Chaos Monkeys

I was thinking: what did this book do for me? And a few things come to mind:

It entertained. I got a relatable story of a guy moving from finance at Goldman to small tech to start up tech via the Y combinator to corporate tech at Facebook. There is much politics, drama, gossip, alcohol and even sex throughout. Aside from the plot, Martinez has a facility with the pithy turns of phrase which were delightful to read. Some examples below.

It soothed I had just come out a tech startup feeling cynical. I needed catharsis. And this book delivered. It confirmed the view that founders are rapacious, ego-maniacal, assholes. Words and values to them are means to an end. As are people and employees. Nothing is sacrosanct. Everybody is out for themselves.

I remember someone in a previous job telling me about the cutlery framework for explaining relationships in the Indian civil service, the vaunted IAS. You have a spoon which you use to feed your superiors. You have a fork with which so poke your inferiors. And for your equals, the knife. I have found that to be apt, and certainly the Valley that Martinez describes. Here he is in the acknowledgement:

I wish I could somehow manage to thank the Silicon Valley ecosystem itself: investors, the tech press, lawyers, informants, advisers, and the various characters I’ve alternately befriended or maligned in these pages. Let’s be blunt: ours was a relationship of pure convenience, and I exploited you as much as you did me. As they say, the ideal deal is one where both parties walk away feeling slightly screwed. Here’s to our perfect deal.

Martinez reserves special vitriol for middle managers (409).

It’s because you are without a doubt the least daring and least innovative person at your organization, because in the opportunity-rich environment in which you live, the ambitious and capable have left to pursue it. There’s a negative selection in which the cream (or whatever it is that initially rises) gets constantly skimmed off, and you are what’s left after years of continual skimming. Changing from big company A to big company B is cosmetic, as it’s of course at least a lateral move if not a step up. You learn that what matters in a big company is to avoid falling victim to firing or layoffs, and to appear important and critical to the company’s mission. You have mastered the art of “managing up”: namely, controlling the feelings and perceptions of the management layer above you. You take feedback well, and make sure to be seen speedily acting on that feedback. If you have reports, you champion their careers internally (make sure they know you’re doing that), and try to mold them into people like yourself, who are organizationally effective and recognized as such. In all but the most pathological organizations, your reports’ success will reflect well on you and create your own success. You make sure to form allegiances and friendships with your peer managers, particularly in organizations like sales or business development that you’ll need to push your business agenda forward. When there’s an ineffective and incompetent member in the organization, rather than calling them an idiot to their face and firing them if possible, you channel feedback to their manager and learn to work around their incompetence. If the incompetence does not directly affect you or your team, you look the other way and focus on the levers you do control.

You’re middle management: you’re the necessary layer between the visionaries and risk-takers who created the organization, and the new acolytes of your religion for whom this is a job, and you are their first whiff of corporate culture and authority.

If you’re cleverer than most middle managers (e.g., Gokul), you’ll work at building your personal brand in a way that both augments your prestige and reflects well on the organization, all in a studiously self-effacing way that allays any concerns around thinking yourself a “star.” Failing that, the logo on your business card is your strongest asset, and you need to bank as much on that as you can, right up to the moment you trade it for another (hopefully better) one.

I’ll skip the more mundanely familiar pieces where a manager steals your work and puts his name on it when presenting to the big boss. Or the usual internal fight for resources.

Another of my favorite sections in the book describes what happens when Martinez takes two engineers from the small tech company Adchemy to his startup. The senior engineer has been there for a long time and expecting humanity in the parting. It recalled my recent departure from the tech startup.

On the last hour of the last day, McEachen, saint that he was, went to Murthy’s office to say good-bye. He had invested over four years of his life in the company, watching it grow from a small shared space to the expansive floor of a high-end office tower. I waited impatiently by the emergency exit staircase, to avoid running into any other employees.

After ten minutes or so, he emerged, looking astonished, or maybe shell-shocked.

“He barely even looked up from the screen.”

His voice cracked as he said it. He looked at me imploringly. For a moment I thought he might actually cry.

“He didn’t say anything, and didn’t shake my hand.”

Matt McEachen, Adchemy’s best, most productive engineer, until the day he left the author of the biggest chunk of Adchemy’s codebase, was treated worse than a contract janitor on the way out. I marveled at a world in which well-meaning, industrious, but naive engineers are routinely manipulated by the glib entrepreneurs who seduce them into joining their startups, then relinquish them when they are no longer useful. Every Jobs has his Wozniak. I couldn’t exactly claim I wasn’t, to some degree, doing the same to him right then. He was merely trading Murthy for me. Especially how advertising works Engineers can be so smart about code, and yet so dense about human motivations. They’d be better served by reading less Neal Stephenson and more Shakespeare and Patricia Highsmith.

To no one’s surprise this Adchemy CEO would later go on to sue the author’s startup. Luckily they had friends in high places. None other than Paul Graham via YC makes a cameo and gets everyone to behave.

It taught Martinez does a good job of explaining things.

I’ll take away this long passage on the essence of advertising:

Internet advertising has the same atavistic resemblance to the newspaper advertising that preceded it. The first such ads were run in La Presse, a Parisian paper, in 1836. Advertisement was originally a scheme to lower the paper’s selling price and capture market share. A successful strategy, it was soon copied by all newspapers. The ads themselves were rectangular frames of advertiser-created content, placed either below or alongside regular content, and marked as distinct by their blocky frame and large, garish lettering.

Sound like an ad you saw on nytimes.com recently?

Of course, advertising isn’t the only place where this happens. We refer to spacecraft as “ships” given their resemblance to the seafaring kind, and given the intellectual origins of space travel in the mathematics and engineering of marine navigation. This emulation is merely a result of the organic progression of our mad and clever species from one technological toy to another.

In the same way, marketers refer to websites and mobile apps as “publishers,” a quaint reflection of the advertising world’s origins in that of ink and newsprint. The “publisher” is simply the entity that brings the eyeballs to the auction block, whether via Pulitzer Prize–winning writing or a game in which you launch irate birds against antagonistic pigs. During the early days of Internet advertising, the publisher played a critical and powerful role. In the aughts, websites like Yahoo had an entire sales force (as newspapers still do) that sold those little squares of characters and images directly to advertisers. Many a fax and email flew around just to sell one “insertion order,” in the industry argot (and a wonderful double entendre). The ability to target was nil; at best, one could indicate a certain part of the website for an advertisement to appear in (say, the movies section). Analytics and attribution—answering the question of who saw and eventually bought what—were equally nonexistent. The only difference between the Internet and highway billboards was that you didn’t have to physically glue a poster somewhere.

By 2008, that had all changed, which is why a former Wall Street quant like me was at Adchemy. A company called Right Media was allowing advertisers to segment users into specific clusters based on their actions on a given site (e.g., putting something in a shopping cart). Originating the notion of real-time data synchronization between the online world and specific publishers, Right Media even let you tag users that came to your site (or anywhere else) and find them again later. Acquired by Yahoo in 2007, it had developed the first “programmatic” media-buying technology; “programmatic” meaning media controllable via computers talking to one another, rather than humans talking to one another via sales calls. Additionally, one could target advertisements based on user demographics like age, sex, and geography. Media buying was no longer about putting a square on the automobile or real estate section, but about finding specific users anywhere and anyhow. All this data being generated, stored, and used, by both publisher and advertiser, made room for people who once priced credit derivatives to do the same for parcels of human attention instead.

Something else was going on.

In media, money is merely expendable ammunition; data is power. With this new programmatic technology that allowed each and every ad impression and user to be individually scrutinized and targeted, that power was shifting inexorably from the publisher, the owner of the eyeballs, to the advertiser, the person buying them. If my advertiser data about what you bought and browsed in the past was more important than publisher data like the fact that you were on Yahoo Autos right then, or that you were (supposedly) a thirty-five-year-old male in Ohio, then the power was mine as the advertiser to determine price and desirability of media, not the publisher’s. As it turned out (and as Facebook would painfully realize in 2011, forming the dramatic climax of this book), this “first-party” advertiser data—the data that companies like Amazon know about you—is more valuable than most any publisher data.

This was a seismic shift that would affect everything about how we consume media, leaving publishers essentially powerless and at the service of the various middlemen between them and advertiser dollars, all in the name of targeting and accountability. If the publisher wasn’t savvy enough to arm itself with sophisticated targeting and tracking bead tech works fore tangling with the media-buying world, then that world would come to them, in the form of countless arbitrageurs and data quacks peddling media snake oil. Which is why even august publishers like the New York Times live at the pleasure of the media supply-side technology, data management solutions, and advertiser technologies that ostensibly pay them. Of course, some very protective publishers like Facebook and Google, with unique media offerings, refuse to get arbitraged so openly, and to one degree or another, attempt to own the technical and business connection between them and the advertising dollars.

This is how online advertising works: money turns into pixels and electrons in the form of ads, which turn into a scintilla of attention in someone’s mind, which after a few more clicks and electrons shuffling about, turns back into money. The only goal here is to make that second pile of money as large as possible relative to the first pile of money.

That’s it.

Whether it be brand marketers trumpeting the new BMW X5, game developers getting players to spend real money on virtual goods, or someone selling an online nursing degree, the only difference is the time frame in which those different goals occur—in other words, the time between attention and action. If the time frame is very short, like browsing for and buying a shirt at nordstroms.com, it’s called “direct response,” or “DR” advertising. If the time frame is very long, such as making you believe life is unlivable outside the pricey mantle of a Burberry coat, it’s called “brand advertising.” Note that the goal is the same in both: to make you buy shit you likely don’t need with money you likely don’t have. In the former case, the trail is easily trackable, as the “conversion” usually happens online, usually after clicking on the very ad you were served.* In the latter, the media employed is a multipronged strategy of Super Bowl ads, Internet advertising, postal mail, free keychains, and God knows what else. Also, the conversion happens way after the initial exposure to the media, and often offline and in a physical space, like at a car dealership. The tracking and attribution are much harder, due to both the manifold media used and the months or years gone by between the exposure and the sale. As such, brand advertising budgets, which are far larger than direct-response ones, are spent in embarrassingly large broadsides, barely targeted or tracked in any way.

Now you know all there is to know about advertising. The rest is technical detail and self-promoting bullshit spun by agencies. You’re officially as informed as the media tycoons who run the handful of agencies that manage our media world. (pg 39)

There is much besides such as where to get coffee in SF?

The Creamery is the ne plus ultra of SF startup cafés. You could probably raise money from a VC, hire an engineer and businessperson, and then turn around and sell the company to a big-company exec right there, before your coffee gets too cold.

How to value a start up deal?

The “pre-money valuation,” or “pre,” is the stated value of a company before the investors’ money is added to the company’s balance sheet. “Post” is that same value after you’ve cashed their check(s). For example, raising $1 million on $10 million pre means you’ve got an $11 million ($1M + $10M) post-valuation. It’s paper value, plus cash o You’re middle management: you’re the necessary layer between the visionaries and risk-takers who created the organization, and the new acolytes of your religion for whom this is a job, and you are their first whiff of corporate culture and authority.

How capitalism works?

The reality is, Silicon Valley capitalism is very simple: Investors are people with more money than time.Employees are people with more time than money.Entrepreneurs are simply the seductive go-betweens.Startups are business experiments performed with other people’s money.Marketing is like sex: only losers pay for it.Company culture is what goes without saying.There are no real rules, only laws.Success forgives all sins.People who leak to you, leak about you.Meritocracy is the propaganda we use to bless the charade.Greed and vanity are the twin engines of bourgeois society.Most managers are incompetent and maintain their jobs via inertia and politics.Lawsuits are merely expensive feints in a well-scripted conflict narrative between corporate entities.Capitalism is an amoral farce in which every player—investor, employee, entrepreneur, consumer—is complicit. But hey, look at these shiny iPhones. Right? (p67)

In his memoir, Antonio Garcia Martinez comes across as a swashbuckling, bridge-burning hero. That our hero would also want sympathy is perhaps not surprising. Redemption is, after all, on offer to all.

Don’t be deceived by my withering treatment of Facebook in this book; inside every cynic lives a heartbroken idealist. If I’m now a mordant critic, it’s because at one point, like Lucifer once being the proudest angel before the fall, I too lived and breathed for Facebook, perhaps even more than most.