Tag: Startups

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Mediocrity vs Greatness in Complex Systems

It is 12:27AM and I didn’t write anything today. Better late than never.

These days I am thinking about complex systems. I am interested the most in what makes some teams, companies, or countries produce mediocre vs great results.

I am starting more and more to believe that the structure of the system matters more than the inputs. As long as the people pass a minimum qualifications threshold, their outcome is highly dependent on the structure they are in.

The problem is it is easy in retrospect to understand what made a system work or not work. It is hard to deliberately design a complex system in a way that makes it produce great results. You kinda need to control its evolution without intervening too much.

I think we will never find the answer to the why question. But the thing to keep in mind is that structures matter, and the outcomes are based on them.

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Google Flights

I was never a fan of Google flights. Yesterday a friend told me to give it another shot. I went there and I got hooked.

The new experience is much faster and more dynamic. The work done on the front end is great.

The most impressive for me is how fast the results load if you change something in the search. For example when you add another passenger, Google can’t just multiply the price * 2 as they have to ensure the flight still has a seat for the passenger you just added. This requires a new API request to the providers asking them for the new search results, which is typically slow. Same applies to any other change like dates or airports.

It seems this speed is driven by caching results on their end, however cache is not reliable as it may happen that the trip is no longer there, or the price went up by the time users click on the flight to book it. I don’t know what else they are doing to make it this fast while staying reliable.

Another reason for this speed is caused by only searching the airlines themselves and not other 3rd party websites. SkyScanner always gets stuck trying to retrieve the data from that one slow provider. This also reduces complexity on the front end as Google doesn’t have to show the same flight multiple times by multiple providers.

Overall it seems that you can provide a superior experience by building insanely faster horses, even if you don’t have the all the options, nor the most accurate prices.

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App Store 30%

I recently read about the backlash on Apple and Google’s 30% cut on every transaction on their stores.

Fortnite game will no longer be supported on Android. Players are asked to disable the security features and install the application outside of Google play store. I wonder if others will start doing this, or if there will be a new Android store with better economics at least for games.

This is not possible on iOS. Today I was on YouTube app on my iPhone and it prompted me to try YouTube premium free for one month. As usual I like to check those funnels and noticed something weird. It costed 16 Euro per month after the trial even though I saw it before on the web version costing 12. I went to YouTube mobile web version and surprise surprise, it costs 12.

So Fortnite is circumventing Google, and Google can’t circumvent Apple so they are charging more, and probably Spotify have a similar dynamic with both Apple and Google since they can charge less for their music services since they both own Apple and Google music respectively.

What I like about this interesting dynamic is how it shows the strength of the big players, and that there is no single playbook for how to do things.

Fortnite will sacrifice the revenue drop from play store, because apparently they expect to make more from their fanatic users who will just do anything to download the game. And Google is charging more on iOS, expecting users to not bother and still pay.

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Ekshef Postmortem

We don’t have that many startup postmortems coming from the middle east. Here is one.

Backstory

We started Ekshef in 2011 fresh out of college. I started it with other four co-founders. Our goal was to build an online booking service for doctors similar to what’s currently Vezeeta. The main motive for me was to solve the problem of finding and booking doctors, since I spent countless hours of my life in doctors’ clinics, and in my parents’ car while waiting for my turn.

We joined Flat6Labs cycle 0 (the very first cycle).  And after some ups and downs, we stopped working on Ekshef in 2013/2014. By the time of this writing, all the founders (with the exception of one) are outside of Egypt, and most of the people we worked with during that time are also currently outside of Egypt.

Since I have been getting some inquiries on what happened, and why it didn’t work. I decided to answer this once and for all. Before you proceed please note that this is my perspective, and other involved stakeholders might have different opinions.

Wrong Problem

We wasted a lot of time trying to solve the wrong problem. We thought if we solve the appointments problem for patients everyone would be happy. We realized that doctors don’t give a shit about organizing their appointments. In fact, some doctors even like having their clinics busy and full, because it is an indicator for many Egyptian customers of how popular – which means good – is this doctor.

We later realized the biggest pain for patients is actually finding out the good doctors. I still believe this is the main pain point in Egypt. People still ask their mom, their neighbor, or their friends for doctor recommendations. When we realized this we started building a social recommendations engine. The idea was you login to Ekshef using your Facebook account, then you would have two options 1) Recommend a doctor to your FB friends. 2) Ask for doctor recommendations. Back then, Facebook APIs allowed pulling all of the users’ friends (hello Cambridge Analytica). We were one of the beneficiaries of this feature and were using the social graph to help users recommend doctors to each other. This feature had moderate success, we could’ve optimized it more but we ran out of funding and lost hope before managing to get there.

Inexperience

We were naive and fresh out of college. We had a great technical team that could build anything. This led us to build a crazy search engine that would allow you to search for doctors with any way. Location, specialty, price, opening hours, you name it. To make it more crazy, I wasn’t satisfied by most of the services that provide Arabic search, including Vezeeta. Omar El Mohandes, who was working with us at the time and currently working at Amazon based in London implemented the Soundex search algorithm for Arabic. This algorithm allows you to search for any Arabic word without having to worry about the different versions the word. احمد = أحمد. Not only this, Omar did some improvements to make it detect typos. Yes, typos in Arabic names were still getting you the right doctor on Ekshef. Just like Google.

Another side of inexperience was dealing with those outside the company. We believed a lot of people that were lying to us. We had to no experience how to raise funds, and even our investors were inexperienced as much as we were with how the model should work. The general push was towards fund raising, but the company wasn’t really funding ready. The fund raising was based on totally unrealistic financial models that make no sense for a pre-market fit, pre-revenue company. We didn’t know it, our investors didn’t know it, and the people we were trying to raise funds from didn’t know it. It was like a group of blind people trying to identify the elephant in the room.

Wrong timing

When we started in 2011, internet and smartphone adoption wasn’t at the same level it is at now. Doctor assistants didn’t have smartphones. They didn’t know how to use a computer or the internet. Facebook and twitter weren’t as popular. People were downloading a game such as subway surfer by sending a 5 EGP message to get a link to the game on Google play store. And amidst all this, we were naively thinking the uneducated doctors assistants will use our system to organize appointments.

Add to this the political instability, and the fact that none of us had to stay and work in Egypt. We all decided one after another that it is not worth it, and everyone left to join a company abroad (Google, Amazon, Booking…etc).

Final Remarks

Ekshef experience shaped me in many ways. I have countless stories from these days. I met many great people that put their trust in me and helped me a lot. I have made good friends and was surrounded by some of the smartest people I know. I also had my flaws. I apologize for anyone I hurt or screwed up with. And I hope they forgive me.

As for my opinion on starting a startup in Egypt. I am extremely bearish on Egypt and don’t see it as a fertile ground for anything meaningful to come out of it.

There is a lot of inefficiency that makes any optimization problem impossible. There are basics that don’t exist such as logistics and payments infrastructure. There is an unavoidable brain drain that makes scaling an engineering organization super hard. And last but not least, building a successful company is a decade worth of effort with low probability of success, and with the current currency situation the economics don’t work compared to having a stable dollar/euro paying job abroad.

I hear you saying but look at Instabug and Wuzzuf. Those are exceptions to the rule. We are yet to find their final outcome. Even with the successes they have, they are at risk of losing everything and going back to zero. And still, those are exceptions in a country that’s failing by any objective measures.

I hope I am wrong.

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Shoe Dog

I recently finished the memoir of Nike’s founder Phil Knight. I didn’t know it is pronounced “Nikee” and not “Nike like Bike”.

It is a clear story of passion and persistence. The book reminds me of “The hard thing about hard things” by Ben Horowitz. It has the same pattern of a series of ups and downs with extremes on both ends. The main difference I felt was Phil’s story was more personal. He talked more about how he felt and what was he thinking when things were happening. It kinda makes you feel in his shoe.

It is a story of mastery. Starting the company with his three decades older coach is a great example of the evolution from apprenticeship to mastery. They both had passion for shoes and running. Phil had the energy, while Bowerman had the experience that made him innovate on shoe designs. I feel envious he was this lucky to find such a mentor.

The book is well written and worth the time. There are countless quotes to share but those two are the ones I liked the most.

  • “We’re also finishing construction on a new athletic facility, which we plan to dedicate to our mothers, Dot and Lota. On a plaque next to the entrance will go an inscription: Because mothers are our first coaches.”
  • “When goods don’t pass international borders, soldiers will. Though I’ve been known to call business war without bullets, it’s actually a wonderful bulwark against war. Trade is the path of coexistence, cooperation. Peace feeds on prosperity.”
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The Arab tech scene and its impact on Egypt

Egypt has been losing its Arab leadership politically, and I can say it is also coming to tech.

Gulf led by Saudi Arabia and UAE understands that oil is running out, and the world won’t be as dependent on it as before. So they started finding new ways to secure their future.

Luckily, we are witnessing the second industrial revolution, this time it is happening in tech. So Saudi and UAE decided to double down on tech investments, and the first macro and micro trends started to show up.

Saudi’s Public Investment Fund (PIF) the country’s main sovereign wealth fund invested $3.5 billion in Uber earlier this year.

It also announced a new 100 billion – with a b – dollars fund with Japan’s softbank to invest in tech startups.

Then UAE announced it will be the first place in the world to build Hyperloop to connect Dubai to Abu Dhabi. Hyperloop is a new technology that enables the transportation of humans and goods at 1200km/h without flying. The original paper of the technology was published by Elon Musk. The company that will build the Hyperloop in UAE is Hyperloop One, a company founded by ex-SpaceX employees and one of silicon valley’s top investors.

Earlier this week, Emaar’s Chariman (The company behind Burj Khalifa) announced that he is building a new ecommerce startup with $1 billion investment, half of it coming from Saudi’s PIF, the other half comes from him and other Emarati investors. The new venture will be headquartered in Riyadh.

Yesterday, Saudi announced another 200 million Saudi Riyal VC fund to support local tech startups. It is still unclear how the fund will be deployed and managed.

I think you only need two kinds of people to create a technology hub: rich people and nerds – Paul Graham, founder of Y Combinator

Gulf has rich people, it lacks nerds. Egypt has higher ratio and number of nerds than Gulf.

To attract these nerds, most of whom already left Egypt to chase better opportunities in Europe and US, these gulf companies are paying hefty sums to attract them to go and work there.

Careem, Uber’s middle east competitor is paying unmatchable salaries for engineers to join its Dubai office, they are even opening an office in Berlin to attract Arab engineers who don’t want to leave Germany. They are paying higher than most of Germany based companies.

These new ventures need engineers, and with such levels of funding they will do whatever to get them on board.

I do believe this snowball will keep getting bigger, funding will increase in the Arab world, with competition between different Gulf states to attract tech talent.

There could be a bubble, mostly because these companies are not started by nerds but rather by rich people who think if they put enough money into it, it should work. Which is also another reason why we will see most of these companies as localized copycats to successful global ones, mostly in ecommerce, logistics, and payments since these have the easiest to understand business models.

Overall I think this is mostly good, because if things are changing it means there is a chance for someone to create something really innovative on a global scale. Even if most of the current experiments fail the knowledge will be passed to other people and everyone will learn from their mistakes.

I lost hope in Egypt becoming a good tech hub during my lifetime long ago, but these are other signs to confirm that.

I hope I am wrong.

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Every Loser

I watched the movie “the big short” more than 10 times. It is a great story of how few people challenged everyone, and turned to be right.

One of the scenes I like is when this company led by Mike Baum (Played by Steve Carrel) meets a guy from Deutsche Bank who purposes the idea of shorting mortgage backed securities.

Shorting in this case simply means going to a bank and telling them I am gonna pay you X yearly. In the case of the unlikely event that this mortgage bond fails (people couldn’t pay their loans), the bank would pay you 10X or even 100X.

Mike Baum couldn’t believe what the Deutsche guy said that people won’t be able to pay their mortgage. He is a skeptical man. So he decided to go and find out.

The line that stood with me is this one where he is urging his team to move fast because..

“Every Loser With A Couple Million Bucks In A Fund Is Gonna Be Jumping On Us.”

I recently resonate frequently with this line. I think this is also becoming true in tech. Every loser with a computer and internet connection can launch a website/app and call themselves a founder. Only few people will have the courage, commitment, patience, and dedication to build a great company.