Paul Graham:

Raising money is the second hardest part of starting a startup. The hardest part is making something people want: most startups that die, die because they didn’t do that. But the second biggest cause of death is probably the difficulty of raising money. Fundraising is brutal.

One reason it’s so brutal is simply the brutality of markets. People who’ve spent most of their lives in schools or big companies may not have been exposed to that. Professors and bosses usually feel some sense of responsibility toward you; if you make a valiant effort and fail, they’ll cut you a break. Markets are less forgiving. Customers don’t care how hard you worked, only whether you solved their problems.

Investors evaluate startups the way customers evaluate products, not the way bosses evaluate employees. If you’re making a valiant effort and failing, maybe they’ll invest in your next startup, but not this one.

But raising money from investors is harder than selling to customers, because there are so few of them. There’s nothing like an efficient market. You’re unlikely to have more than 10 who are interested; it’s difficult to talk to more. So the randomness of any one investor’s behavior can really affect you.

Problem number 3: investors are very random. All investors, including us, are by ordinary standards incompetent. We constantly have to make decisions about things we don’t understand, and more often than not we’re wrong.

And yet a lot is at stake. The amounts invested by different types of investors vary from five thousand dollars to fifty million, but the amount usually seems large for whatever type of investor it is. Investment decisions are big decisions.

Read on.

Oy, the farm bill…

Yet you couldn’t write a piece of legislation that more thoroughly represents the Beltway status quo than this one. In every way imaginable, and even a few more, it repeats and compounds the spendthrift errors of previous farm bills.

Since the last farm bill in 2002, the price of cotton is up 105%, soybeans 164%, corn 169% and wheat 256%. Yet when Mr. Bush proposed the genuine change of limiting farm welfare to those earning less than $200,000 a year, he was laughed out of town. The bill purports to limit subsidies to those earning a mere $750,000, but loopholes and spousal qualifications make it closer to $2.5 million. As Barack Obama likes to say, it’s time Washington worked for “the middle class,” which apparently includes millionaire corn and sugar farmers.

Another purported change is the arrival of “fiscal discipline,” in Nancy Pelosi’s favorite phrase from the 2006 campaign. Yet it turns out this farm extravaganza may bust federal budget targets even more than we thought a week ago. That’s because the new price supports – the guaranteed floor payments farmers receive for their crops – have been raised to match this year’s record prices.

Mad yet? Keep reading.

The USDA reports that if crop prices fall from these highs to their norm over the next five years, farm payments will surge. For example, if corn prices return to $3.25 a bushel from today’s $6, farmers would get $10 billion a year in support payments. If bean prices fall to their norm, they’d get $4 billion. Thus, if farm prices stay high, consumers face higher grocery bills and farmers get rich. If farm prices fall, taxpayers kick in the difference and farmers still get rich.

On the same day that Congress fleeces the taxpayer for agribusiness, it spanks oil company executives for making too much money!

Sugar producers also make out like Beltway bandits, receiving the difference between the world price of sugar, which is now $12 per pound, and the guaranteed price of about $21 per pound. That’s a roughly 75% subsidy for already wealthy cane growers and a nice payoff for the $3 million they contribute to House candidates each year.

Any wonder why food prices are going up?

All of this is a status quo that both political parties can believe in. More than a few liberal Democrats are privately embarrassed by this corporate welfare spectacle. But they’ve been mollified by Speaker Pelosi, who spent the last week assuring her left that the bill also includes another $10.4 billion for food stamps and nutrition programs.

This entitlement expansion comes only days after the Congressional Budget Office reported that paying the bills for existing entitlements could require tax rates to climb to 80% in the future. Yes we can!

So the American taxpayer gets screwed coming and going. Now, guess who voted for this piece of crap?

Sen. Hillary Clinton? Yes!
Sen. Barack Obama? Yes!

Sen. John McCain? No.

Those who say all politicians are the same have a point when it comes to things like the current farm bill. It’s a bi-partisan pig out.

Too much spending: The bill increases spending by almost $20 billion over the next ten years, at a time when net farm income is at an all-time high. Much of this additional spending is disguised by budget gimmicks that take advantage of formal scoring rules to hide real spending increases.

New sugar program: The bill would make the government buy sugar for 2X the world price, store it, then resell it at about an 80% loss to the taxpayer. Sugar sells for about 11¢/lb on the world market. The US government would have to buy sugar for about 22¢/lb, store it, and then auction off the excess to ethanol plants. We estimate that such an auction would net the government about 4¢/lb. In addition, this new provision would require the government to guarantee that domestic sugar producers get 85 percent of the domestic sugar market.

Subsidies for rich farmers: Farmers would be eligible for government subsidy payments if their incomes were as high as $1.5 million if married, and up to $750,000 if single. We had a big fight with Congress last year over whether families with income of 3 times the poverty level should receive taxpayer-subsidized health insurance. This bill would subsidize amarried farming couple with income more than 107 times the poverty level (which is $14,000 for a couple). Put another way, such a couple would be in the top 0.2% of the income distribution. You would be subsidizing their business with your income taxes.

At least John McCain, who identifies politicians as Republicans, Democrats and “appropriators” plans to vote against the bill.

But it won’t matter; it will pass, Bush will veto it and the veto will be overridden.

Farm Aid indeed.

Furthermore, current US Food aid rules prohibit buying food from local farmers, say in Africa, to provide relief for Africans. Bush wanted this rule changed. Congress said no.

 How one woman managed to create a $36 million company, despite her handicap.

With a $2,000 loan from my mother, I have grown my Tempe-based firm, Terri’s Consign & Design Furnishings, into the largest U.S. resale furniture retailer, with 16 stores and $36 million in annual sales. And I’ve done it despite my dyslexia.

I wasn’t always open about my learning disability. Because I was teased in school, I became a master at “faking it until you make it.” In meetings I’d pretend I could read the papers being passed out.

In reality I was hanging onto everyone’s words, hoping to keep up. I was also embarrassed by my handwriting - it’s cursive until I get confused. Then I resort to print. I’d make excuses for not writing things out. “Oh, you couldn’t read my writing anyway - I’ll just tell you!”

But when Terri’s Consign opened its first franchise, I realized that I didn’t have to fake it anymore. I had made it. So I decided to be upfront about my dyslexia and finally began to run my business on my terms.

When we needed a manual for future franchisees, I was totally honest, and said I couldn’t do it. Instead, I hired a writer. To teach my staff the manual’s contents, I got an 11- by 14-inch sketchpad and drew it all out.

All my presentations - even the ones I give to the bank - are done in crayon and pencil. It seems odd, but using color helps me get the full picture and distinguish concepts. With illustrations in hand, I meet with my top four executives to explain the ideas. They in turn pass my thoughts on to their departments - either verbally or in art form. If it’s the latter, my assistant, who is also a graphic designer, turns my drawings into polished posters.

Paul Graham:

Umair Haque wrote recently that the reason there aren’t more Googles is that most startups get bought before they can change the world.

Google, despite serious interest from Microsoft and Yahoo—what must have seemed like lucrative interest at the time—didn’t sell out. Google might simply have been nothing but Yahoo’s or MSN’s search box.

Why isn’t it? Because Google had a deeply felt sense of purpose: a conviction to change the world for the better.

This has a nice sound to it, but it isn’t true. Google’s founders were willing to sell early on. They just wanted more than acquirers were willing to pay.

It was the same with Facebook. They would have sold, but Yahoo blew it by offering too little.

Tip for acquirers: when a startup turns you down, consider raising your offer, because there’s a good chance the outrageous price they want will later seem a bargain. [1]

From the evidence I’ve seen so far, startups that turn down acquisition offers usually end up doing better. Not always, but usually there’s a bigger offer coming, or perhaps even an IPO.

Of course, the reason startups do better when they turn down acquisition offers is not necessarily that all such offers undervalue startups. More likely the reason is that the kind of founders who have the balls to turn down a big offer also tend to be very successful. That spirit is exactly what you want in a startup.

While I’m sure Larry and Sergey do want to change the world, at least now, the reason Google survived to become a big, independent company is the same reason Facebook has so far remained independent: acquirers underestimated them.

Corporate M&A is a strange business in that respect. They consistently lose the best deals, because turning down reasonable offers is the most reliable test you could invent for whether a startup will make it big.

…writes Paul Graham about startup founders versus equally brilliant programmers who are employees.

…I was in Africa last year and saw a lot of animals in the wild that I’d only seen in zoos before. It was remarkable how different they seemed. Particularly lions. Lions in the wild seem about ten times more alive. They’re like different animals. And seeing those guys on their scavenger hunt was like seeing lions in a zoo after spending several years watching them in the wild.

Trees

What’s so unnatural about working for a big company? The root of the problem is that humans weren’t meant to work in such large groups.

Another thing you notice when you see animals in the wild is that each species thrives in groups of a certain size. A herd of impalas might have 100 adults; baboons maybe 20; lions rarely 10. Humans also seem designed to work in groups, and what I’ve read about hunter-gatherers accords with research on organizations and my own experience to suggest roughly what the ideal size is: groups of 8 work well; by 20 they’re getting hard to manage; and a group of 50 is really unwieldy. [1]

Whatever the upper limit is, we are clearly not meant to work in groups of several hundred. And yet—for reasons having more to do with technology than human nature—a great many people work for companies with hundreds or thousands of employees.

Companies know groups that large wouldn’t work, so they divide themselves into units small enough to work together. But to coordinate these they have to introduce something new: bosses.

These smaller groups are always arranged in a tree structure. Your boss is the point where your group attaches to the tree. But when you use this trick for dividing a large group into smaller ones, something strange happens that I’ve never heard anyone mention explicitly. In the group one level up from yours, your boss represents your entire group. A group of 10 managers is not merely a group of 10 people working together in the usual way. It’s really a group of groups. Which means for a group of 10 managers to work together as if they were simply a group of 10 individuals, the group working for each manager would have to work as if they were a single person—the workers and manager would each share only one person’s worth of freedom between them.

In practice a group of people never manage to act as if they were one person. But in a large organization divided into groups in this way, the pressure is always in that direction. Each group tries its best to work as if it were the small group of individuals that humans were designed to work in. That was the point of creating it. And when you propagate that constraint, the result is that each person gets freedom of action in inverse proportion to the size of the entire tree. [2]

Anyone who’s worked for a large organization has felt this. You can feel the difference between working for a company with 100 employees and one with 10,000, even if your group has only 10 people.

Get this:

Three corporate executives summoned Friday for a shaming by Democratic lawmakers defended raking in hundreds of millions of dollars despite contributing to the subprime mortgage crisis that has their companies reeling from losses and the nation on the edge of recession.

Congress thinks it has a role to play in “shaming” business leaders?

Contribute to the subprime crisis? Not long ago Congress was accusing lenders of red-lining minority neighborhoods and not lending them money.

“There’s a complete disconnect with reality,” said Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee.

Indeed. Henry, and the disconnect begins with you.

Businessweek. 

After months of betting on an increase in oil prices, some speculators now see a new downward trend.

That’s because in today’s oil market, change is the only constant. The latest twist came on Dec. 5, when OPEC announced at its meeting in Abu Dhabi that it would not increase production. That pushed prices toward $90 per barrel in overnight trading. Further bolstering prices was a U.S. government report that oil inventories had dropped by a surprising 8 million barrels the week ending Nov. 30 from the week prior, sending prices as high as $90.35 on the New York Mercantile Exchange (NMX) in morning trading.

But the increase was only momentary, and within a couple of hours, prices were falling again. That move tracked the downward trend of the past week, as growing fears of a U.S. recession and speculation OPEC would boost production had helped push oil down more than $10, closing on Dec. 4 at $88.32 per barrel on the Nymex.

The American:

If you were to stop by Google’s Silicon Valley headquarters in Mountain View, California, it might be difficult to catch the attention of a company employee. When staffers are not working furiously to expand Google’s already thoroughgoing dominance of Internet searches and online advertising, they are likely to be busy taking advantage of the com­pany’s fabled perquisites, which include a buffet of free, wholesome food; a volleyball court; laun­dry machines; and even a bike repair facility. Or perhaps the employees would be lost in thought, pondering whether to sell options on a stock that at the end of November hit $676 a share. Google’s future has never seemed brighter. 

But if you did manage to buttonhole someone at Google and then offered a gentle warning that all the great things being said about the company today were being said—with just as much fer­vor—about Intel a decade ago, you would likely be met with a blank stare. In the mid-1990s, Intel’s semiconductor business was the talk of the Valley; its chief executive, Andy Grove, was selected by Time magazine as its Man of the Year in 1997.

When Grove stepped down as chief executive in 1998, Intel’s market capitalization was almost $200 billion. Its compound annual growth rate during Grove’s 11-year tenure in the top spot was 42 percent. The decade since has hardly been as giddy. Intel is still a com­pany with great strengths. It is hardly a flash in the pan. But for the past few years, the chip­maker has struggled in the eyes of Wall Street and has lost market share to a once nearly for­gotten rival, Advanced Micro Devices (AMD). Not long ago, Intel announced a major restruc­turing, including the elimination of 10,500 jobs. Yet the company clearly must make other moves that are just as bold, or else it is in danger of los­ing its distinctive position in the world of high technology. 

Could Intel’s recent past be Google’s future? Or worse: could both Intel and Google find themselves one day following the path of General Motors? It is extraordinarily difficult for even the best-run company to maintain a commanding position year after year in its chosen industry. And the last thing that deci­sion makers want to do when they’re running a business at the top of its game is to remind themselves that bad things really do happen to good companies. 

They might prefer not to contemplate it. And yet the evidence is everywhere. 

• IBM once dominated the world of data pro­cessing. The IBM 360 was given its name because it surrounded your data needs by 360 degrees. No more. 

• In 1970, Sales Management magazine described the five big U.S. tire manufacturers as enjoying unthreatened control over their market. Within two decades, four of the five either were bankrupt or had been absorbed by other firms. 

• The A&P supermarket chain was once the nation’s largest retailer. Today, it is a German-owned concern with stores in six states and the District of Columbia. As the once-mighty business appears headed for the proverbial dustbin of history, the only remaining ques­tion seems to be: paper or plastic? 

• In 1896, Dow Jones established its “Industrial Average” of a dozen leading companies’ stocks. A century later, only one firm on that list—General Electric—has survived as an independent entity.

The clowns who run Los Angeles don’t know much, but they do know how to run businesses out of town with excessive regulation and high taxes.

Los Angeles has a national reputation for hostility to business — and it’s getting worse. Recent business surveys by Kosmont & Associates, a private consulting group, and the Rose Institute at Claremont McKenna College rank the city as the second most expensive in which to do business in California.

Larry Kosmont, co-author of the Kosmont-Rose Institute report, says business costs in L.A. average between 2 1/2 to five times those of more business-friendly cities.

For instance, a $10-million office or retail operation pays about $59,000 in annual utility taxes and license fees to do business in L.A., compared with $9,300 in Pasadena, $904 in Burbank and zero in Rosemead.

So by moving a couple miles, from LA to Burbank, a retailer can save $58,096 annually, just in taxes. Unlike politicians, businesses are rational so they split town to the tune of 100,000 jobs lost since 1995.

What to do? Why, empanel a panel of the same types who created the problem. It’s the circle of life: create problems, then hire yourself to fix them.

Southwest Airlines gives 171 soldiers a free ride home for the holidays.

 Gotta feed the sharks.

The city of San Francisco must pay about $1 million in attorneys’ fees to a white man who filed a successful race-discrimination suit after he was passed up for a promotion at San Francisco International Airport, a state appeals court ruled Friday.

Allen Harmon won $30,300 in damages in a 2004 verdict by a San Mateo County jury that concluded he was rejected for a supervisor’s job in 1998 at least in part because of his race. A minority candidate got the promotion, and Harmon’s lawyer said he had to wait 16 months to get the same job through a race-neutral civil service promotion.

Via Maggie’s Farm:

Well, well, well … 166,000 new jobs. Twice the consensus view. Did somebody say Goldilocks? Did somebody say the greatest story never told?

U.S. businesses and entrepreneurs are in very good shape. These are the real job creators. And with low tax rates, low inflation, and low interest rates, the economic and stock market outlook looks extremely bullish. The economic bears continue to underestimate the strength of the consumer because they continue to underestimate the strength of business. Ultimately, it is business that creates jobs. And it is jobs that create income.

Here’s the key point: Outside the struggling financial and consumer discretionary sectors, the economy is firing on all cylinders. Economy-wide profits are up a smoldering 15 percent in the third quarter when you remove these two laggards. And in addition to today’s robust, expansionary jobs number, GDP blew away forecasts earlier this week, coming in a hair shy of 4 percent. (For the record, this represents the biggest back-to-back quarterly gain in four years.) This means healthy American businesses are generating jobs. Meanwhile, hardworking American workers are out there spending money, with real, disposable, after-tax, after-inflation income running around 4 percent — a big number.

I’m not sure which is worse: the smell of stinky armpits or the odor of caged animals. Ugh, every three years, the writers and producers who occupy the same pen known as Hollywood act like monkeys flinging their feces against the walls. Both sides make menacing noises to indicate they’re going to bite the hands that feed them.

They don’t care that the last WGA strike, in 1988, dragged on for 22 weeks and dragged down the Industry by a half-billion bucks. If that happens again, then I say drag everyone away from the bargaining table and put them in the same padded cell.

Web entrepreneur, essayist and venture capitalist Paul Graham writes:

There’s something interesting happening right now. Startups are undergoing the same transformation that technology does when it becomes cheaper.It’s a pattern we see over and over in technology. Initially there’s some device that’s very expensive and made in small quantities. Then someone discovers how to make them cheaply; many more get built; and as a result they can be used in new ways.

Computers are a familiar example. When I was a kid, computers were big, expensive machines built one at a time. Now they’re a commodity. Now we can stick computers in everything.

This pattern is very old. Most of the turning points in economic history are instances of it. It happened to steel in the 1850s, and to power in the 1780s. It happened to cloth manufacture in the thirteenth century, generating the wealth that later brought about the Renaissance. Agriculture itself was an instance of this pattern.

Now as well as being produced by startups, this pattern is happening to startups. It’s so cheap to start web startups that orders of magnitudes more will be started. If the pattern holds true, that should cause dramatic changes.

1. Lots of Startups

So my first prediction about the future of web startups is pretty straightforward: there will be a lot of them. When starting a startup was expensive, you had to get the permission of investors to do it. Now the only threshold is courage.

Read the rest. Finally,

The process of starting startups is currently like the plumbing in an old house. The pipes are narrow and twisty, and there are leaks in every joint. In the future this mess will gradually be replaced by a single, huge pipe. The water will still have to get from A to B, but it will get there faster and without the risk of spraying out through some random leak.

This will change a lot of things for the better. In a big, straight pipe like that, the force of being measured by one’s performance will propagate back through the whole system. Performance is always the ultimate test, but there are so many kinks in the plumbing now that most people are insulated from it most of the time. So you end up with a world in which high school students think they need to get good grades to get into elite colleges, and college students think they need to get good grades to impress employers, within which the employees waste most of their time in political battles, and from which consumers have to buy anyway because there are so few choices. Imagine if that sequence became a big, straight pipe. Then the effects of being measured by performance would propagate all the way back to high school, flushing out all the arbitrary stuff people are measured by now. That is the future of web startups.

Negotiation strategy is one of those areas of business the people treat like it’s a religion. Everyone has their opinions, is convinced they are right, and has tons of anecdotal evidence to back them up. Regardless of whether you take the hardline approach, something softer and more win-win, or something tricky, a new research paper explains how to get the most out of your negotiation. The secret? Mimic the mannerisms of the other party.

According to the research, “mimickers created more value and then claimed most of that additional value for themselves, though not at the expense of their opponents.” Of the test negotiations, 67% of the negotiators who mimicked their counterparty closed the deal, compared to 12.5% of the non-mimickers. But, a word to the wise - keep it subtle. Obvious mimicking may be interpreted as mocking instead.

PepsiCo 
Archer Daniels Midland
Kraft Foods
Alcatel-Lucent
Xerox
Areva
Rite-Aid
WellPoint
Sara Lee Corp
Ebay
Avon Products
MTV Networks
Safeco
Western Union
Time Inc,
Deloitte & Touche
Southwest Airlines.

All are US companies run by women.

Glass ceiling RIP.

That line belongs to Lily Tomlin, giving voice to her officious phone company switchboard operator. At the time when AT&T was a monopoly, the phone company didn’t have to care (like our government).

Back then, you couldn’t own a phone, you leased it from THE PHONE COMPANY. When the monopoly ended in 1984, people started buying their phones. Except for a few who didn’t know any better.

Lloyd Overlock never had much reason to think about his telephone. The 85-year-old Hermon resident just paid his bills and knew the service was there if he needed it.

But Overlock, who for five decades has been paying a monthly fee to lease his phone, found out recently that the arrangement is a pricey, outmoded throwback to the days of telephone industry monopoly.

“I don’t use it much; I just sit here and wait for it to ring,” he said Friday during a visit at the cozy home he built himself and moved into back in 1952. That’s the same year he got his telephone, a heavy, dark-gold contraption the size of a child’s shoebox, with a solid-feeling finger dial. It hung on his kitchen wall all those years — until last week, when his niece Roberta York was making one of her frequent visits from her home in Millinocket.

York said she peeked at a bill from AT&T lying on the kitchen table. As is the case with most area residents, she said, her uncle’s phone service is provided by Verizon, so she was curious.

“I said, ‘Uncle, what’s this?’ And he said, ‘That’s for my telephone.’ That’s when I realized he was still leasing his phone from AT&T,” she said. “He got that phone in 1952, and he’s paying $4.42 a month for it, every month.”

Right away, she said, she picked up the gold receiver and dialed the customer service number on the bill to cancel the service. The friendly operator on the other end attempted to dissuade her, offering her uncle a 20 percent discount off his monthly rental fee and reminding York of the benefits of leasing.

“She said that if something goes wrong with that phone, they’d have a new one here the next business day,” she recalled. “I was thinking to myself, ‘If something goes wrong with that phone, I’ll go to Wal-Mart and get one the next day.’ But I didn’t say it.” She just told the representative to cancel the lease, and then she drove to a local dollar-discount store and bought her Uncle Lloyd a new wall phone for $7. It plugged right in to the old connection and worked like a charm.

York said it troubles her that elderly people like her uncle get taken advantage of. The monthly lease doesn’t seem like a lot of money, she said, but it adds up.

“For some people, that four dollars could mean a gallon of milk or a prescription or something to eat,” she said.

People will something to sell, that’s who. $161 billion a year’s worth.

My son was married yesterday and he and his wife didn’t break the bank doing it. There was a church ceremony, good food at a Thai restaurant and that was that. My wife and daughter made the wedding cakes and I shot the photos with help from friends. Very little was “outsourced” to professionals.

Something tells me they’re going to do all right. But their approach is becoming the exception.

The marketing of the wedding as a once-in-a-lifetime opportunity to be close to heaven — or at least close to celebrity — is explored in “One Perfect Day: The Selling of the American Wedding,” by New Yorker writer Rebecca Mead.

The book is a must-read for future brides and grooms who want to honor the day without getting caught up in the escalating production values promoted by the industry.

“An American wedding is a testament to the enduring desire to have things that seem meaningful and make a statement of commitment,” Mead says. “People want to know how to get married, and the people most readily available to tell them are the people selling the stuff to do it. There are cultural forces that encourage ‘bridezilla’ behavior.”

Wanting the Best, Spending the Most

Those forces begin with “norms” touted by the media. Consider that the much-publicized cost of the average wedding — $28,000 — comes from a study conducted by Conde Nast Bridal Group, publisher of three wedding magazines and a web site. The study’s respondents are those who had answered an online survey, responded to a magazine promotion, or attended a bridal show. Not exactly the population of brides at large.

“If a bride has been told, repeatedly, that it costs nearly $28,000 to have a wedding, then she starts to think that spending $28,000 on a wedding is just one of those things a person has to do, like writing a rent check every month,” Mead writes.

Mead looks behind the wedding-industrial complex, including the Chinese seamstress who earns 40 cents for sewing the skirt on a $1,000 gown; the Cinderella coach and other trappings of Disney’s “Fairy Tale Wedding Department”; and the videographer who encourages peers at an industry conference to double their prices, because “parents want the best for their children.”

Those are the same parents who shell out $10 for their kids birthday parties. Let ‘em eat cake!

From BusinessPundit:

During World War II, statistician Abraham Wald tried to determine where to add extra armor to airplanes. Based on the patterns of bullet holes in returning airplanes, he suggested that the parts not hit should be protected with extra armor. Why?

Wald was looking at what is sometimes called “dead evidence.” He reasoned like this… if these planes are returning, we know that if they are hit in the spots they have been hit, they can still fly. The planes that did not return must have been hit in different places. So put the extra armor wherever the returning planes were not hit.

I think most people would have a natural inclination to put the armor where the returning planes had been hit. The real answer is simple, but counterintuitive. It’s called “dead evidence” because it is what people ignore when they make these judgments.

For instance, you may see a story on TV about how to survive a plane crash. The producers will interview 10 plane crash survivors, and figure out what they did in common, then recommend that you do that too. What they don’t think about is how many people did those same things, but still died in the crash. The dead can’t be interviewed, so we will never know.

How can you use this in your business? Think about the dead evidence. Don’t look just at winners, look at losers to see if they did the same things as the winners. Don’t just look at what the top companies in your industry are doing, look at what all kinds of different companies are doing. Sometimes you can learn more by looking at failures than at successes.