The Ultimate Lie

There’s been one common theme throughout Trump’s campaign: that the political establishment in Washington is corrupt, and that he as an outsider can “drain the swamp.” Trump’s final campaign ad is the perfect distillation of this message.

There are many lies contained in this ad. But by far the most salient lie is that Trump somehow represents any notion of change or that Trump is an outsider in any capacity.

Donald Trump is only an outsider in the sense that he has never held formal political office. Beyond that, he is no more an outsider than Hillary Clinton or any of his Republican rivals from the primaries.

If the Washington elite have willfully ignored electorate’s will in favor of rich elites economic interests, we have no reason to believe that Trump will act differently. Consider:

  1. He attends the same parties as the Clintons.
  2. He inherited an organization worth approximately $200M.
  3. He would have been better off investing in index funds rather than running the Trump Organization. He could have made more money from his wealth than from actually working.
  4. He names everything he touches after himself. This is one of the defining characteristics of the elite class.
  5. He lives in a gold-plated penthouse of one of the tallest buildings in Manhattan.
  6. He started a foundation in his own name, and asked for donations from others, and then spent that money on himself. That’s exactly the corruption he accused the Clinton foundation of.
  7. He used legally dubious mechanisms to avoid paying taxes for over a decade.
  8. He has stolen from thousands of contractors — most of whom were poor or middle class.
  9. He defrauded thousands of people who paid to learn from him.
  10. He’s been involved in over 3,500 lawsuits. This number is simply so staggeringly large that the only viable explanation is that he’s screwed over thousands of people whom he’s worked with.
  11. He cheated on his 1st wife with who would become his 2nd wife. And he dumped his 2nd wife to marry a model who is 24 years younger than him. Trump has no interest in his family or children, only in sex with beautiful women.
  12. While he was wearing a microphone, he bragged about how he could sexually assault women precisely because he was a celebrity.

How many middle-class men and women in this country have had the privilege to live a Trump-like lifestyle? Exactly zero. Trump has been a privileged, arrogant, insider who leveraged his money, power, and connections to detriment of those around him. He is the quintessential definition of insider.

Trump has made it clear that there’s only one thing he cares about in life: Donald Trump. At no point in his 70-year life has he shown a genuine, prolonged, material interest in helping or supporting anyone other than himself and his immediate family. Instead, he has gone out of his way on thousands of occasions to take advantage and harm those who were less fortunate and less capable than himself.

Yet, Trump presented himself as the only option that can help the common man from the tone-deaf Washington elite. And the media simply regurgitated Trump’s story and treated it as fact when his narrative couldn’t have been anything further from the truth. Trump positioned himself as anti-establishment. The media utterly failed to highlight that the entire foundation of Trump’s campaign was baseless and false. But Trump kept on repeating his story, and the media and the electorate came to believe that Trump somehow represented change when in fact nothing could be further from the truth.

In the weeks since Trump won the election, we can already see that Trump never intended to drain the metaphorical swamp. He is filling his cabinet with long-serving, establishment Republican figures. I understand it’s impossible to appoint 1,200 outsiders into the federal government in two months. But Trump is appointing establishment Republicans to most of the highest cabinet positions:

Chief of Staff — former RNC Chair Reince Priebus.

Defense — General James Mattis — a former general who was active in the 2003 Iraq Invasion. Congress actually has to give him a special pardon to serve.

Treasury — Steven Mnuchin — a former Goldman Sachs executive.

Health and Human Services — Tom Price — a six term congressional Republican.

Commerce — Wilbur Ross — a billionaire investor who has repeatedly bought out companies, fired staff, and milked the companies for profits.

Attorney General — Jeff Sessions — a Republican senator who was rejected for a federal judge role because he said that the KKK was better than marijuana.

Head of CIA — Mike Pompeo — a congressional Republican who has investigated Hillary Clinton over half-a-dozen times and found nothing of substance.

Transportation — Elaine Chao — wife of Republican Senate Majority Leader Mitch McConnell, and Labor Secretary under George W Bush.

Trump is in no way draining the swamp. He is not acting in the interest of the middle class. Instead, he’s appointing his friends and loyalists into positions of power, and preparing to give himself and the elite class of the US huge tax cuts while gutting the social safety net for the poor and lower-middle classes. He is actively trying to enact policies that will be detrimental to his base: the white working class.

By virtually every measure, now is the best time to be alive in the history of the world. This has been noted by many, including Warren Buffet and President Barack Obama. The Internet has dramatically expanded educational opportunities for everyone; people have more time to enjoy leisurely activities than ever before; medicine is saving more lives than ever before; humanity is on a path to automate almost all physically back-breaking work; globalization is lifting billions of people out of poverty.

Do not believe that Trump is the solution to America’s problems or to very real plight of working class. He doesn’t give a damn about you, your family, or this country. On thousands of documented occasions, he has made it clear that he only cares about himself.

Trade Shows Are War

Note: this post is applicable to trade shows, conferences, symposiums, and other cross-company gatherings.

Last week a first-time founder asked me about getting ready for a trade show. The summary of our conversation was:

Trade shows are the ultimate zero-sum game.

Whether you attend a trade show as an individual scoping out a new industry, as a startup breaking into a market, or as an established industry player, you have a single goal: monopolize the time and attention of your targets to maximize the probability of continuing the conversation after the event.

I generally deplore zero-sum thinking. In the world of startups and technology, I always want to expand the pie rather than fight over a fixed pie. But trade shows are a weird, backwards universe. You’ll spend copious amounts of money and time and you will not close any business or recruit any candidates at the event. None. Therefore your goal is to maximize the probability that your targets want to speak to you after the show so you can actually make something happen.

It’s important to recognize that at a trade show, every single person, piece of signage, video reel, coffee station, workshop, afterparty, etc is your competition. Everything and everyone are competing for the fixed amount of attention that your targets could otherwise devote to you.

Make no compromises in taking as much of their time as you possibly can. Trade shows are war for time and attention that masquerade as civil discourse.

Here are some implications of this lens:

1. Trade show time is precious. Therefore, you need to be on your A game at all times. Therefore, do not drink. Trade shows, either directly, or indirectly through after-parties, hand out what amounts to effectively unlimited alcohol. Do not waste your time getting drunk. You have cooler friends back at home you can get drink with. If you drink, you will talk to less people than you otherwise would have, you will be sloppier in your conversations, and you will not be on your A game the next day.

2. About a month before the event, identify everyone who will be at the show that you want to meet with and coordinate explicit meeting times and places with them. Naturally, you’ll want to meet with them somewhere where you can control their attention. Do not try to meet with your targets in your booth or at a location in the exhibit hall. The exhibit hall is effectively raw anarchy: a state of unmitigated entropy. There is simply too much noise and too many other people vying for your target’s attention on the show floor. As a startup, you likely won’t have the budget or staff to justify have a private meeting room in your booth or to rent out a private suite near the exhibit hall. So instead, meet your targets just outside the exhibit hall, or in a food area. Anywhere that’s easy to find and that has less stimulation than the show floor.

3. I suspect that > 50% of trade show attendees are scrounging for battery cables by 6pm. Turn off all non-essential services on your phone to maximize battery life. Get an external battery pack if necessary. Don’t let your phone’s (lack of) battery distract you from your targets.

4. 50–90% of the people you meet will not be worth your time and attention. Put those business cards in one pocket, and the valuable business cards in another. In the evening, after not drinking, write custom follow ups to each person whom you care to do business with. Make sure to remark on your specific conversation so they know it wasn’t a mail-merged email template. Do not expect a response the next day. In your note, make sure to let them know that you’ll reach back out to them ~2 days after the end of the show, and do exactly that. Do not be afraid to email them multiple times after the show. Your only goal at the show was to get follow ups after the show, so you better damn well make sure that you do.

5. Do anything you can to be memorable. Anything. Trade shows are stimulation overload. Within three days of leaving a trade show, no one will remember what your booth looked like, or even what you looked like. Most people will just remember the hotel they stayed that and some particular events they attended (e.g. a workshop or an after party). The average attendee likely speaks with over 200 people at an event. Of those 200 people, that attendee will likely remember five of those people. Do whatever you have to in order to be one of those five. Unique and tasteful attire is solid, but do more. Have a unique opening. Memorable business cards. An amazing pitch. Whatever. It. Takes.

Understanding The Sales Funnel

B2B Sales pipelines are more telling than most people realize. In this post, I’ll outline how to think about sales funnels, and the implications of the sales funnel on the rest of the business.

What are the stages of the sales cycle?

There are five stages that prospects go through during the sales cycle. These stages will be referenced a few times in this post.

What should a sales pipeline look like?

There are, broadly speaking, three shapes a sales funnel can take (on a # of customers basis; you can see some odd shapes if you track projected deal size throughout the lifecycle of a deal): Conservative, moderate, and aggressive.

Why these names? What makes one of these graphs more conservative than the others?

Let’s look at the same graphs, but from the perspective of a single deal that’s halfway through the sales cycle. To analyze the “sales funnel” for a single deal, let’s examine the ratio of the size of top of the funnel to the size of the bottom of the funnel. The smaller the ratio — or in other words, the “tighter” the graph — the more likely that deal is to close.

It’s obvious which of these models is most predictive for a deal that’s halfway through the sales cycle. The conservative model of course! Companies that have a sales funnel that looks more like the aggressive model really don’t know what the probability of closure is for a given deal because it’s not clear how fast the graph will turn in towards the end of the sales cycle.

What can a sales organization do to optimize towards a conservative sales funnel?

Qualify, qualify, qualify!!! It’s pretty difficult to over-qualify deals in the early days. SDRs don’t necessarily need to do all of the qualifying. The larger the ACV, the more information will be needed to really understand if a customer is a right fit for your solution. While a deal is still in Recognition, AEs and/or SDRs should be qualifying as much as possible.

As one point of reference, during my tenure at Pristine, our close rate on a # of customers basis from Determination to close was 93%. On a $ basis, the close rate from Determination to close was actually over 100% as we had under forecasted almost every deal in the earlier stages of the sales cycle. To be fair, we didn’t have any direct competition. We competed against the status quo, so bake-offs and price-based competition weren’t major factors that impacted the sales funnel conversion rate towards the end of the sales cycle. Obviously, competition will dramatically reduce conversation ratios at the end of the funnel.

The larger the ACV, the more conservative the sales funnel needs to be. This makes sense so that the company can accurately forecast and achieve its quarterly revenue targets, but also because the amount of work required on a deal increases exponentially as a deal progresses through the sales cycle. As a general rule, each stage of the sales cycle takes 10x more work than the prior stage, except Acceptance. It’s imperative to qualify as much as possible as early as possible to maximize the efficiency of the sales organization.

Why is it important to optimize towards a conservative sales funnel early?

Developing a sales process that results in a conservative sales funnel requires tremendous discipline and is a strong indicator of general operational excellence. A startup with a conservative funnel knows how to identify, qualify, and close customers in a systematic way.

There are also logistical reasons to optimize towards this early. Changing the shape of this funnel gets harder as sales organizations grow. Processes become more rigid; coordination, training, and re-training become more challenging; egos grow, etc. For example:

In a 100-person sales organization, it’s going to be much more difficult to change the shape of the curve than in a 10-person sales organization. In a 100-person sales organization, making changes at one step of the funnel will require upstream and downstream changes in the rest of the sales organization. A lot of people will need to be retrained, comp plans restructured, team shuffled, etc. In a 10-person sales organization, the CEO and VP Sales can gather the entire sales organization in one room, walk the whole team through the gap in the sales funnel, how it’s going to be addressed, and discuss the implications for each individual over the course of a few hours.

Lastly, a conservative sales funnel makes a startup a generally healthier and predictable business. In almost all cases, CAC increases as a startup scales. Why? Because as startups pursue growth, they inevitably adopt less efficient customer acquisition channels than those used in the earliest days. Moreover, as a startup grows, competition inevitably does as well, which will drive down close-rates at the end of the funnel, dramatically driving up overall CAC. In some cases, once a brand is established, CAC can decrease as the brand itself draws in the customers, but it should be assumed that CAC will never decrease until there’s material evidence to the contrary.

If you assume that CAC will always increase or perhaps eventually flatten out, the importance of optimizing towards a conservative model becomes even more important. The more variable the cost per lead at the top of the funnel, the more variable the CAC will be at the bottom. This variability will increase the more aggressive the sales funnel is. To maintain a healthy LTV / CAC ratio, it’s imperative to arch the sales funnel inwards towards a conservative model early in a startup’s lifecycle.

Note: I’m a huge fan of Insight Squared for sales funnel reporting and analytics. It makes visualizing and understanding a company’s sales cycle simple. I’m sure there are other tools that are just as good, but my experiences with Insight Squared have been superb.

Conspiracy Theories Don't Scale

Donald Trump is promoting yet another conspiracy theory. This time, he’s suggesting that the economy itself is a sham. He’s asserting that:

  1. Janet Yeller, Chair of the Federal Reserve, has been a puppet of Obama, and that Obama has instructed her to keep interest rates artificially low to bolster the economy.
  2. Unemployment figures reported by the Bureau of Labor Statistics (BLS) are outright and knowingly false. Trump suggests that the actual unemployment rate is over 40%, whereas the figure reported by the BLS is about 4%.

This isn’t the first conspiracy theory that Trump has promoted. He continues to deny the impact of carbon and climate change, he continues to state that Obama is a Muslim that wasn’t born in the United States, that the electoral system is “rigged”, among many other accusations.

There are lots of problems with conspiracy theories. But there’s a common thread I’ve observed in most of them: conspiracy theories don’t consider the challenge of human coordination and human propensity to leak facts. As a result, conspiracies don’t scale.

What do I mean by “scale?” Let’s look at a few high profile examples:

Enron — it the wake of Enron’s collapse, the SEC learned that only a handful of individuals who really knew what was going on prior to the collapse: Chairman Ken Lay, CEO Jeff Skilling, and CFO Andy Fastow. It seems that 1 or 2 of Arthur Anderson’s (Enron’s auditing firm) partners had some inclination of what was going on, but not more than that. On the eve of Enron’s demise, which ultimately destroyed tens of billions of dollars of value, only a handful of people knew knew the truth.

Bernie Madeoff — Bernie’s children turned him in after he admitted to them in private that his entire wealth management operation was a Ponzi scheme. Not even his children, both of whom were senior executives at the firm, knew of any fraud. In the investigation afterwards, it was discovered that Bernie ordered two junior staff members to produced fraudulent investment reports when clients requested redemptions. In a $65B fraud case — the largest in history — only ~3 people knew what was going on, and it’s likely that only Bernie knew the true extent of fraud.

9/11 — All together, only 15–20 people were involved in the planning of the 9/11 attacks. Of those, approximately 8 were pilots who actually flew the planes. No more than 10 others were involved. Based on what we know, the pilots didn’t even know what their targets were until weeks before the attack. All the pilots knew was that they were being recruited for a secret mission. Only a handful of Al Queda leaders actually planned the operation.

When you hear statements that fly in the face of common sense, the simple litmus test to think through is is “How many people would have to be lying for this to be true?” If that number exceeds 20, it’s likely a conspiracy theory, and nothing else. This is especially true when conspirators know that the truth is incriminating. As the number of people involved in a scandal grows, the truth will eventually leak. It’s simply human nature.

Let’s look at some of Trump’s claims through this lens. How many people would have to be lying for Trump’s statements to be substantiated?

False unemployment numbers from the BLS — dozens, if not hundreds of people work on these reports each month. There is a lot of transparency provided during the process. The process itself is scrutinized by many others. All together, hundreds of people are involved in this process, and it’s ongoing. It never stops. There is simply no way that hundreds of people are keeping secrets on this issue over the last 8 years of the Obama administration.

Climate change — even if you ignore all of the independent research done on the subject and only read the research of the EPA, the data is clear: climate change is real. The EPA has published dozens if not hundreds of reports on the issue, which represent the culmination of hundreds of researchers working for thousands of hours. There is simply no way all of these highly knowledgeable and intelligent researchers are producing reports suggesting there is a problem when in fact there isn’t one.

Electoral fraud — when Trump’s polling numbers began to dip in early August, he began to hint that, if he loses in November, that people should suspect that the electoral system is rigged. This statement is utter nonsense. Since votes are reported on a county basis to the state level, then if there were to be any fraud, state and county level officials would have to coordinate. Hundreds of county level and dozens of state level staff would have to knowingly commit fraud to make sure the numbers added up in plausible way to move the needle in favor of one candidate. There is no way that this many people can plan, in anticipation of losing, to adjust their votes, and to coordinate in real time on one day. It is simply not possible.

Conspiracy theories don’t scale. So please, when you hear people call out organizations, ideas, or movements as frauds, please just think: if this theory were to be true, what would it take to be true? If more than 20 people would have to conspire to make it so, then it’s overwhelmingly likely that the theory is false.

Rethinking The Customer Relationship In Medtech

This post was originally featured on TechCrunch.

In light of Dollar Shave Club’s recent sale, I started thinking about other industries that haven’t yet rethought the customer relationship by leveraging the cloud. A significant majority of FDA-approved medical devices — and their associated business models — should be rethought around the idea that the cloud is a core feature of the product.

Cloud-connected diapers

Pixie Scientific makes smart diapers that monitor Alzheimer’s patients for urinary tract infections (UTIs). They are innovating on at least five distinct technical fronts: hardware, software, chemistry, cloud and AI/machine learning/image analysis.

Today, the process of monitoring for UTIs in Alzheimer’s patients is rudimentary, at best. Diapers are changed every 6–12 hours, or if the patient smells too bad. This process repeats until the patient ends up in the ER screaming of abdominal pain caused by a UTI that’s made it to the bladder or kidneys.

Pixie rethinks the entire process by monitoring urine content in near real time. As urine content begins to show signs of a UTI, care teams can act proactively.

This is a profound shift: Not only are computers making recommendations (not diagnoses), but Pixie is building a library of data that will make their products the best in the world at detecting UTIs in Alzheimer’s patients. This medical device will leverage data network effects to improve recommendations. This medical device will get better as more people use it. That’s insanely awesome.

Cloud-connected vitals monitors

Stasis Labs makes a cloud-connected vitals monitor that can be used in any setting outside of the ICU. Rather than selling the hardware, Stasis provides the end-to-end system for a few dollars per bed per day. Traditionally, hospitals would have spent $10,000+ per monitor to buy and install a GE or Welch Allyn vitals monitor. These monitors require manual integration with electronic medical record (EMR) systems. To get alerts (e.g. “warn me if pulse drops below 50 for more than 10 seconds”), the EMR needs to integrate with a clinical decision support (CDS) system, adding even more cost.

Stasis rethinks the entire process of vitals monitoring: their box just needs an internet connection, and that’s it. All alerts (e.g. “warn me if O2 dips below 93 percent”) can be managed from a browser/Android interface. Within a few years, Stasis will have the world’s largest database of vitals monitoring for every single disease state. They’ll use that data to make recommendations and predictions.

Cloud-connected inhalers

Propeller Health makes an add-on that fits into any inhaler and records ambient data. Propeller helps asthma and COPD patients understand which environmental factors cause symptoms.

Again, the cloud is paramount to deliver this service: There is no way Propeller could ever understand every environmental trigger and their associated impacts on patients. They didn’t have to. They simply record sensor data, ask the users for some input and aggregate and analyze the data to deliver insights.

But what about pharma and implantable medical devices?

The examples I’ve provided are all FDA Class 1 devices — devices that are generally considered low risk in the event of failure. As the cloud invades medtech, it makes sense that entrepreneurs are starting with the lowest hanging fruit — Class 1 devices. Implantable medical devices and pharmaceuticals are Class 2 and 3 devices, respectively, so naturally, the capital requirements are higher for those.

But the opportunities are easy to imagine:

  • An artificial knee that records range of motion over time to record improvements.
  • A pacemaker that records pulse and correlates it with activities, and provides activity recommendations that are coordinated with a care plan.
  • A pill that records when it’s taken (or not taken). This has huge implications for insurance, chronic disease management and more.

Of these examples, Proteus has been working on the third for about a decade. They’ve raised hundreds of millions of dollars with the fundamental aim of bringing the cloud to the business of pharma (and not just research, where pharma already does lots of computational biology/simulations). The opportunity is staggeringly large.

Other than the cloud, what’s so special?

The cloud changes not only the product, but the entire business model.

No one in the adult diaper business has a direct relationship with the patient or caregiver. Because Pixie uses an app, Pixie has a front to build to engender that relationship. And that means Pixie can go direct to consumer, cutting out 50 percent of the cost that’s associated with retail. (owned by Amazon) has been going direct to consumer for a while, their business model has no lock-in beyond a recurring diaper subscription. Pixie’s does. Once customers go Pixie, they’re never going to go back. That changes how Pixie can think about CAC because their LTV will be much higher.

Stasis is SaaS-ifying what was traditionally a capital expense. This will dramatically increase the size of the market by making vitals monitoring available to almost anyone in any disease state for just a few dollars per day. Home care, ERs and more. And they will become the first out-of-the-box solution that can predict adverse outcomes. In time, this function will be considered a basic requirement for all vitals monitors.

Propeller, like Pixie, will build direct relationships with consumers. They’ll make recommendations. They’ll know who the consumer is, and deliver products, messages and services accordingly. They won’t rely on retail or other traditional channels of distribution because they will own the customer relationship. Once customers go with Propeller, they’ll be locked into their ecosystem and look to Propeller for the next innovation in inhalers and asthma/COPD management.

For implantable medical devices, there will be less opportunity to build a consumer relationship. Patients aren’t going to decide between a Stryker or Smith Nephew knee replacement; surgeons make that decision (at least for the foreseeable future). But by layering the cloud into Class 2 and 3 devices, medical device manufacturers will have an opportunity to unlock mammoth revenue streams: true pay for performance from payors. Once devices can actually report real-world performance, insurers will gladly pay for surgeons to use the best devices, and for physicians to prescribe the best drugs based on real-world data and performance.

Medtech companies will build direct relationships with consumers, providers and payors. Every medtech product and business will be infused with the cloud as the industry inverts over the next 20–30 years.