When you come to the 2^100 forks in the road...

In some simple games, it is easy to spot Nash equilibria. For example, if I prefer Chinese food and you prefer Italian, but our strongest preference is to dine together, two obvious equilibria are for both of us to go to the Chinese restaurant or both of us to go to the Italian restaurant. Even if we start out knowing only our own preferences and we can’t communicate our strategies before the game, it won’t take too many rounds of missed connections and solitary dinners before we thoroughly understand each other’s preferences and, hopefully, find our way to one or the other equilibrium.
 
But imagine if the dinner plans involved 100 people, each of whom has decided preferences about which others he would like to dine with, and none of whom knows anyone else’s preferences. Nash proved in 1950 that even large, complicated games like this one do always have an equilibrium (at least, if the concept of a strategy is broadened to allow random choices, such as you choosing the Chinese restaurant with 60 percent probability). But Nash — who died in a car crash in 2015 — gave no recipe for how to calculate such an equilibrium.
 
By diving into the nitty-gritty of Nash’s proof, Babichenko and Rubinstein were able to show that in general, there’s no guaranteed method for players to find even an approximate Nash equilibrium unless they tell each other virtually everything about their respective preferences. And as the number of players in a game grows, the amount of time required for all this communication quickly becomes prohibitive.
 
For example, in the 100-player restaurant game, there are 2&100 ways the game could play out, and hence 2^100 preferences each player has to share. By comparison, the number of seconds that have elapsed since the Big Bang is only about 2^59.
 

Interesting summary of a paper published last year that finds that for many games, there is not clear path to even an approximate Nash equilibrium. I don't know whether this is depressing or appropriate to the state of the world right now, it's probably both. Also, it's great to have mathematical confirmation of the impossibility of choosing where to eat when with a large group.

Regret is a fascinating emotion. Jeff Bezos' story of leaving D.E. Shaw to start Amazon based on a regret minimization framework is now an iconic entrepreneurial myth, and in most contexts people frame regret the same way, as something to be minimized. That is, regret as a negative.

In the Bezos example, regret was a valuable constant to help him come to an optimal decision at a critical fork in his life. Is this its primary evolutionary purpose? Is regret only valuable when we feel its suffocating grip on the human heart so we avoid it in the future? As a decision-making feedback mechanism?

I commonly hear that people regret the things they didn't do more than the things they do. Is that true? Even in this day and age where one indiscretion can ruin a person for life?

In storytelling, regret serves two common narrative functions. One is as the corrosive element which reduces a character, over a lifetime of exposure, to an embittered, cynical drag on those around them. The second is as the catalyst for the protagonist to make a critical life change, of which the Bezos decision is an instance of the win-win variety.

I've seen regret in both guises, and while we valorize regret as life-changing, I suspect the volume of regret that chips away at people's souls outweighs the instances where it changes their lives for the better, even as I have no way of quantifying that. Regardless, I have no contrarian take on minimizing regret for those who suffer from it.

In that sense, this finding on the near impossibility of achieving a Nash equilibrium in complex scenarios offers some comfort. What is life or, perhaps more accurately, how we perceive our own lives but as a series of decisions, compounded across time.

We do a great job of coming up with analogies for how complex and varied the decision tree is ahead of us. The number of permutations of how a game of chess or Go might be played is greater than the number of atoms in the universe, we tell people. But we should do a better job of turning that same analogy backwards in time. If you then factor in the impact of other people in all those forks in the road, across a lifetime, what we see is just as dense a decision tree behind us ahead of us. At any point in time, we are at a node on a tree with so many branches behind it that it exceeds our mind's grasp. Not so many of those branches are so thick as to deserve the heavy burden of regret.

One last tidbit from the piece which I wanted to highlight.

But the two fields have very different mindsets, which can hamper interdisciplinary communication: Economists tend to look for simple models that capture the essence of a complex interaction, while theoretical computer scientists are often more interested in understanding what happens as the models grow increasingly complex. “I wish my colleagues in economics were more aware, more interested in what computer science is doing,” McLennan said.

Compress to impress

One of the funniest and most implausible things in movies is the grand speech by the general, usually the film's protagonist, in front of thousands of soldiers in the moments just before a critical battle. Examples abound, and the punch lines lodge in the memory, from Henry V ("We band of brothers") to Braveheart ("They will never take away...our freedom!") to Lord of the Rings: Return of the King ("There may come a day...but today is not that day!"). 

[Does this actually happen in real life? Did generals ride back and forth before the start of battles in the Civil War and give motivational speeches? I'm genuinely curious.]

The reason these scenes always strike me as absurd is that the character giving the speech is never using a megaphone or a microphone. The speech is almost always given outdoors, in the open air, so his voice carries for a radius of, what, thirty or forty feet? I imagine a soldier standing in the last row of the army about a mile away from the front lines bugging everyone around him, "What did he say? Can anyone hear?" and being shushed by everyone. Maybe only the first row or two of soldiers needs to hear the motivational speech because they're the first to run into a hail of bullets and arrows?

Even with modern communication infrastructure, however, any modern CEO deals with amplification and distortion issues with any message. Humans learn about this problem very early on by playing telephone or operator, or what I just learned is more canonically known outside the U.S. as Chinese whispers. One person whispers a message in another person's ear, and it's passed on down the line to see if the original phrase can survive intact to the last person in the chain. Generally, errors accumulate along the way and what makes it to the end is some shockingly defective copy of the original.

Despite learning this lesson early on, most people in leadership positions still underestimate just how pervasive this problem is. This is why any manager or executive is familiar with how much time they spend on communicating the same things to different groups in the organization. It feels like it's all you do sometimes, and yet you still encounter people who feel like they're in the dark.

I hadn't read Jeff Bezos' most recent letter to shareholders until today, but it was just what I'd expect of it given something I observed in my seven years there, which are now more than a decade in the rear view mirror. In fact, one of reasons I hadn't read it yet was that I suspected it would be very familiar, and it was. The other thing I suspected was that it would be really concise and memorable, and again, it was.

I suspect that very early on in his career as CEO, Jeff noticed the Chinese whispers problem as the company scaled. Anyone who is lucky enough to lead a successful company very quickly senses the impossibility of scaling one's own time to all corners of the organization, but Jeff was laser focused on the more serious problem that presented, that of maintaining consistent strategy in all important decisions, many of which were made outside his purview each day. At scale, maintaining strategic alignment feels like an organizational design problem, but much of the impact of organizational design is centered around how it impacts information flow.

This problem is made more vexing by not just the telephone game issue but by the human inability to carry around a whole lot of directives in their minds. Jeff could spend a ton of time in All Hands meetings or with his direct reports and other groups inside Amazon, explaining his thinking in excruciating detail and hoping it sank in, but then he'd never have any time to do anything else.

Thankfully, humans have developed ways to ensure the integrity of messages persists across time when transmitted through the lossy mediums of oral tradition and hierarchical organizations.

One of these is to encode you message in a very distinctive format. There are many rhetorical tricks that have stood the test of time, like alliteration or anadiplosis. Perhaps supreme among these rhetorical forms is verse, especially when it rhymes. Both the rhythm and the rhyme (alliteration intentional) allow humans to compress and recall a message with greater accuracy than prose.

Fe fi fo fum, I smell the blood of an Englishman.
 

It's thought that bards of old could recite epics like Homer's Odyssey entirely from memory because the stories were in verse form (and through the use of memorization tricks like memory palaces and visual encoding). I don't know many people who can recite any novels from memory, but I've occasionally run across someone who can recite a long poem by heart. That's the power of verse.

It might be impossible to recite The Great Gatsby by memory regardless of what heuristics you employed, but it would certainly be easier if it were written by Dr. Seuss.

I do not like them,
Sam-I-am.
I do not like
Green eggs and ham.
 

I never chatted with Bezos about this, so I don't know if it was an explicit strategy on his part, but one of his great strengths as a communicator was the ability to encode the most important strategies for Amazon in very concise and memorable forms.

Take one example "Day 1." I don't know when he first said this to the company, but it was repeated endlessly all my years at Amazon. It's still Day 1. Jeff has even named one of the Amazon buildings Day 1. In fact, I bet most of my readers know what Day 1 means, and Jeff doesn't even bother explaining what Day 1 is at the start of his letter to shareholders, so familiar is it to all followers of the company. Instead, he just jumps straight into talking about how to fend off Day 2, which he doesn't even need to define because we all can probably infer it from the structure of his formulation, but he does so anyway.

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.
 

An entire philosophy, packed with ideas, compressed into two words. Day 1.

He then jumps into some of the strategies to fend off Day 2. The first is also familiar to everyone at Amazon, and many outside Amazon: customer obsession. Plenty of companies say they are customer focused, but Jeff articulates why he chose it from among the many possibilities he could have chosen for the company, giving it a level of oppositional definition that would otherwise be lacking.

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.
 
Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.
 

The second strategy to ward off stagnation is a newer codification (at least to me) of a principle he hammered home in other ways when I was there: resist proxies. 

As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.
 
A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.
 

There are many ways one could have named this principle, but this one is just novel and pithy enough to be distinctive, and from now on I'll likely refer to this principle as he formulated it: resist proxies.

The next principle is the one that needs the most work: embrace external trends. Doesn't really roll off the tongue, or lodge in the memory. This is also universal enough an idea that someone has likely already come up with some exceptional aphorism, some of you may have one on the tip of your tongue. It maybe that it's just too generic to be worth the effort to stake a claim to with a unique turn of phrase.

The last principle I also remember from my Amazon days: high-velocity decision making (inside of it is another popular business aphorism: disagree and commit). This could be named "ready fire aim" or "if you don't commit, you've basically quit" or "if you don't really know, just pick and go" or something like that, but "high-velocity" is distinctive in its own sense. It's an adjective that sounds more at home in physics or in describing some sort of ammunition than it does in a corporate environment, and that helps an otherwise simple principle stand out.

Go back even further, and there are dozens of examples of Bezos codifying key ideas for maximum recall. For example, every year I was at Amazon had a theme (reminiscent of how David Foster Wallace imagined in Infinite Jest that in the future corporate sponsors could buy the rights to name years). These themes were concise and memorable ways to help everyone remember the most important goal of the company that year.

One year, when our primary goal was to grow our revenue and order volume as quickly as possible to achieve the economies of scale that would capitalize on our high fixed cost infrastructure investments and put wind into our flywheel, the theme was "Get Big Fast Baby." You can argue whether the "baby" at the end was necessary, but I think it's more memorable with it than without. Much easier to remember than "Grow revenues 80%" or "achieve economies of scale" or something like that.

Another time, as we looked out and saw the $1B revenue milestone approaching, one of Jeff's chief concerns was whether our company's processes could scale to handle that volume of orders without breaking (I'll write another time about the $1B revenue scaling phenomenon). To head off any such stumbles, we set aside an entire year at the company for GOHIO. It stood for "Getting our house in order".

As the first analyst in the strategic planning group, I produced an order volume projection for $1B in revenue and also generated forecasts for other metrics of relevance for every group in the company. For example, the customer service department would have to handle a higher volume of customer contacts, and the website would have to handle a greater traffic load.

Every group had that year of GOHIO to figure out how to scale to handle that volume without just linearly scaling its headcount and/or spending. If every group were just growing their headcount and costs linearly with order volume, our business model wouldn't work. The exercise was intended to find those processes that would break at such theoretical load and begin the work of finding where the economies of scale lay. An example was building customer self-service mechanisms to offload the most common customer service inquiries like printing return labels.

I could continue on through the years, but what stands out is that I can recite these from memory even now, over a decade later, and so could probably everyone who worked at Amazon those years.

Here's a good test of how strategically aligned a company is. Walk up to anyone in the company in the hallway and ask them if they know what their current top priority or mission is. Can they recite it from memory?

What Jeff understood was the power of rhetoric. Time spent coming up with the right words to package a key concept in a memorable way was time well spent. People fret about what others say about them when they're not in the room, but Jeff was solving the issue of getting people to say what he'd say when he wasn't in the room.

It was so important to him that we even had company-wide contests to come up with the most memorable ways to name our annual themes. One year Jeff announced at an All Hands meeting that someone I knew, Barnaby Dorfman, had won the contest. Jeff said the prize was that he'd buy something off the winner's Amazon wish list, but after pulling Barnaby's wish list up in front of the whole company on the screen, he said he didn't think any of the items was good enough so instead he went over to the product page for image stabilized binoculars from Canon, retailing for over $1000, and bought those instead.

I have a list of dozens of Jeff sayings filed away in memory, and I'm not alone. It's one reason he's one of the world's most effective CEO's. What's particularly impressive is that Jeff is so brilliant that it would be easy for him to state his thinking in complex ways that us mere mortals wouldn't grok. But true genius is stating the complex simply.

Ironically, Jeff employs the reverse of this for his own information inflows. It's well known that he banned Powerpoint at Amazon because he was increasingly frustrated at the lossy nature that medium. As Edward Tufte has long railed against, Powerpoint encourage people to reduce their thinking to a series of bullet points. Whenever someone would stand up in front of Jeff to present, Jeff would have rifled through to the end of the presentation before they would've finished a handful of slides, and Jeff would just jump in and start asking questions about slide 35 when someone was still talking to slide 3.

As a hyper intelligent person, Jeff didn't want lossy compression or lazy thinking, he wanted the raw feed in a structured form, and so we all shifted to writing our arguments out as essays that he'd read silently in meetings. Written language is a lossy format, too, but it has the advantage of being less forgiving of broken logic flows than slide decks.

To summarize, Jeff's outbound feedback was carefully encoded and compressed for maximum fidelity of transmission across hundreds of thousands of employees all over the world, but his inbound data feed was raw and minimally compressed. In structure, this pattern resembles what a great designer or photographer does. Find the most elegant and stable output from a complex universe of inputs.

One of the great advantages of identifying and codifying first principles is how little maintenance they need. Write once, remember forever. As testament to that, ever year, Bezos ends his Letter to Shareholders the same way.

As always, I attach a copy of our original 1997 letter. It remains Day 1.
 

It's his annual mic drop. Shareholders must feel so secure with their Amazon shares. Bezos is basically saying he figured out some enduring principles when he started his company, and they're so universal and stable that he doesn't have much to add some twenty years later except to point people back at his first letter to shareholders.

Other CEO's and leaders I've encountered are gifted at this as well ("Lean in" "Yes we can" "Move fast and break things" "Innovation is saying no to a thousand things" "Just do it" "I have a dream") but I gravitate to those from Jeff because I saw them arise from distinct needs in the moment, and not just for notoriety's sake. As such, it's a strategy applicable to more than just philosophers and CEO's. [Sometime I'll write about some of the communication strategies of Steve Jobs, many of which can be gleaned from his public keynotes. He was an extremely skilled and canny communicator, and in many ways an underrated one.]

Tyler Cowen named his latest book The Complacent Class. It's a really thought-provoking read, but the alliteration in the title helps. Now economists everywhere are referring to a broad set of phenomena by the term "complacent class." It wouldn't be nearly as memorable if called Complacent People or The Dangers of Self-Satisfaction. Can you name the subtitle of the book? It's "the self-defeating quest for the American Dream" but no one remembers that part.

Venkatesh Rao once wrote a memorable post about management principles encoded in the American version of the TV show The Office. Anyone familiar with the post probably remembers it by the first part of its title: "The Gervais Principle." Very few, I'd suspect, remember the rest of the title—"Or The Office according to The Office"—though it does employ a clever bit of word repetition.

Whatever you think of Hillary Clinton as compared to Donald Trump as Presidential candidates, I'd venture that more people can recite Trump's mantra—Make America Great Again—than Clinton's. I don't know if she had a slogan, or if she did I don't remember what it was. Her most memorable turn of phrase from the campaign trail was probably "then deal me in" at the end of a much longer phase, “if fighting for women's healthcare and paid family leave and equal pay is playing the woman card, then deal me in." It's difficult to think of a phrase more emblematic of her problems in articulating what she stood for. The first part of the sentence is long and wonky, and I couldn't recall it from memory, and she never followed up on the second enough.

If she'd used it repeatedly in a speech, it could have been a form of epistrophe like Obama's "Yes we can" or Martin Luther King's "I have a dream." Imagine if she had an entire speech where she kept hammering on what other cards she wanted to deal. "If ensuring that everyone in the country has an equal opportunity to reasonable healthcare is playing the [?] card then deal me in. If ensuring everyone in this country has the right to a good education is playing the [?] card then deal me in." And so on. But she would only use it once in a while, or once in a speech, whereas Obama had entire speeches where he would circle back to "Yes we can" again and again. [Maybe there isn't an equivalent to "woman card" that makes this epistrophe scalable but the broad point about her weak use of rhetoric holds.]

That's not to say "Make American Great Again" is some slogan for the ages, but it is succinct and has a loose bit of trochaic meter (MAKE ah-MERIC-uh GREAT a-GAIN) which grants it a sense of emphatic energy which all political movements need. His supporters compressed it into #MAGA which became a more liquid shorthand for social media. In general it seems the populist backlash and the alt-right are stronger at such rhetorical tricks than the Democrats or the left, but perhaps it is bred of necessity from being the opposition party?

Rhetoric can get a bad name because some lump it in with other language tricks like those used in clickbait titles. "You won't believe what happened next" or "This will restore your faith in humanity" or "ten signs you're a Samantha." Those aren't ways for making something stick, those are ways for making someone click. [Quiz: what rhetorical techniques were used in that last sentence?] Rhetoric isn't inherently good or bad; it can be used for ideas both inspiring and appalling.

There will come a day when you'll come up with some brilliant theory or concept and want it to spread and stick. You want to lay claim to that idea. It's then that you'll want to set aside some time to state it distinctively, even if you're not a gifted rhetorician. A memorable turn of phrase need not incorporate sophisticated techniques like parataxis or polysyndeton. Most everyone in tech is familiar with Marc Andreessen's "software is eating the world" and Stewart Brand's "information wants to be free." Often mere novelty is enough to elevate the mundane. You've spent all that time cooking your idea, why not spend an extra few moments plating it? It all tastes the same in your mouth but one dish will live on forever in an Instagram humblebrag pic.

If you're stuck and need some help, I highly recommend the delightful book The Elements of Eloquence: Secrets of the Perfect Turn of Phrase, whose title I remembered as simply Eloquence, which might, come to think of it, be the more memorable title.

First resort

A recent survey of online shoppers shows Amazon gaining share as the starting destination of choice.

Many point to the importance of being the default option on a popular operating system. For example, Apple's podcasting and mapping apps have massive market share despite not being seen as the best options in their categories because they are defaults on iOS.

But just as important are people's mental shortcuts. When I was at Amazon, we obsessed over being the "site of first resort." When it comes to search, Google is the site of first resort. When it comes to ordering a ride share, Uber is the service of first resort.

For us at Amazon, being the site of first resort for an online shopping trip was an obsession. This is why it was so critical to expand out from books to other product lines quickly. We didn't want to cement ourselves in shoppers' minds as the site of first resort for buying books but nothing else.

It's also why both Google and eBay were seen as existential threats. Both offered the potential of offering much larger selections of products than us and potentially stealing that coveted mental bookmark spot in the user's mind. If more often than not, a shopper couldn't find a product on Amazon but instead could find it on eBay or Google, slowly they'd habituate themselves to beginning their search on those services.

Of course, earning the mantle of online shopping default relies on more than selection. I don't know if Amazon offers more SKU's in its catalog than eBay and Google today, but it offers a superior customer experience end to end. Google and eBay don't handle fulfillment themselves, and post order customer service is dicey if something goes wrong. Amazon is the gold standard there, and that's part of what shoppers have come to rely on when they start their online shopping there.

A few years back I was in a wedding party, and I had to purchase a specific shirt to match the other groomsmen. I could only find it at Barney's, and the local outlet didn't offer it in my size so I ordered it from their website. The package was stolen from our apartment lobby, so I wrote Barney's customer service asking for a replacement shipment. They refused and asked me to take it up with UPS or FedEx, or whoever the shipper was. If it were Amazon, they'd have a replacement package out to me overnight on the spot, no questions asked. Needless to say, I'll never order from Barneys again, but it's amazing to think that Amazon's customer service is superior to that of even luxury retailers.

In hindsight, thinking Google might surpass us in shopping seems farfetched, but there was a time eBay had surpassed Amazon in market cap and was growing their sales and inventory in a way that inspired envy in Seattle. It turns out there was more of a ceiling on the potential of auctions as a shopping format than fixed price shopping, but in the moment, it was hard to see where that shoulder on the S-curve would be.

The "always on" computer

At one of the early company All Hands meetings sometime during my time at Amazon (1997-2004), during employee Q&A for Jeff Bezos, someone asked him what change in the world might have the largest positive impact on Amazon's business (I don't remember the exact phrasing of the question, but it was along those lines).

I'll never forget his response, which seemed really strange to me at the time. He said the thing that would be the biggest game changer was an "always on computer." Kids these days may not remember this, but back then we all worked on laptops or desktops that booted Windows, and each time you turned a computer on it took a really long time before they were ready to use, on the order of minutes. My usual morning ritual at Amazon was to boot my computer and then go grab a drink from the break room to make use of the wait.

We were all highly attuned to any friction in the shopping process, but my mind gravitated to all the downstream pain points in ecommerce like shipping fees and delivery transit times. Bezos, as always, was already working far beyond that, thinking back upstream, to the near future.

With an always on computer, he explained, you could turn it on like a television or a light bulb and it would just be on, immediately, which might be possible if the computer was mostly running off of RAM (yes, this was the age before SSD's, which I guess he also saw coming). This would get more people online more often, growing the potential market for Amazon shoppers, who had to be online to access our store.

Of course, I think he'd even admit that he had no idea the "always on" computer would take the form of a smartphone connected to a cellular network. Not only do these computers turn on instantly, they're actually almost never off. What's more, they're not just always on but always connected.

I don't know if Amazon All-Hands meetings these days are still as interesting as they were in the old days, but I wish I had written down Jeff's response to the most interesting questions from the ones I attended. He dropped enough wisdom in those Q&A sessions to make for a succinct and brilliant business book.

My one New Year's resolution for 2017

Those of you who've been loyal readers in the past may have noticed I didn't write much here in 2016. I started a new job which kept me extremely busy. Virtual reality is a very young space, and video and filmmaking in VR are even more nascent. It's an area you can dive really deep and find you've just gone far enough to get lost.

With just a little less time in the day, and work can fill all the free moments, every post I start is a bit more likely to be abandoned midway. There's a certain amount of potential energy every one of my posts requires to push it into publishable form. I often wish I had an editor who would just read my drafts and prod me (and them) into a finished state. In the past, that editor was me, but that role has fallen to the wayside.

Also, no matter how many times you tell people that your views represent your own and not those of your employer, someone will frame some story that way. Given how many people and entities I deal with through my job, it's hard to say much without feeling vulnerable to so many PR gotchas. That left me generally reticent to dip into the fray, though I have the same volume of opinions on matters tech or otherwise..

My one and only resolution for 2017 is to resume regular posting here. I should set a measurable goal, so I'll set a target of one post a week. By my past standards, easily achievable, but given last year's pace, more daunting than it might sound.

I do so as much for myself as for any imagined readers. As many who study Amazon know, Jeff Bezos banned Powerpoint presentations and forced everyone who would present to him to put their ideas into essay form. There's much wisdom in that, not only because so much time is wasted in the presentation production process, but because the process of writing forces you to clarify your thinking.

All those hours spent reworking a draft? That's the mind at work. The most popular time of year for a gym is January, and the first quarter of the year in general. Writing, to me, is exercise, just for the mind. So I'm joining everyone who hit the gym today by sitting here in front of my keyboard. It feels healthy.