"Creativity-by definition-comes from mixing things up." Tom Peters
Born in Hawaii, Guy Kawasaki started his career with an undergraduate degree from Stanford and an MBA from UCLA. His first job was at a jewelry manufacturer ("the toughest business I've encountered"), where he learned how to sell. From there, he went to work for an educational software company called EduWare Services until it was bought by Peachtree Software. Luckily, he says, a friend from Stanford got him a job at Apple. When he saw what a Macintosh could do "the clouds parted and the angels started singing." For four years he evangelized Macintosh to software and hardware developers. Around 1987, his job done for the time being, he left to start a Macintosh database company called ACIUS, which he later left to "pursue [his] bliss of writing, speaking, and consulting." In 1995 he returned to Apple as an Apple fellow, his job this time being to maintain and rejuvenate the Macintosh cult. A couple of years later, he again left Apple to start Garage with Craig Johnson of Venture Law Group and Rich Karlgaard of Forbes. Version 1.0 of Garage was to provide matchmaking services for angel investors and entrepreneurs. They upgraded to version 2.0, which was an investment bank for helping entrepreneurs raise money from venture capitalists. Today, version 3.0 is focused on being a venture capital firm and making direct investments in early-stage technology companies. Currently, he's a founding partner at Garage and co-founder of Alltop as well as a husband, father, author, speaker, and hockey fanatic. Alltop is an online magazine rack that he hopes you'll check out—he suggests Innovation.Alltop, for example. He's written nine books, the latest being Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition, which he discusses with Erik for our interview. You can read about his other eight books here.
[Bio adapted from guykawasaki.com.]
tompeters.com asks ...
Your new book covers everything under the sun for starting a company. What won't you learn from reading this book?
GK: You won't learn how to get the government to bail you out. [Laughter] How's that?
Excellent. There goes a big chunk of our audience. Why this book now?
GK: I wish I could tell you that a year ago I was smart and figured out that the world was going to collapse and that people would need is a dose of reality. It was just luck. My editor told me to take the best of my writing, organize it, edit it, and put it all together to create a unified book.
Once you blog something, a week later, for all intents and purposes, it's gone. If the Google gods are good to you, and someone types in the right string of terms, they might find it. But other than that, it's gone, and that's one of the frustrations of being a blogger.
Another motivation was hearing the same questions over and over again. Now I have a good answer for them, which is, "Go buy the book."
A book is still a great way to disseminate information. Yours is going to become a manual for a lot of start-up companies as well as companies beyond that stage.
GK: From your mouth to God's ears. Peter Drucker is an author whom I truly admire. He wrote a book called Management, which was his 500-page compendium of all the work he'd done up to that point in his career. Management is to Peter Drucker what Reality Check is to me. To make something perfectly clear, I'm not claiming I'm a Peter Drucker. Just like Dan Quayle is no JFK, I'm no Peter Drucker, but relatively speaking, Reality Check is to me what Management was to him.
You've invested a lot of energy in your blog over the years. You really jumped on that idea.
GK: I was probably the last person in America to jump on the blogging thing. But once I started—
I remember when your blog began. You've been diligent and it's always had real content, useful information.
Is your book aimed primarily at Silicon Valley entrepreneurs?
GK: It's aimed at anybody with 30 bucks. [Laughter] Somebody once asked Tom Clancy what his new book was about, and he said, "It's about 26 bucks," which is classic. Tom is the man for comebacks.
You have a checklist at your blog that helps a reader determine how much she or he needs to read your book. Your first question is, "Are you making meaning?"
GK: Companies that try to make meaning (i.e., change the world) are the companies that usually succeed. And people who simply want to make money so that they can buy German cars usually fail. For one thing, they attract the wrong kind of co-founders. They attract investment bankers and MBAs, which are arguably the two worst kinds of people for a start-up.
Meaning for me means changing the world and making the world a better place. Macintosh made the world a better place. Google made the world a better place. Yahoo made the world a better place. So that's the first test: Are you making meaning, or are you simply trying to make a buck?
Your next question is, "Does your product jump to the next curve?" What does that mean?
GK: World-changing things happen when you don't simply duke it out on the same curve—make a slightly better computer or a slightly better website—but you jump curves. A very good example of jumping curves comes from the ice business, believe it or not.
Ice 1.0 was Bubba and Junior, in the winter in the colder parts of the United States, going to a frozen pond and cutting out a block of ice. Ice 2.0 was freezing water in any city, at any time of the year in an ice factory. It was so much more convenient; it didn't have to be winter, and you didn't have to go outdoors. Ice 3.0 is the little ice factory in your house called a refrigerator. It's much better than the ice factory because you don't have to go to the ice factory or have the ice factory deliver ice to your house.
The way the world is going, Ice 4.0 is making an ice carving with your logo, giving it away, and making it up on advertising. [Laughter] But we don't need to go that far.
My point here is that none of the ice harvesters became ice factories, none of the ice factories became refrigerator companies, and none of the refrigerator companies are looking at biotech because most people stay on the same curve. They're born there, and they die there.
You have to be of a certain mind to be able to jump to that next curve. Is it an innate ability?
GK: Ironically, the more successful you are, the harder it is to jump to the next curve. So if you're very successful at making mini-computers, are you likely to embrace a personal computer? Not at all. It's that sort of conundrum. This is the problem that Clayton Christensen addresses in The Innovator's Dilemma. If you're the world's greatest steel mill making high quality, very expensive steel, how do you jump to the next curve when you basically want to preserve the status quo?
Meanwhile, if you're a start-up steel mill and you're making crappy steel—because that's where the high-quality steel mill will let you enter the market—as an innovator you can make higher and higher quality steel until one day you become the 800-pound gorilla, and you're stuck in your own inertia. No question about it, that's the challenge.
What's the first thing you tell someone who says, "I want to start a company"?
GK: "Show me the prototype," because life is full of good intentions. In the first part of my career, I believed that the quality of the idea was the key. I have come to reverse myself. I now believe that it's not the quality of the idea, because good ideas are easy. It's the quality of the implementation. Implementation is hard; ideas are easy.
We've seen a number of books about that of late. What changed your mind? Was it simply experience in the world?
GK: I've seen how hard it is to implement ideas. Macintosh was a great idea and I saw how hard it was to implement and make it successful. Implementation is where you make or break an idea. I could give you a good idea right now. It will make you billions of dollars. Make an operating system for a personal computer that's bug-free, elegant, and fast. That's a great idea. Try to do it—that's the test.
What mistakes do you see over and over from entrepreneurs?
GK: By far, I think the most common mistake is that they are wildly optimistic even in their most conservative state. Time after time we see companies who say, "All I need is one percent of the people who buy dog food." Here's their calculation: "There are 300 million Americans, one in four owns a dog. That's 75 million dogs. Each dog eats two cans of dog food per day, which is 150 million cans of dog food per day. How hard could it be to get a mere one percent? That's 1.5 million cans of dog food per day. So we believe, conservatively speaking, we'll sell a million and a half cans of dog food per day. This means we'll need five distribution centers, 50 telemarketing reps, and strategic partnerships with Purina and every other dog company. We'll need the co-location of our website in five cities and an IT support staff. And we hope that that will allow us to cope with our growth."
So they open up, and six months later they're selling 500 cans of dog food per day. Meanwhile, they have all this infrastructure and they're burning a million dollars a month. That's what I see over and over again. I have never seen an entrepreneur meet his or her conservative projections. Never.
Do you think the one percent idea comes from direct marketing, where if you get a one percent response from your mailings, that's average? Do you think people transpose that notion, or is it that they think they couldn't get any lower than that?
GK: It's partially "I can't get any lower than that." And "How hard could that possibly be?" [Laughter] There are two things wrong with the one percent theory. One is, for some markets it is very hard to get one percent of the market. BMW has two percent of the American car market.
Do you know how hard BMW works to get two percent of the car market? And you think you're going to fall off a truck and sell one percent, conservatively?
The second thing wrong with the one-percent theory is that no venture capitalist wants to hear a company that aspires to dominate one percent of the market. We want to invest in companies whose greatest threat is the U.S. Department of Justice: Antitrust Division. [Laughter] The tricky thing is to come off saying you're going to get a big market share without looking delusional. That's a conundrum.
What companies should do is show up and be able to say that in month one they sold 5,000 cans of dog food, in month two they sold 15,000, and in month three they sold 25,000. Then ask for capital to ramp up. That's a much better conversation than, "Trust me, we only need—conservatively—one percent of dog food sales to be successful."
Right. I think you say in the book that sales fix everything?
GK: Yes. Because as long as you have sales, you're still in the game. The leading cause of failure in start-ups is death, and death occurs when you have no more money. And paper profits are not the same as money.
There's always that stupid idea that becomes a big viral hit, right?
GK: I'll give you some examples of stupid ideas. Tell me if you would have funded these ideas, had they come to you.
"We're a bunch of computer science students at Stanford, and we think we have the best search engine. We are going to be, however, the ninth search engine in the market. There's already Inktomi, Yahoo!, and AltaVista. We have a better way." Would you have funded Google?
If Pierre Omidyar came to you and said, "We think people want to buy used printers on line," and you said to him, " Pierre, if I'm buying the printer, how do I know if it works? If I'm selling the printer, how do I know if I'll get paid?" You'd say, "EBay is a dumb idea. People want face-to-face. They want to see the printer, much less a Ferrari, before they bid on it."
I'm still amazed that eBay works. I've had precisely that thought: I haven't seen this thing, how do I know it works?
GK: And people literally buy Ferraris that way. I never would have predicted that.
That totally amazes me. To this day, I am still dumbfounded by the whole notion.
GK: Another two guys come to you and say, "We're starting a company. We need infinite bandwidth and infinite server space so that people can steal copyrighted videos and upload them." [Laughter] You know that's a company I wouldn't fund. But, Google buys YouTube for 1.7 billion dollars. How do you figure that?
So stupid ideas are a good thing, huh?
It's all about trying stuff. Tom Peters always says, "Just try stuff."
GK: Tom should redo his book In Search of Excellence and call it In Search of Stupidity. Tell him I said that. [Laughter]
I will. He might actually like that idea.
GK: Luckily, with technologies like MySQL, Ruby on Rails, and PHP, you can try stupid ideas for a lot less money. If you wanted to create a website like my website, Alltop, five years ago, you would spend a year with three programmers and a million dollars. Now you can do something like that for less than 50 thousand bucks. The fact that it's gotten so much cheaper means that many more people are trying stupid ideas.
The problem is that it's kind of like an explosion of life forms. If you knew exactly which life form would thrive in the future, obviously you'd only create that kind of life form, right? Who knew that the giraffe would make it and the triceratops wouldn't? So the proliferation of seemingly stupid ideas just reflects the law of big numbers. The more stupid ideas there are, the more likely there's one great one in there. You could start 20 ideas at 50 thousand dollars instead of one at one million dollars.
How many times does the term bull-shiitake appear in your book?
GK: Roughly 20 times. I happen to know this because the copyeditor wanted to remove them after the first three because he thought it was starting to get pedantic. He wanted to call it bullshit, but I refused, because many church leaders are going to read this book. I know this for a fact because many church leaders read Art of the Start. Shiitake is a kind of mushroom. No elder can argue that it's profanity. That's why the term is in there.
It is in there a lot; I'll have to agree with your copyeditors on that.
GK: There's a lot of bullshit in the world.
You have a lot of interviews with other authors in your book. Do you have a favorite question for them?
GK: No, I don't have stock questions. I conducted all the interviews by email. I sent them ten questions, and said, "Take your best shot." And then I edited the hell out of them.
[Laughter] I'll have to try that sometime. I've always relied on recording interviews.
GK: I found recording too slow and expensive. If I were Studs Terkel and wanted to interview a service station attendant, I couldn't exactly send him an email. But, I'm interviewing writers. By definition, I'm hoping they're articulate. If the person isn't articulate in email—which is understandable—I try to make them articulate for the greater good.
Good for you. [Laughter] Your start in the world was as an evangelist at Apple. How did that come to be? Why did you become an evangelist?
GK: The position already existed at Apple. The title was coined by a guy named Mike Murray who was the director of marketing of the Mac Division. With religious fervor and zeal, we believed that we would make the world a better place with Macintosh, so we needed evangelists who believed in the Mac religion.
The honest story about how I got that job is favoritism. My college classmate, Mike Boich, hired me. If it were not for that connection, I would have never been hired because I was in the jewelry business. That's a kind of hardware, but not the kind of hardware that is desirable for a software person. [Laughter]
That story led to a chapter at the end of the book about how you should hire people who are not necessarily perfect candidates. In my case, I lacked the background and education to do the job. What made me successful is a love for Macintosh.
Were you interviewed, or did they just ask you to come on board?
GK: I was interviewed. The first job they offered me wasn't right for me, so I didn't get that one, and I didn't want that one. The second job was a natural. I don't know, maybe Steve Jobs was out of the office that day. Somehow I got the job.
The subject of hockey always seems to pop up when you're around, yet you grew up in Hawaii.
GK: Yeah, a big hockey haven. [Laughter]
You spent most of your life on the west coast of the U.S. in warm climates. What's the story with you and hockey?
GK: About six years ago, we went to our first San Jose Sharks game. I took my kids, and at the time they were seven and nine. They loved it and wanted to try it. My wife told me, "You can't be one of these Silicon Valley dads sitting on the sideline on your Blackberry. You need to be involved in their lives. You need to learn hockey and coach them." Lo and behold, I really fell in love with it. I probably play hockey five or six times a week now. I'm not that good.
It doesn't matter in hockey as long as you're willing to skate fast back and forth.
GK: The key words being fast and back and forth. It's the fast and back part that's the problem. For me, hockey is a true test of love. The true test of love is not that you love to do something you're good at; it's if you love to do something you suck at. And I love hockey. I'm very good at speaking, and I love to speak. But it's easy when you're good at it. It's when you suck at it and you love it, that's the test.
I'm impressed. I thought you may have grown up playing it, but I wasn't sure how, what with growing up in Hawaii.
GK: I had never ever skated in my life until I was 48 years old, which is roughly 42 years too late. Someone told me last week that doctors believe exercise prevents or slows the onset of Alzheimer's. I probably will not get Alzheimer's.
I'm a bicyclist, and I'm addicted. I have to exercise or my brain feels stifled. I'm sure you have good equipment.
GK: Oh yeah. You know when you go skiing in Colorado and you see somebody from Texas with all the latest equipment—the really nice bunny suit and all that? That's me. [Laughter]
So you're an author, a speaker, and a venture capitalist. What's your favorite activity among those three?
GK: My favorite is being an entrepreneur with Alltop.
Tell us about it.
GK: A consistent theme in my life is that I like to democratize things. Alltop democratizes information. It makes information readily available to people who might never have been able to get it because of the overabundance of search engine results. Alltop aggregates all the news and blogs for any given topic.
This news is in one place. You don't register. You don't create a profile. You don't meet friends. Nothing. You don't vote. Want all the political coverage? Go to Politics.Alltop, it's there for you. Naturally, we cover popular topics like sports, politics, and news, but the most gratifying topics are areas like slavery, autism, and adoption.
I had no idea there's so much human trafficking and slavery that still goes on. I saw this movie about human trafficking a few weeks ago, and I decided we should do Slavery.Alltop. We aggregate all the human trafficking and slavery news sites in one place to build awareness. It's going to be a long time before Digg has a slavery tab.
Alltop is the most gratifying work I've done since Macintosh because the sites that we add love the traffic, and the people who read the output that we create are happy to find something that's easy to use.
Is there an editorial team at Alltop, or do you wake up in the morning and see some new topic that interests you and say, "Hey, let's get this on Alltop"?
GK: That often occurs. Twitter has had a huge impact on Alltop. I have around 28,000 close friends on Twitter, and many of them not only suggest topics but provide the sources for them, too.
Are they coming to your house Saturday night?
GK: If they would all just buy one book ... [Laughter] What typically happens is that we announce we're doing Adoption.Alltop or some such. We post all the adoption news and someone will see it and say, "My child is autistic. It would be great for parents of autistic kids to be able to get all the news about autism on one site, too." So then we do Autism.Alltop, and somebody says, "My kid isn't autistic, but he has OCD." It goes on and on like that.
That's great. Is there any kind of hierarchy within the category? What goes above the fold?
GK: There are three characteristics for what goes above the fold. First, does the source bring us credibility? For example, at politics.alltop.com, we have to have the Washington Post, New York Times, and Politico. Otherwise people would go there and say, "How can they say they cover politics? The Washington Post isn't there."
Second, does the source contain great, undiscovered content? You may find this to be a facetious example, but if you went to Humor.Alltop, you'll see the first two sites are Stuff White People Like, and Stuff Indians Like. We think they are so funny that we wanted to make more people aware of them.
Third, has the source helped us? If they take care of us, we take care of them. If they help us promote Alltop, then we'll move them higher. What's not going on is user-generated folding. We don't believe in the Digg echo chamber effect. We're highly subjective.
How big is your team for Alltop?
GK: My two partners, a woman in Hawaii who does much of the topic building, a few people who consistently contribute to us, and me. The development is outsourced to a small company called Electric Pulp in South Dakota. Alltop itself has the full-time equivalent of maybe three people.
That's the way of the working world now. Somebody has an idea and you find folks all over the world to execute it. You haven't mentioned anyone in India.
GK: South Dakota is far enough.
It's very exciting stuff. Thanks so much for your time, Guy. It's been a pleasure.
GK: Thank you.
Email: guy (at) – alltop dot com
Blog: "How to Change the World"