with this idea.  Note also that these funds may have minimums to get started.


3. Figure out what you want to accomplish, and then find the organization that can help you do it.

Over lunch one day a friend said to me, “I’m so frustrated with people asking me all the time for money. I have a hard time figuring out who to give to.”  I pointed out that she was starting from the wrong place.  Instead of picking from among organizations approaching her, she should first think about her priorities for charitable giving.  Is improving local K-12 education her passion?  Addressing poverty in India?  Combatting disease in Africa?  Finding a cure for pancreatic cancer?  There are a million good causes.  You simply cannot address them all.  You have to think through which problems are the ones you care about the most.  Then seek out the organizations who operate most effectively in that area.

I’ve been dismayed at the recent trend, particularly among young Silicon Valley philanthropists, to believe that they have to “reinvent the wheel” — that there couldn’t possibly be an organization out there today that is already creatively and innovatively addressing their goals.  Often that is simply not true.  I just heard a speaker say that she believed that encouraging private enterprise is the solution to poverty (something I believe in as well), so she is creating a new organization to do this.  Why not support Endeavor, which works with entrepreneurs around the globe?  Or TechnoServe, which focuses on agricultural entrepreneurship?  Or Accion, which has a multi-decade history of micro-lending?  Unless you plan to dedicate yourself to this effort, it is far more efficient to partner with organizations that are working on the problems you want to address, rather than to create something new.


4. Do your due diligence.

You should be as careful when donating to a charitable organization as you are when hiring a new employee or going to work for a new company.  Check out their financial statements; their IRS 990 forms are public information.  Are they operating in the black?  This fact alone is the greatest sign of a well-run organization.  The leadership should match their expenses with their revenues.  Of course emergency situations arise that occasionally drive an organization to operate at a loss.  But over the long term, the organization needs to be financially prudent, and only spend what it takes in.

You also can research the key employees and make sure that you are comfortable that their background fits the mission.  You can check references, or talk with other key donors to understand their experience.  Most organizations will be happy to provide any additional information that you request.  We even have met with the auditors of an organization and with members of the board, to make sure that we are comfortable with the way the organization is managed.


5. Think about the scale of what you are giving relative to the scale of the organization or campaign.

I think of gifts in two flavors:  leadership gifts and participation gifts.  For leadership gifts, you want to give enough to be a significant fraction of the goal.  For example, if your child’s preschool is trying to raise $10,000 to upgrade the playground, consider a leadership gift of $2,500.  Leadership gifts can come at any amount and often can be paid over multiple years.  In a major university campaign, it might take a gift of $5 million to be a leader!  But, there are many smaller campaigns where you can play a leadership role, even if you do not have great wealth.

Participation gifts, on the other hand, are a “drop in the bucket” relative to the organization, but are still important.  Why should you give $100 to your college if you can’t imagine that it is going to make a difference, and when you feel other organizations need it more?  Because many little gifts add up to a lot of money.  In every fundraising campaign the organization is working to fulfill a “gift table” that often conforms to the 80/20 rule:  80% of the money will come from the 20% of the givers, those who provide the leadership gifts.  However, that last 20% of the gifts comes from 80% of the givers, and those are the participation gifts.  They add up.  Think of your participation gift as an exercise in community giving; together, with many others, you are making an important donation.

Here are some other types of participation gifts that are important:  support friends who are actively engaged in raising money by sponsoring their run or bike ride, buy at the neighborhood school bake sale, purchase seats or tables at events that honor people you know and respect.  Although sometimes these “asks” can feel oppressive, you should feel great about the leverage that comes from making participation gifts to support other people’s fundraising efforts.


6. Give more than money.

Money is one of the most important resources you can give to an organization to partner with them to accomplish their mission, but they also need volunteer help.  Consider the many possible ways that you can help an organization in addition to sending them money.  Pick carefully, though – sometimes it’s easier to write lots of checks than it is to donate your time.  And once you do volunteer, follow through.  The charitable organization is not well served by people who offer their services, but don’t do what they promised.

The most obvious way to volunteer is to help deliver the mission:  tutor under-privileged children, sort cans at the food bank, or be a docent at your local museum.

A more strategic contribution is to join a committee or the governing board of the organization.  To be on the board, you’ll need to be invited; generally these invitations happen once you become involved and the leadership gets to know you and has confidence in your contribution.  Being a board member can be very rewarding because you are involved in larger decisions such as resource allocation and personnel, and you have a greater impact over a longer period of time.

You also can join a committee rather than the board itself.  For example, many organizations have an investment committee that decides how to invest money while it is waiting to be deployed.  If you are a financial professional, and have expertise to offer, you can join the investment committee, which requires less time than being on the board yet still offers great help to the organization.   There are many other committees that seek expertise.  You should think through your experience and contact the organization to figure out the best fit.


7. Say no graciously.

It’s okay to say no.  You don’t have to give gifts to everybody who asks.  You can simply say, “I believe in a focused approach to my philanthropy, and this particular cause is not in my focus today.  Your organization seems to be engaged in important work, so I wish you the best of success.”


8. Let your money be flexible – grow capacity, not just programs.

The conventional wisdom in philanthropy circles is that you should evaluate an organization’s effectiveness by examining the ratio of internal cost to what it spends on the mission.  The thinking is that “overhead” is bad, so the organization should minimize this expense.  Moreover, many philanthropists want to fund specific projects and not any of the overhead.  This feeling is understandable – donors want to make something happen, and they enjoy seeing the specific outcome associated with their gifts.

However, I feel that sometimes this approach is short-sighted (see the great TED talk by Dan Pallotta on this subject).  Yes, sometimes it makes sense to support a specific project, like getting a program started or renovating a facility.  But organizations cannot survive unless they have great leaders, and these leaders should be paid at market rates.  They also need strong internal processes, such as financial systems to track their spending.  They need good marketing, to make sure that the world knows what they are doing.  And they need professional fundraisers (the “sales department”) to find people who resonate with the mission.  Indeed, a great non-profit needs many of the same things that a great company does, and it doesn’t make sense to ask them to do great work without the infrastructure to enable it.

We sometimes give gifts that are restricted for specific programs or projects.  But we also believe in giving regular unrestricted gifts for the organization’s operating budget.   Even if you do want to designate a gift for a specific purpose, consider wording that gives flexibility to the organization to adapt it as needed.  Another idea is to give a program gift along with an annual operating gift, even if the second is smaller.  It’s also helpful to think longer term when giving operating gifts.  We try to be consistent in the amount we give for many years, allowing the organization to know that there are certain resources they can count on.   In brief, invest your philanthropic dollars in great organizations that serve the missions you care about, not just in specific programs.


9. Consider a portfolio approach.

A few years ago, my husband and I did an analysis of our giving.  We created a table with “causes” across the top, and “geographies” down the side.  The causes were things that we cared about:  Jewish activities, cultural activities, education, fighting poverty, protecting the environment, and so on.  The geographies were four: local, regional, national and international.  We then mapped our giving into this matrix, to see the distribution.

We learned quite a bit from this exercise.  For example, we saw there was a blank in “Jewish + international” box, and so decided to support something in Israel.  We thought about the causes we really cared about (see tip #3 above), and evaluated organizations working on that issue (in this case, our issue of concern is religious extremism).  Through research, we discovered that the Israel Democracy Institute was doing some compelling work on this problem; we did our due diligence and then we made a leadership gift to IDI.

In the portfolio analysis, we also found “boxes” that were weighted more heavily than we realized, and consequently we have had an easier time declining additional opportunities in those areas.

The portfolio approach might not be for everybody. But if you find that you are giving to a wide variety of causes and don’t feel that you have a grip on the bigger picture, you might want to give it a try.


10. What’s in a name?

I have mixed feelings about giving under my name vs. anonymously, and about attaching my name to something specific in recognition of my charitable giving.  My first reaction to this tradition was to request anonymity.  I wasn’t giving money in order to get attention.  Further, I wasn’t wild about other organizations approaching me once I was known to be generous.

But when I asked to be anonymous for the first leadership gift I gave, the organization asked me to reconsider.  They pointed out that seeing other people’s names on campaigns inspires people to give.  Donors like to be part of a broader peer group.  So, somewhat reluctantly, I agreed that my donation would not be anonymous.

When it comes to attaching a name to a specific aspect of a project, this technique seems to me to have gotten a bit out of control.  Certainly, it makes sense to me that someone who makes a mega gift to start an institute or to build a hospital should be welcome to put their name on it.  It is well-deserved recognition for magnificent generosity.  But campaigns now have attempted to take this concept down to micro-levels, with naming extending to individual rooms in the hospital, individual seats in the theatre, individual steps on the stairway, and individual bricks in the entry.

Generally, our strategy is to NOT give anonymously in order to help inspire others.  However, we often decline specific naming opportunities, preferring general recognition only.  That being said, we do have our bricks and seats as well!


Next Steps

So how do you get started being a philanthropist?  Here is your to-do list.

  • Set an annual budget.
  • Determine the split between leadership gifts and participation gifts.  Remember that leadership gifts can be paid over several years.  You also want to keep some room in your budget for participation gift opportunities that come up later in the year.
  • Make a spreadsheet that includes future years, so you can track your commitments as well as your intended future gifts (such as multiple years of consistent giving to organizations’ operating budget even if not committed).
  • Think about what causes you care most about.
  • Consider a portfolio approach.
  • Identify organizations that can address those needs.  Do adequate due diligence on organizations you are considering, particularly for leadership gifts.
  • Set an annual date to review your giving.  Put it on the calendar as a repeating event.


If you do all or most of these items, then as far as I’m concerned you are a philanthropist.  Welcome to the club!


Related links:

What if the Health Insurance Companies were based in Silicon Valley?

There is justifiable uproar over the operational difficulties of the federal healthcare web site.  It needs to get fixed, and I am confident that it will be.

But the cacophony is obfuscating a far greater problem that is not the administration’s fault, and that puts the Affordable Care Act at far greater risk:  the mismanagement by the insurance companies of their ACA health insurance plans.

Remember that the greatest alternative to a mandated insurance system like ACA is a single-payer system, i.e. Medicare for everybody.  Since that would have rendered health insurance obsolete, one would think that the insurance companies would be overjoyed that instead of eliminating their business, the ACA gives them an opportunity to dramatically increase their business.

For insurance companies, it seems the business opportunity of a lifetime.  They now could add millions of people to their insurance rolls.  Granted, some are higher health risk, but many are not, and the best chance of having a balanced risk pool is to make it as big as possible.

Indeed, I imagine that a Silicon Valley based company would have used this opportunity to invest ahead of the curve and grab the largest set of customers that they could.  Then, over time, they could figure out the implications, and fine tune the cost structures.  A Silicon Valley company would have thought: let’s be aggressive in making our plans super attractive, let’s gain the most ground now, and let the investors bear the short term costs.  Over the long run it will pay off enormously.  This is the strategy we’ve seen used by many young successful companies such as Google, Facebook, Twitter, Pinterest, Dropbox, etc.  Get the customers now, while you can, and tweak the business model later.

But the insurance companies are not based in Silicon Valley, and that’s not what they did.  In fact, they seem to have done the opposite.  I can imagine the strategic offsite where somebody said, “These new customers are going to be, on average, high risk; they will have pre-existing conditions and they will be very expensive for us. So let’s price our plans as high as possible, exclude as many of hospitals and doctors from our networks as possible, and try to get our competitors to insure them instead of us.  Let’s be conservative in our actuarial analyses, and plan for the worst.  Let’s make sure that our investors take no short term risk on this new pool of customers.”

Why do I think this is what happened?  I’ve seen the impact on my own health insurance plan, and those of friends and family.  As I’ve written about previously, I’m a healthy 50+ year old (okay, maybe closer to 60-) who had great difficulty getting private insurance to begin with.  Once I did, I’ve experienced an AVERAGE premium increase of 25% per year, for 10 years.  The insurance companies have done well by me; as a holder of a high deductible plan, I’ve cost them almost nothing.   I eagerly awaited the unveiling of the ACA plans so I could easily compare my plan (which is grandfathered and I can keep if I want) with a wide range of plans from a competitive marketplace.

Covered California, our state’s ACA web site, worked perfectly well.  I looked at the bronze plans, which are the most comparable to my current plan.  Alas, the new plans fall short:

Existing plan       Comparable ACA plan

Monthly cost                     $502                       $598

Deductible                          $4100                    $4500

Max out –of-pocket       $5850                    $6350

In addition, most of my key medical providers, those based in one of the largest medical groups in my area, are not included in the new plan coverage.  In other words, I can pay 19% more, get a higher deductible, have a higher out-of-pocket cap, and not see my same doctors.  Even more maddening, my 22 year old healthy daughter is in the same boat.  Isn’t she the kind of customer they want to attract into the pool?  Well, her premium would go up by 13%, also for a higher deductible, a higher out-of-pocket cap, and without her current doctors.

Okay, I get the theory.  The cost of insurance for the young and healthy will have to go up, such that older and sicker people can get insurance at a reasonable premium.  As a long-time liberal, I’m fine with that.

But here’s what makes no sense: the insurers should WANT to attract me and my daughter into their ACA pools.  By charging more than existing individual and family policies and reducing the size of provider networks, they have effectively made certain that we – presumably all healthy, since we had to submit health information and could be denied –would NOT join the ACA pool.   I realize that this situation is not true for everybody.  Many plans are cancelled rather than grandfathered, and those people are forced into the ACA pool.   But why not strive to put everybody into one giant pool?

Here’s a thought experiment.  Imagine that the insurer made their ACA plans less expensive than my current plan, even by a little bit, and that they included broad networks.  Then we, and all the other generally healthy people they insure in the independent market, would choose the better policy under the ACA.  This strategy would give them some protection against a sicker population.   It would buy some time learn the characteristics of this new, formerly uninsured, pool of people.  And they would grab customers while they are at a transition point.

I know everybody is mad at President Obama, and there is legitimate frustration at the roll-out.  But the insurance company executives are the ones who have really blown it.  They’ve been given an amazing business opportunity.  Instead of stepping up, they are retreating into an actuarial haze, using a pricing strategy based on the past rather than on the future.  I’m not arguing that they should price their policies low as a matter of politics or moral obligation.  I’m a proud capitalist, a believer in Adam Smith’s “invisible hand”.  The insurers should have thought like Silicon Valley entrepreneurs and looked out beyond the immediate risks and into the future beyond.

It’s time to put pressure on the real culprits in the fragility of the ACA — the insurance companies — and make sure they understand that if they fail at making this system work, they ultimately risk l

Why is a no-punt strategy in football like being an entrepreneur?

I listened to a wonderful interview of Kevin Kelley, coach of the Pulaski Academy’s high school football team in Arkansas.  The interview is from Slate’s Hang Up & Listen sports podcast.

Coach Kelley does not believe in punting.  He also does not believe in normal kick-offs; he always does onside kicks.  If you don’t know anything about football, then just skip this interview and my blog post.  But if you do, perhaps you are as intrigued as I was when I first heard the topic.

I’m an occasional football fan, watching a few games a season, and understand the basics of the game. The notion of not punting sounded radical to me.  At a 4th down, it was always a thrill when the team decided to “go for it” rather than punt.  Those 4th down tries made for some of the most exciting football moments in the game.  It seemed very daring, very brave.

The Baylor Bears punt against Texas A&M in a 2007 regular season game.
Yet Coach Kelley ALWAYS “goes for it” by trying for the 4th down, and never punting.  Is he crazy? The Coach explains that he made this decision based on the data.  Since our company Grok is into data science, this notion intrigued me.  According to the Coach, while you indeed won’t make every 4th down, you will make a high enough percentage of them that when stacked up against the yards gained on a punt, it argues for always going for it.  Of course, if you’re playing the percentages, you need to be consistent, so it is only in very narrow circumstances that the Coach actually punts.  Listen to the interview – this guy is winning tons of games.

So what does this have to do with entrepreneurship?  As I listened to the Coach, it all sounded very familiar to me.  Here are some reasons why.

1. entrepreneurs need to defy conventional wisdom

Just because something always has been done one way doesn’t mean that it’s the best way.  Coach Kelley challenged that conventional wisdom.  Much of what an entrepreneur does is to challenge conventional wisdom, going deeper into the question to see if it still makes sense.

2. entrepreneurs take calculated risks

The general public perceives entrepreneurs as crazy risk-takers.  Nothing is further from the truth.  (Successful) entrepreneurs figure out which are the key risks to take, and try to de-risk everything else.  On the risks that they take, they try to understand the odds.  Coach Kelley knows that he won’t make every 4th down, but he has calculated the benefit of winning a percentage of them.  The Coach is not taking risks just for the heck of it and he’s not being crazy, he’s just trying to win.

3. entrepreneurs need to be willing to fail

Why don’t all the other coaches change to this strategy, given Coach Kelley’s success?  Well, for a few reasons (this one, and the next one!).  Many people simply are unwilling to risk failure of any kind.  It just goes against their nature.  These people should not become entrepreneurs.  Many of the best companies and products have come out of companies and products that were failures at first, but the learning gained informed a better, next generation.

4.  leadership teams and owners must be aligned

Many coaches could not change to Coach Kelley’s strategy because, as he points out, the first time that they did not convert the 4th down, they would be fired.  If you want to have a team or group that tries bold strategies, you can’t punish them the first time the strategy fails.  This philosophy is part of the culture of Silicon Valley, where smart venture investors act as team members with the company leadership to agree to risk taking strategies.

5.  act, adjust; act, adjust

Coach Kelley describes the crazy onsides kicks that they use instead of kick-offs.  They have many varieties.  If one style of kick works, they keep it.  If it doesn’t, they scrap it.  The team is constantly experimenting, just as are entrepreneurs, rapidly adjusting to feedback from the market.

6.  there’s a lot to be said for momentum

Part of the Coach’s argument for on-sides kicks is that regaining possession just after a touchdown is a huge momentum swing.  That momentum can carry the team to the next touchdown.  I see the same in high tech.  Once a product starts gaining momentum, it gets talked about and shared, and that momentum accelerates the success.

7.  manage for the long term, not the short term

Coach Kelley is structuring his team’s play not just to win a particular down, or a particular drive, or even a particular game.  The Coach’s strategy is aimed at winning a particular season.  He knows he will lose some downs, drives, and even games, but he’s confident that over the long run, he can win a higher percentage, and his stats support that.  An entrepreneur has to think along the same lines (and has to have an investor who agrees to that approach).  So much of a new business is uncertain that one has to be prepared to tune it over time in order to achieve success.

8. if you’re smaller than the other guys, you better figure out a different way to play

The Coach points out that as a small school, Pulaski simply can’t compete by having the biggest, strongest guys.  So he had to figure out a way to “change the rules” (within the rules, of course).  An entrepreneur often is up against leading players in the market, and has to do the same.  When we were starting Palm, our competitors were big computer companies such as Compaq and Hewlett-Packard.  When we were starting Handspring, doing the first smartphones, our competitors were even more frightening, like Nokia and Motorola.  In each case, we “changed the rules” by creating a product that met different customer needs.  For example, the PalmPilot was smaller, less expensive, and less-featured than the competitive products of the day.  But it met the need for being simple and fast to solve certain problems like tracking your daily calendar, an approach that ultimately was much more successful than the other products, despite their big company and big brand backing.

Thinking of Coach Kelley makes me smile.  I love someone who manages to totally change my view of a question, particularly one that I’ve held for many, many years.

Charity and shopping …. really?

I’m getting fed up with all of the charity solicitations when I’m out shopping.

I take my philanthropy seriously.  Each year, Len and I sit down and go through all of our large gifts, review our priorities, decide which organizations to support, etc.  We do big gifts, we do little gifts.  We do operating gifts, we do capital gifts.  We serve on boards of non-profits, so we give our time and energy as well.

So why do I find it so annoying when I go to the grocery store, and they ask me if I will add a contribution to the Boys & Girls Club?  I’m there to pick up milk and orange juice – what does the Boys & Girls club have to do with that?  I find it an intrusion on my personal space, an “ask” when an ask is not appropriate.  Last week, when I was purchasing a mattress pad at Bed Bath & Beyond, I was asked if I would pay for a bottle of hand sanitizer that would go to a soldier in our armed services.  Really?  Mattress pad = hand sanitizer for soldiers?


I think that the reason it annoys me is that I automatically feel guilty.  How can I be so cheap as to not add a dollar for the Boys & Girls Club?  To purchase a bottle of hand sanitizer?  But, I sternly remind myself, my giving is under my control, not under the random control of merchants, who are making selections of charities according to their values, not mine.  After all, there is no “bad” cause.  In fact, there are probably hundreds of thousands of worthy causes.

Now I realize that some people are not charitable on a regular basis.  Perhaps for them, it’s a nice reminder that on occasion, one should do something generous for strangers.  However, even for the not-so-charitable, I would argue that it would somehow be better to inspire them to be thoughtful about their giving, rather than purely opportunistic.

In fact, this whole charitable giving + company marketing is really getting out of hand.  Buy this yogurt, and we’ll give to breast cancer research.  Buy these glasses and we’ll give a pair to a poor person.  Buy this jacket and we’ll donate to hurricane victims.  Sure, these are all worthy causes, and perhaps the people purchasing these items are motivated by the pitch, and thus both the companies benefit, and the charities benefit.  But, I wonder, how much truly goes to the charities, and how much is really about burnishing a company image.  What if, somehow, I could direct those donations to the charities that I want to support, not those chosen for me?

Now, I’m a diehard capitalist, and have no problem with positive company branding exercises. But I’d really rather make my own priorities about when and where to give.  And I’d like you all to back-off on the constant asks.  Particularly when I’ve just popped in for a carton of milk.

Welcome to my blog

I’ve decided to start a blog for several reasons.

First, I have a lot on my mind, so I figured that I would write about it!

Second, I’m helping nephew Brad with his business, CoinTent.  I will post short articles on my blog for no charge, but I will ask you to pay small amounts (“micropayments”) for my longer posts.  I’ll look forward to your feedback as we see how to make micropayments an exciting new monetization option for content creators.