Friday, May 13, 2005

Moneyball for Software

In Moneyball, author Michael Lewis outlines 5 simple rules that Billy Beane, General Manager of the Oakland Athletics, kept in mind as he was shopping for players just before the trading deadline:
  1. "No matter how successful you are, change is always good. There can never be a status quo. When you have no money you can't afford long-term solutions, only short-term ones. You have to always be upgrading. Otherwise you're fucked."
  2. "The day you say you have to do something, you're screwed. Because you are going to make a bad deal. You can always recover from the player you didn't sign. You may never recover from the player you signed at the wrong price."
  3. "Know exactly what every player in baseball is worth to you. You can put a dollar figure on it."
  4. "Know exactly who you want and go after him." (Never mind who they say they want to trade.)
  5. "Every deal you do will be publicly scrutinized by subjective opinion. If I'm [IBM CEO] Lou Gerstner, I'm not worried that every personnel decision I make is going to wind up on the front page of the business section. Not everyone believes that they know everything about the personal computer. But everyone who ever picked up a bat thing he knows baseball. To do this well, you have to ignore the newspapers."
Points #1 and #2, and to some extent #3, directly relate to small software companies and the software developers who work for them.

#1 is interesting. As a software developer I'm trying to gain new skills every single day. I've often found that when you start to get comfortable it starts getting dangerous for your career. Newer, better technologies are released out to the world every single day. I think a fundamental misunderstanding that business managers without a background in software have is that software and systems are like a car: when they get to the end of the assembly line they're done. In reality, software and systems are a moving target and need to be considered and managed as such.

The interesting part about his second sentence in #1 is true, you need to get something out as quickly as possible in a small software company and this process needs to be repeated many many times in rapid succession. However, taking on revenue at all costs and building short term software solutions can eventually become your costs when you do get bigger.

Point #2 touches on something similar that Marc Andreesen, co-founder of Netscape (who?), once said when asked about his next challenges at the company. He said something to the effect of, "protecting against bringing on mediocre people." Jack Welch also talks about this in Winning. Companies without a stable and thoughtful hiring plan can easily end up hiring basically the first ones in the door out of necessity for a warm body or the necessity to find the cheapest labor. Likewise, companies without a stable and thoughtful technology strategy can find themselves locked in by past mistakes. Panic sets in and more bad decisions are made. Really, the market conditions snuck up and something that could have been predictable ends up hurting those companies in the long run.

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