Knowing what, knowing how

By Oliver Damian

Knowing what is not the same as knowing how. Some are good only in one and not the other. The lucky ones have a bit of the two. Game changers have a great helping of both.

With knowing what I'm not referring to the simple retention of information. Names, dates, places, and the like. Things like Ulan Bator is the capital of Mongolia. This ability used to be much more valuable back in the day when there was a lot more friction in accessing information. To look up something meant knowing which hefty volume of the dead tree encyclopedia or almanac to thumb through. For more serious topics, it meant looking through a physical card catalogue of index cards that pointed to books or microfiche. This has now largely been substituted by Wikipedia, SSRN,WorldLII, and other online information providers who are a google search or social media feed link away— literally from the palm of our hands via our smart phone or tablet.

What I meant was not knowing the dots but rather the ability to connect the dots. Knowing what is knowing what is important, what needs to be done— given the context, limitations, risk, opportunities and trade-offs. It is big picture thinking. It's about making decisions. Strategy, if you will. Big ideas territory.

Knowing how, in contrast, is tactics. It is technical knowledge. For example knowing how to code websites using HTML, Javascript, and Amazon Web Services. It is knowing how to do things, not necessarily knowing if the thing one knows how to do, is the right thing to do. It is the ability to implement according to specifications or directives made by someone else.

I have a friend who—apart from two months as a bus conductor— has never worked in his life. He never went to university. Yet he is the wealthiest and most street-smart philosophical human I personally know. In his words: I never had a CV. I made myself unemployable. He learned how to be an entrepreneur early on in life. He knows in his bones that there is always a deal to be made. Somewhere in the world, there will always be assets that are underpriced. The trick is to: find these assets; buy them at a low price using borrowed money; transform them (bunch, slice or spruce them up); then sell them for a much higher price. If you are smart about it, the only money you risk is the deposit for the loan to buy the asset—the very same asset that will secure the loan. Even the deposit can be mezzanine financed. There, in a nutshell, is the formula to create money out of thin air. There is always a flow of money. You just have to position yourself where the flow is happening. It is not quantum physics, but not everyone can do it.

My friend did not know how to draft a mezzanine agreement, or to create a Dutch Antilles special purpose vehicle. He paid bankers and lawyers to do it for him. He may not know all the details, but he knew the details that mattered. As he kept saying: I've never put money into something that I do not fully understand. I just don't do it.

Of course knowing what to do is not enough. You actually have to do it. You must have the apetite for risk. Entrepreneurship by its very nature is risk-taking. It is not for those who expect the safety of wages to be deposited in their bank accounts at the end of each month. This appetite for risk is what separates the entrepreneurs from the employees.

Now, the real game changers have both know what and know how. Mark Zuckerberg did not merely see the potential of social networks and hired people to program, he coded the first version of Facebook. Larry Page and Sergey Brin of Google did not merely see the potential for a better search engine, they actually invented a real breakthrough in computer science with PageRank. Bill Gates together with his partners coded Altair BASIC. As with anything, there are exceptions. There are people who are so strong in their know what that they can squeeze, to the max, the know how out of everyone around them. Think, Steve Jobs and Jeff Bezos.

However, in the lean start-up world we now live in, it is simply much better if you can code. You don't have to be the best. You simply have to be good enough. When you get an idea, you could try it out, experiment and tinker. Just enough to build a minimum viable product(MVP)— to test if your idea has legs. If it has, then that is the time to bring in the kickass know what people to add belts and braces, bells and whistles on your MVP.

The industrial revolution gave us the developed world we live in now by harnessing the economies of scale in the production of atoms by first exploiting steam, then petroleum, now electricity. Think factories where hard goods are made; industrial farming; massive transport, supply chain and distribution infrastructure. To make these economies of scale happen, we had to build massive enterprises that have an HR, marketing, accounting, sales and of course the all important management department in addition to the people who actually make the products sold. As a fresh graduate who got good grades in an approved specialist field at university, you hope you could easily slot in as a cog in this massive machinery and get promoted year in and year out.

It's different in the software world where bulk of the work is with bits not atoms. You don't need all the massive overhead of the industrial age. A start-up can be as small as a guy and a gal working in a garage writing code that piggybacks on the massive cloud infrastructure already built by the likes of Amazon Web Services. In a small, lean, fluid team, there is simply no room for super-specialists. Everyone has to do a bit of everything that needed to be done. Of course, there would still be a division of labour between back-end and front-end developers, UX designers and the like. But everyone has to pitch in to do marketing, customer service and other business building tasks.

David Heinemeier Hansson sums it up really nicely in 49:50 to 51:14 of this badass Unlearn your MBA talk at Stanford:

[...]it requires that you actually do stuff, like it doesn't work if you're the idea guy. So, I think with starting a company, being the idea guy is... doesn't work. There's no room in a new small company for an idea guy. You have to do stuff. You have to have utility, value. Ah... You have to be able to build stuff, design stuff, market stuff... Something that has direct value, ahm... to the business, not just an idea, and that's where I see a lot of these actually go wrong, because people would think they can get along just being the idea guy, so just being management. There's no management when you're three people. There's no management when we're 15 people. We still don't have any managers hired at 37 Signals. Every single one of us are producers. I'm still a producer. I still write code. Jason still designs. We still do all the stuff and management is sort of the off-shoot of oh yeah sometimes we have to deal with issues as they come up. The problem is when you have actual managers whose sole job it is just to manage. They make up bullshit to manage. Because you got to fill an 8 hour day. And in the beginning there's like 40 minutes of management every 3 days. That's what you need in terms of management. You do not need 8 hours of management. Which is how you get policies, and all these other bullshit that crops up when people don't have anything to do. Idle managers are absolutely the worst.

Lastly, page 46 of the Valve Employee Handbook specifies what type of people they are looking for in their world of making game software. To them the most valuable people are T-shaped people. These are people who are generalists highly skilled at a broad set of valuable things (the horizontal bar on the T) and who at the same time are the best in their narrow discipline (the vertical bar on the T).

David Heinemeier Hansson-Unlearn Your MBA (Entire talk)