I’m so happy these guys are making it work (they’ve been at  it for a couple years) with something similar to what we are trying.  It’s funny – when Second Life started there was another company in the space and their CEO was incredibly competitive and aggressive – was clearly unhappy we existed.  But I always (unsuccessfully) tried to urge him to realize that he was making a mistake.  Competition for scarce resources (or customers) is often assumed by early-stage ecosystem players to exist when it actually does not.  In fact, in the early days (and LoveMachine and Rypple are brave pioneers in the very earliest days of changing work cultures), the only real ‘competition’ is all the people who think your idea just isn’t going to work at all.  The people doing the same crazy stuff as you – those should be your allies.  The fact that they exist means you might just be right.  Also, selling stuff to companies (or consumers) in the early days is typically like being 2 peanut sellers in St. Marks square… there isn’t much need to worry about competition or pricing or whatever, because you could wander that giant square all day long and never run into each other or the same customers.

Slowly but surely, businesses are going to start adopting new models for how they organize themselves and value people.

That was my office yesterday…  I was completely powered by the sun, online via wi-fi.  Macbook Pro battery never dropped below 100%, as I sat in the full sun and worked, connected to everyone via our chat journal.   Talk about technology that will change our lives!  The solar cell that made this all possible (on the right in the picture) is a flexible cell – folds up to the size/weight of a book – printed with some sort of crazy nano-tech process onto a rubber/plastic substrate.   The solar cell, which you can buy here is about $600.  So for about $2,500 per person, you can equip your team with enough gear (MacBook, solar cell, and EVDO card for internet access when there isn’t wi-fi) to relocate your business to the nearest beach.  Look forward to many great pictures to come… LoveMachine-goes-the-beach, LoveMachine-on-a-boat, etc.   Wouldn’t you really rather work for a company that can spend a day a week on lawnchairs in a circle at a park?

“Never get off the boat, unless you are going all the way.”

Martin Sheen’s character in Apocalypse Now says this after watching an amazing scene in which one soldier is chased by a tiger after foolishly leaving the heavily armed patrol boat to take a leak:   The usual behavior of a company is to wander half-heartedly into areas where it will not try hard enough to really succeed.  Generally, this is because there isn’t the right risk model – no individual is actually held accountable for success (or failure).  Everyone is involved, but noone is committed.  Here’s the trick:  Most of the time, do almost nothing.  Work much less than your competition.  Say no to everything.  Take shortcuts.   But when you decide to get off the boat, know that you are going in the water, and play only to win .

“Good night, Westley. Good work. Sleep well. I’ll most likely kill you in the morning.”

The Dread Pirate Roberts was a much better boss than most.  Westley’s job wasn’t ever safe.  He actually had to keep adding value.  Most people don’t.  Most work lacks both urgency and accountability.  Should you really receive a fixed salary, forever, just because you were once useful to the company?  This is extraordinarily inefficient.  A great company should pay you according to how much value you have added in the period for which you were paid.  Seems simple enough, doesn’t it?

“Fear is the Mind-Killer”

This is one of those ones that everyone think is cool and says but that noone actually understands.   In all likelihood, almost everything you do at work (and possibly most of the rest of your life) is done in a state of fear.   But you don’t think so, do you?  Next time you are in a meeting, put your hands under the table in your lap, and turn them face up.   That’s a vulnerable position.  Try to keep your hands that way during the meeting.  See how hard it is?  That’s because you are scared.  You are protecting, negotiating, hedging.  Lose your fear, and you will be able to do much greater things.  But (and this is the tough part), actually losing your fear means accepting and embracing that you are actually afraid.  Letting yourself really feel it, experience it, and then moving through it and beyond it.  Google the rest of that quote (the whole poem) and think about it.

OK so I’m going to put these 3 up, cause it’s almost lunchtime and I’ve got other stuff to do.  Looking back, these are rather warlike, masculine examples – there are many other great ones too in different directions.  Will work on another set later.

The link to the first version of that is:

http://www.surveymonkey.com/sr.aspx?sm=vXF7UUl2j_2fQOcDbv_2bk_2f2VqmnQ0fx1KmvJ39QNnzNRxs_3d

Obviously these are the earliest days.   Noone wants to fire me yet, and I can only go downhill from here, stats-wise.  Probably means both that we’re too small, and that I haven’t been aggressive enough to really piss anyone off yet. 

Once a quarter, as CEO of Linden Lab, I would send an anonymous email survey to the entire company (I used SurveyMonkey) which you could complete in about 1 minute.  The anonymous survey asked 3 simple questions:

#1:  Would you rather keep me as CEO, or get a new one?  (Keep/New)

#2:  Regardless of your answer to #1, do you think I am doing better at my job, or worse?  (Better/Worse)

#3:  Why? (text box)

Each quarter, I shared the results of #1 and #2 with the whole company as soon as they were all in (as you can imagine the participation rate was pretty high!).   The answers to #3 I took home and read privately, generally with a glass of something strong in my hand (In Vinum Veritas).  I generally scored high on these questions, but in sharing the data I used to remind everyone that what mattered most was the trendline.  Someday, one way or another, it would come my time to leave, and the trendline on that answer was how the whole company would know it was time for me to go.  Being fearless enough to take a survey like this isn’t just for you (the aspirational fearless leader), it’s for the whole company.  Think what it feels like to work at a place where you get a survey like that in your email.

A version of this survey is one of the things we are planning to build at LoveMachine, and try and get other companies to use.  If it takes only a minute to ask everyone in your company this question, why wouldn’t you?  Yet there are no more than a handful of companies doing anything similar to what we did at Linden.  Why not?  Can it really be that such a frank evaluation of executive performance isn’t worth the one minute it will take to get?   Why isn’t your company doing this?  Give me a single answer that makes sense.  I dare you.

Technology, transparency, and communication can remove the need for much of what we have conventionally referred to as management.  If you are willing to be honest about your own contributions, and willing to help evaluate everyone else, systems like the LoveMachine and Rewarder can replace the part of management that makes sure you are at work for 10 hours a day or measures how well you do what you are told to do.  But technology and community certainly can’t replace leadership!  The measure of true leadership in a company should be whether people will follow you and work for you, even if they aren’t required to. Your job as a leader should be to convince people to follow you – to commit to your specific projects, to get behind your strategy, or to agree with your mission.

Moreover – and this is captured in many of the LoveMachine tools – true leaders should be measured on how well they do this.  Don’t tell people what to do.  Instead, let them choose, and measure yourself on to what degree they follow you.  For a senior exec, probably the best way is with surveys like this, because execs should author and evangelize great high-level strategy, as well as do a fantastic job mentoring others.   This is fairly easy and fast to measure with  surveys.  For project leaders that are committed to specific deliverables – what we most typically call ‘middle management’, the simple way to measure their success is to create an internal marketplace in which they present their ideas to an audience of individual contributors who can make their own decisions which projects and leaders to follow.  If as a project leader, noone is willing to work on your project, what should that tell you?  At LoveMachine, if noone wants to work with you, they don’t have to.

It seems likely that companies willing to measure their leaders in this way will take over,  in much the same way that countries ruled by Kings and Queens were competed out of existence by the more efficient democracies in which leaders were measured in this same way.

At LoveMachine, we use a bonus/profit-sharing system that is simple, extremely accurate, inspiring, and empowering.  And we’d love to come and install it in your company – just ask us.

The idea is simple:  Instead of a management-led exercise in reviewing and ranking team members, simply give everyone in the company the same amount of money, and then tell them to give it away to everyone else, in any way they think makes sense.

That’s madness, right?    Actually, no.  It turns out that if you are willing to take the plunge (which you can easily do by starting with a small amount of money assigned to the program), and if you do it the right way, this process is statistically optimal in valuing team-members.   It can’t actually be done any better.  By engaging every brain in the company in a fast collective evaluation of everyone else, you maximize the ‘computation’ allotted to the bonus process.  No small group of managers, however well-meaning, can approach the accuracy of this process, because they can’t possibly know the details of how everyone contributed and supported each other.

Additionally, even if this process was no better at finding high performers (which it is), it would still be an enormous win because it removes management from the process of evaluating bonuses.  This is powerful and inspiring.  Each person receiving a bonus knows that the amount they receive is quite literally the collective opinion of the entire company.  Their boss (or bosses boss) has nothing at all to do with it.  It’s a very hard number to argue with.  You have to accept it as truth.  There is no complaining about management.  Separating the management function of valuation and review from that of leadership and mentoring is one of the single most powerful cultural changes a company can make.  Historically we have needed to have people watching over each other and trying to maximize the productive output of reluctant employees.  This is no longer the case in most companies.  Most jobs today are jobs that are taken by people actually wanting to do the job, with a passion for the success of the company, and a sense of ownership.  In these companies the optimal strategy is to have leaders inspire, mentor and suggest strategy.    It is highly sub-optimal to empower managers with the poorly-executed and often-abused task of valuation.    The solution is to create great transparency, and then let everyone participate equally in value-setting.

Lest you worry that this won’t work or scale, we did it for a number of quarters at Linden Lab, typically distributing $500-1000 from each of 100-200 people.  At LoveMachine, we use it to distribute a ‘bonus’ amount of compensation equal to about 40% of total comp.  Combining the process with the job-based / transparent method we are using at LoveMachine gives us what we think is an almost perfect way of paying each other.

FAQ

Q:  How do you keep people from cheating and just trading with their friends?

A:  You eliminate this by empowering a randomly chosen set of employees to see ALL the distributions being made – who is giving how much to who else.  If you know there are many eyes on the data, you will not cheat.  As an additional nice feature, our system doesn’t let individual auditors actually see the details of their own amounts received.  So there isn’t any risk that being an auditor will improperly influence other people’s behavior.

Q:  What data to you make available to everyone at the end of the process?

A:  How transparent to be about results will vary by what sort of company/culture you are in.  Generally there are two choices.  One choice is to show everyone a graph of the final results (how much the #1 person received, the #2 person, etc), but not the names of the people.  This lets people see where they ranked, but not what others received.   The other choice is to fully publish how much each person in the company actually received.  You don’t let people see where there money came from, though – the process of giving needs to be anonymous to work.

Q:  Do popular people get more that they deserve?  What about highly visible jobs verus ‘behind-the-scenes’ roles?

A:  Surprisingly, no.   The opposite actually tends to happen – the rewarder process ‘discovers’ the unsung heros.   Groups also tend to be rewarded in the right proportions – you will see the correct mix of groups in the top-10, for example.

Q:  Do the execs or senior managers get overpayed?

A:  Actually, they tend to get underpaid by the system, at least initially.  Again – the rewarder tends to discover/reward more ‘hazard pay’ – people doing things that are great for the company but not glamorous – which is exactly what you want.

Q:  How big does the company need to be to use it?   Is there a size beyond which it is no longer effective?

A:   We did the first LoveMachine rewarder ‘run’ with about 10 people, and it’s been run at Linden Lab with about 200+ eligible people.   We don’t think there is any uppper or lower size limit.

Q:  Do people tend to give to their closest friends/cliques?

A:  Actually in practice people give ‘farther out’ in the network – to jobs different than theirs, for example.  We think the reason is that people tend to feel like they have already valued/rewarded their immediate teammates day-to-day, and they elect to use the rewarder to reach farther out to recognize people they don’t know but that they feel are vital to the success of the company.

Q:  How often to do you do it?  How much time do people have to decide?

A:  Quarterly or Monthly, depending on how rapidly projects are getting done.  You should match the rewarder interval to the typical scale of projects, so everyone is able to value big deliverables when they look back over a period of time.  As to the time to decide – it’s up to you.  There isn’t value to a lot of deliberation, because your first ‘gut’ reaction on how to hand out money is the right one.  You don’t want people to talk to each other or spend much time thinking – it breaks the system to do that.   A typical approach is to give everyone 1 or 2 days to decide how to allocate their amounts.

When I first moved to San Francisco, I was amazed at how hard it was to walk around the city.  I’d go out to dinner and get frustrated at how I was often sweating in my nice clothes by the time we got there.  After about 6 months I realized that I didn’t get sweaty anymore.  Optimistically, I initially figured this was because I had become stronger.  But later I realized that I had simply learned how to walk more slowly uphill.   The brain tends to want to walk at the same speed, which works OK until you run into a place with fairly steep streets.

There is some kind of lesson here, which is why I wrote this.  Often when running (here in San Francisco), I’ve been struck by this thought and how it somehow connects to work.

Ryan and I have been wandering San Francisco, working fulltime out of coffee shops, hotel lobbies, and bars for the past 2 months or so.  Sometimes we have been joined by other LoveMachine teammates for meetings or just fun.   After giving it careful consideration, we’re going to strive never to have a central office, regardless of how many people are working at LoveMachine.   It’s definitely the future – I predict that many companies are going to give up offices, here are some of the reasons:

Internet Anywhere:  Wifi or wireless IP access is pretty much everywhere, meaning you can always be online.  We carry Verizon cards that are like $50/month and give us good access even when there isn’t wifi.  It’s just really simply now to be connected from anywhere, certainly for work.  This wasn’t true even a couple years ago.

No more servers:  All the LoveMachine servers are in the cloud – on Amazon’s EC2 servers, or Google.  This includes email, intranet, calendars, development machines, etc.  Again, this wasn’t possible a couple years ago.  No more racks of physical hardware.  I can’t fathom why a startup going forward would have a server closet.

Fun and Inspiring:   Try it.  Work in a hotel lobby (our favorite so far is the W in SOMA SF).  Great people-watching, feels so fun to get free coffee even though you aren’t staying there.  And without the crutch of being in an office, you actually feel like you need to get something done.   Plus, you actually work less hours and get to see your family and friends more.

Memory Palace:  There are lots of good references to read more about this, but there is a well-observed phenomena where meetings and conversations that happen in a novel location are easier to remember later.  So actually the worst-case-scenario is having a recurring team meeting in a fixed meeting room!  On the other hand, there are probably 2,000+ different locations available to LoveMachine just in San Francisco.  It’s already a big advantage – I can easily remember meetings with people by keying to the location where we were sitting.  This is a tangible competitive advantage.

Better use of Capital:  In San Francisco, a startup office with room for 10 people is going to cost something like $5,000 per month for the rent, cleaning, bandwidth and other admin costs.  So that’s like $500/month per person.   Why don’t we just give everyone a $500 monthly budget for food and coffee and not have the office?  Let’s see… would you rather “Our office is at 350 Brannan Street, we expect you to be there by 10 every morning, and we don’t cover parking”, or “Here is $500 you can use it all on coffee or maybe save it this month and instead get a hotel room at the Phoenix for your teammembers to party in all day.”

Less Meetings.  It’s a lot harder to schedule meetings when you don’t know how many seats will be at the table in the next cafe.  Good!  People in general have far more meetings than they need to, and even clever atttempts to reduce meetings will not deter them.   At Linden Lab, I used to make sure that we didn’t have too much of the office dedicated to meeting spaces.  But then we built Second Life and started having all our meetings there.  Foiled again!

This is remarkable velocity.  There are still lots of open questions about the process, but I feel confident this is going to scale, and hopefully become a discussion point for the industry around how to do software development.  By developing a high-transparency shared environment and a very lightweight system for suggesting, bidding, and doing work we’ve gotten somewhere interesting and new.  What is hard to describe is how much more fun it is to work in this type of environment.  It’s very refreshing to have a software team where everyone’s card are on the table, contribution value is clearly articulated, and changes happen hourly.

The image below is a graph of fees paid to team members over these last 3 months.  It is fascinating (but unsurprising) that the graph has the classic power law and long tail of so many collective contribution architectures, like Wikipedia or Second Life, etc.   More to come!

LoveMachine Earnings

Right now we are two guys: Philip and Ryan. In the real world, we are wandering San Francisco looking for interesting alternatives to more conventional office space. Rather than applying for a job, you can start by just helping us out: Check the worklist, and see if there is anything that you can do to help – we’ll pay you by the job if you can. We’ll be changing it and adding things frequently.

You can also follow our adventures at our blog.

Love,

Ryan and Philip