risk, information, time and money (in 20 minutes) by dan milstein

Risk, Information, Time & Money (In 20 Minutes)

Dan Milstein@danmilHut 8 Labs

Tuesday, December 17, 13

First Principles = Win


1. Opportunity Cost


Hut 8, Two Offers


Client A:PSD’s -> HTML


$20/hour


8 hours of work/day


Client B:BIG DATA


$200/hour


4 hours of work/day


WHAT DO WE DO?!?


Math

200 * 4 = 800 20 * 8 = 160


Opportunity Cost:

$640/day

per person


This is happening at your startup


10 people, 1 yearSeries B Valuation:


$20,000,000


$20,000,000

or $0


Opportunity Cost:$8,000/dayper person


$8,000/day


Axiom 1: It’s not all luck


Axiom 2: Teams that fail, work hard


Be terrified of:


Working on wrong things


Don’t worry about:


Working hard


EVERYONE GETS THIS WRONG


2. Information & Money


What if clients hide the rate?


Spend a week researching


That week makes us money


Like, real money


Information Decision

Money+


3. Risk & Information


Chained Risks


1) Can we build it?

2) Will people buy it?


Two Startups


A) Teleportation


B) Enterprise CRUD App


Teleportation:

try to build


CRUD app:

try to sell


What is different?


Degree of Surprise


Information = Surprise


Claude Shannon is a boss


“A startup is a temporary organization formed to search for a repeatable and scalable business model.”

- Steve Blank (also a boss)


4. Information & Time


Rates of Change FTW


Velocity = Meters/Second


Velocity = Distance/Time


Revenue = Dollars/Month


Revenue = Money/Time


Information = Money


Revenue = Information/Time


Again, real money


5. Risk, Information & Time


Here’s where it gets fun


Example: Health IT


Velocity (aka Revenue):

Organizational response to changing nature of risks


NOBODY GETS THIS


In Summary:


In the presence of extreme uncertainty, you make money by extracting information from reality.



The most valuable information is that which reduces uncertainty about the largest in a chain of risks.



The most valuable information is that which reduces uncertainty about the largest in a chain of risks.

To acquire information quickly, the whole team must constantly adjust its understanding of risks.


6. Fear


Leaders & Fear


“Vision”


Go Forth and Win


Putting Principles Into Practice

@hut8labs

http://blog.hut8labs.com




risk, information, time and money (in 20 minutes) by dan milstein

News & Politics

opportunity

reduces uncertainty

extreme uncertainty

putting principles

information

valuable information

extracting

make money