Thinking Second-order Effects

💡 I was going to write a longer piece on this topic, but found this article to be helpful.

One of the key elements of being better in leadership, strategy, and organizational changes is being able to think and anticipate second-order effects.

When you want to roll out programs, systematic changes, (re)budgeting, headcount planning, introducing new processes, thinking beyond the first intended first-order, being able to navigate second-order effects will be critical in how successful those initiatives will be. Most outcomes will be lagging and have lasting/trickling effect throughout the organization, so the quality of the decision and the thoughtfulness matters a lot to save a lot of people’s time, effort, and pain.

Being a thoughtful individual is thinking about the delivery of messages and actions to be able to understand the perspective of and have empathy towards the recipient of the messages and actions.

Being a thoughtful leader is thinking not only about the delivery, but also being able to simulate and consider the trickling effect throughout the organization — what challenges does it bring to different teams’ goals and organizational systems, who will feel the increase in pressure, what does the message say to the other teams outside of your immediate org, who will feel more frustrated vs appreciated, and so forth.

So when you are thinking of introducing changes to your team or broader organization, especially one-way door decisions*, being able to plan and anticipate second-order effects will likely to be even more important than the first-order effects.

“We think about one-way doors, and two-way doors. A one-way door is a place with a decision if you walk through, and if you don’t like what you see on the other side, you can’t get back. You can’t get back to the initial state. A two-way door, you can walk through and can see what you find, and if you don’t like it, you can walk right back through the door and return to the state that you had before. We think those two-way door decisions are reversible, and we want to encourage employees to make them. Why would we need anything more than the lightest weight approval process for those two-way doors?”

Amazon way (Quote Source)

A Guide to Scaling Yourself

How to keep your head above water

I was having lunch with a friend today, and we were discussing how does someone know when a person is scaling or not. Who will scale as the company grow and what stops someone from scaling further?

Some companies have early members scaling beautifully as the organization grows, while some don’t. A lot of smooth scaling happens typically when the company is growing organically and the growth rate is relatively modest (< 50% YoY). When a company is growing > 50% YoY, and in some cases, doubling or more, it becomes incredibly difficult for people to keep up with the scale of the company, as humans grow linearly, yet companies grow exponentially.

Below are a few questions to ask yourself to check if you are scaling with the growth needed and some tips and strategies to continue on the fast growth trajectory.

1. Am I “going horizontal?”

I came across the concept of “Going Horizontal” during 10xCEO program and we discussed extensively on how to make sure the executive team is continuing to scale at the right capacity level for the growth needs of the company.

The team internally might already be “over capacity” if the company’s growth rate is modest and the team is experienced. But if the needs for the leadership capacity emerging from growth out weigh the current capacity, then it will hurt the growth rate and the potential upside of the company as long as the leadership team is not fully built to handle the needs.

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VPC Framework in Management

Balancing between Value, Price, and Cost

I first learned the VPC Framework (VPC: Value-Price-Cost) back in 2006 and the simplicity of the framework made an impression on me. I still revisit a few times a year to think about where our company is in the position within the framework and how we are investing our resources.

The concept is quite simple. Let’s start with the definition:

  • Value: This is the value your offering is creating and delivering to customers.
  • Price: This is the price you charge and customers pay for to acquire or use your offering.
  • Cost: This is the cost of creating and delivering your offering to the customer.

The differences between these elements create the benefits:

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It’s okay to be not liked on demo day.

Y Combinator W16 Demo Day Story

Below is a post I wrote in August 2019 within Y Combinator community (which luckily received 300+ upvotes 🙇‍♂️). Now that I get a pretty steady stream of inquiries about fundraising and accelerator/demo days, I thought it might be helpful to repost here in public format. Hope it brings hope to a few.


Hi S19 founders,

Now that the demo day has officially begun, I just want to share our experience at SendBird (W16), so that perhaps some of you guys can relate.

I’ll admit upfront: We were not the hot company of the demo day. No where near. We didn’t get the overly enthusiastic emails from investors piling up in our inbox.

I thought we were doing okay during the batch, but on the demo day, the ones that got the most amount of ‘likes’ and ‘quickest raises’ were not necessarily the ones we thought did the best during the batch. Some companies raised a lot of money almost on the day of the demo day, while most of us felt like we were punched in our stomach, grasping for air.

Continue reading “It’s okay to be not liked on demo day.”

API Economy and Software Engineering Productivity

One of the macro trends we’re seeing in the software industry today is the rise of the API economy. API (Application Programming Interface) allows implementation, operation, and maintenance to become simpler by providing a set of input rules to the developers outside of the API software and giving them functionalities and processed results in return.

As discussed in the management framework #2 — abstraction and reduction — API is analogous to hiring a good management layer in a company, to provide more leverage to the developer allowing productivity gain through an abstraction layer of software. This abstraction stage is a critical phase in any industry to grow exponentially, as in any complex-enough industry, building all of the value chain end-to-end becomes infeasible and the trade-off between control and speed/quality/resource gets exponentially larger.

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The Four Layers of 2020 Goals Hierarchy

While I was setting up the goals for 2020, instead of grouping to traditional categories (areas of goals) like before, I’ve layered the goals based on the impact across the different layers of society.

There’s a phrase “修身齊家治國平天下” from an ancient Chinese classic “大學”, which translates into four phases of ruling the world:

  1. 修身: Developing and disciplining yourself to raise your intellectual and moral capacity
  2. 齊家: Taking care of your family and organizing your household
  3. 治國: Ruling the country
  4. 平天下: The world will be peaceful

Inspired from this phrase, I’ve organized the goals into the following four laters of 2020 goals hierarchy:

Continue reading “The Four Layers of 2020 Goals Hierarchy”

The Art of Setting Personal Annual Goals

People tend to be a bit skeptical about setting a personal annual goal. Plans often don’t align with your reality and we’ve all experienced the frustration of setting a goal and giving up a few months into the year, unintentionally hurting your self-esteem.

But, if we don’t have a goal and a plan, we don’t really know whether we are headed in the right direction nor whether we’re making a progress towards a goal or not.

I deeply believe one of the core purpose of personal goal setting is not only to achieve them, but to build up your confidence and increase your self-esteem.

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Scaling Leadership through Two Management Frameworks

As an organization reaches certain scale, it is inevitable, at least due to the current limitation set by human interaction mechanisms (e.g. verbal communication, synchronous meetings, groups, hierarchies, physically independent) that there is a certain level of structure that needs to be put in place to manage the organization.

There is a few frameworks that can be useful when scaling the leadership. It’s local applications of the general management frameworks, so let’s explore how they can be relevant to scaling leadership.

1. Convergence <> Divergence framework

This framework demonstrates how to navigate within the horizontal layer (x-axis) of management.

As your organization scales, one thing you constantly run into is the overall increase in diversity within the organization. The proportion of diversity may increase or decrease, but the absolute number of diverse entity (in this case, employees) will simply increase as your headcount grows.

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The Zone of Sustainable Commitment

I was first recommended the book “Leadership and Self-Deception” from Stewart Butterfield during Y Combinator Growth program late last year. I finally got the chance to open the book recently and the story resonated so much that I recommended this book to our entire company.

A high-level summary might go like this: if you get into self-betrayal, you go “in the box” where your perspective of the world starts to distort in your favor. By self-justifying, you find ways to blame others, while inflating your own virtue.

The result is making your relationship worse and inviting others into the box along the way, starting a vicious cycle. Below diagram shows the inside of Bud’s mind, one of the characters in the book. Bud’s baby son David wakes up in the middle of night. The diagram shows what goes through Bud’s mind as he thinks about whether to get up and tend to David or not, while his wife Nancy is asleep besides him.

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The Adventure of a Fool

Recently, I went on a business trip to South East Asia to meet with some of our customers. There I visited a more developed country like Singapore, and then traveled across a city in one of more developing countries like Indonesia. Jakarta was full of surprises, an eye-opening experience, similar to the feeling I had when I first visited Beijing.

There was an insane number of motorcycles on the road, swerving around a three-column of cars on a two-lane street. They were opportunistic, if not entrepreneurial. It was dizzying, yet mesmerizing to see how so many of them could go past all the cars without scratching a single one.

jakarta.jpg

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