There’s a company in Australia that’s growing at a tremendous rate, but isn’t receiving enough mind share  in the business world. So far I’ve read about three business practices employed by Atlassian that stands out from the typical company.

No Sales Force

One of the the fastest growing enterprise software companies, Atlassian earned $105 mm in revenue for 2011, an increase of 35%, with no sales force. They’ve also had 40 consecutive quarters of profitability. Instead of employing a sales staff, Atlassian relies on marketing and good customer service to ensure its users have “a great experience with the Atlassian brand”.

According to co-founder Scott Farquhar:

Instead of a sales guy calling them up and saying ‘When are you going to buy?’ this week, next week, the week after, we allow all our customers to evaluate the software themselves.

We’re at the end of the phone if they have any questions but we’re not going to badger them, trying to get them across the line.

Most businesses don’t provide enough information about their products, instead hoarding information so customers are forced to consult sales staff. By publishing the price, customers know exactly what it’ll cost. thereby, alleviating the need to rely on sale tactics like discounts. The company could then just focus on  making the experience and the product easy to try and easy to buy

Motivating Employees

Click here to view the embedded video.

This video adapts Daniel Pink’s talk at RSA and is based on his book, “Drive,” an exploration on what truly motivates us. When expounding on how to get employees to add value, Pink uses Atlassian as an example.

Similar to Google’s 20% time, Atlassian allow their developers for once a quarter, on a Thursday afternoon, to work on anything they want, any way they want and with whomever they want. The only requirement is that people have to show what they’ve created to the rest of the company at a fun and spirited meeting 24 hours later.

Financial incentives result in a negative impact because they are extrinsic, external and materialistic.
The reason Atlassian gives their employees 24 hours of free mental stimulation is because it fulfills their intrinsic motivation. This in turn gives gives them free time during work hours to create whatever their heart tells them to. The secret to high performance isn’t rewards and punishment, but that unseen intrinsic drive (what’s inside of you). Intrinsic drive is the drive to do things for their own sake the and the drive to do things because they matter

Atlassian calls these sessions “FedEx Days” because people have to deliver something overnight. These one-day bursts of autonomy have produced an array of fixes for existing software and ideas for new products that might not have emerged otherwise. This isn’t management through carrots and sticks. It’s innovation through autonomy.

Self-Analysis Instead of Peer Reviews

According to Atlassian’s HR director, traditional performance reviews cause anxiety for all parties and act as a demotivator. Instead of discussion about how to enhance people’s performance, the reviews caused disruptions and anxiety, and demotivated team members and managers.

Atlassian abolished official performance reviews two year ago, and replaced them with a brief weekly self-analysis that employees complete online by dragging a dot along an axis in response to questions.

You can read a more lengthy explanation on why they decided to replace the peer review system here.

While I thoroughly enjoyed Walter Isaacson’s detailed biography on Steve Jobs, most of the book’s recounted stories expounded upon what we already know about him through anecdotes and interviews. What piqued my interest, however, were the last few chapters, where we get to glimpse what Steve Jobs would have focused on if he had more time to make another “dent in the universe”.

Even though Steve Jobs had precious little energy and time left, he spent a surprising amount of both thinking and talking about education. On his first meeting with Barack Obama, Jobs lectured the President on how to run the country, emphasizing the importance of eliminating the bureaucratic barriers to improving our education system. Moreover, Jobs recognized the need to replace our out-dated lecture-based teaching with more real-time interactivity and personalization.

The meeting actually lasted forty-five minutes, and Jobs did not hold back. “You’re headed for a one-term presidency,” Jobs told Obama at the outset. To prevent that, he said, the administration needed to be a lot more business-friendly. He described how easy it was to build a factory in China, and said that it was almost impossible to do so these days in America, largely because of regulations and unnecessary costs.

Jobs also attacked America’s education system, saying that it was hopelessly antiquated and crippled by union work rules. Until the teachers’ unions were broken, there was almost no hope for education reform. Teachers should be treated as professionals, he said, not as industrial assembly-line workers. Principals should be able to hire and fire them based on how good they were. Schools should be staying open until at least 6 p.m. and be in session eleven months of the year. It was absurd, he added, that American classrooms were still based on teachers standing at a board and using textbooks. All books, learning materials, and assessments should be digital and interactive, tailored to each student and providing feedback in real time.

Recognizing his time was nearing the end, Steve Jobs meets with Bill Gates for the last time. Once again, education was on Steve Jobs’ mind as he wonders how his friend and former-adversary would approach education.

They spent more than three hours together, just the two of them, reminiscing. “We were like the old guys in the industry looking back,” Jobs recalled. “He was happier than I’ve ever seen him, and I kept thinking how healthy he looked.” Gates was similarly struck by how Jobs, though scarily gaunt, had more energy than he expected. He was open about his health problems and, at least that day, feeling optimistic. His sequential regimens of targeted drug treatments, he told Gates, were like “jumping from one lily pad to another,” trying to stay a step ahead of the cancer.

Jobs asked some questions about education, and Gates sketched out his vision of what schools in the future would be like, with students watching lectures and video lessons on their own while using the classroom time for discussions and problem solving. They agreed that computers had, so far, made surprisingly little impact on schools—far less than on other realms of society such as media and medicine and law. For that to change, Gates said, computers and mobile devices would have to focus on delivering more personalized lessons and providing motivational feedback.

I was one of the six people that met with Avichal to ask for his opinion regarding the education space. I remember speaking with him while we were still undergraduate students, and his company, PrepMe, was starting to receive traction.

His provocative article entitled, “Why Education Startups Do Not Succeed, ” initiated a good deal of enlightened discourse amongst both entrepreneurs and educators alike. While I don’t fully disagree with all of the points found in the article, I do want to give my thoughts on Avichal’s main points in hopes that it’ll continue this healthy discussion on the future of online education.

Argument 1: Most entrepreneurs in education build the wrong type of business, because entrepreneurs think of education as a quality problem. The average person thinks of it as a cost problem.

Avichal is arguing that the educated few in America view quality as the primary factor in their purchasing decision, and are thus price insensitive when it comes to education spending. On the other hand, the majority of Americans think of education as an immediate cost, and are thus unwilling to spend on anything outside of compulsory education.

This argument constitutes the basis of Avichal’s reasoning on why online education start-ups don’t succeed and is fundamentally an argument I disagree with. Any person, “educated” or “average”, will not put education inside a vacuum and look at it purely from a cost or quality problem.

From every microeconomics course that I’ve taken at Stanford, the basic tenant is that individual purchasing decisions rely upon the relationship of both the price and the quantity of the good or service. The good or service, in this case, is education.

The implication of the above argument is that the educated few are price inelastic and will continue to demand for education even if subjected to a substantial increase in price. Perhaps, that is true. If my total tuition cost had doubled, my parents would still try to find a way to help support me and I would have to take an even larger loan. However, at a certain price point, for example $1 million for 4 years, we would have to seriously reconsider attending a prestigious university, and I am Asian-American. In fact, there is a movement amongst the very educated, most prominently Peter Thiel and Michael Arrington, advocating forgoing higher education due to its inflated costs and unjustified value.

[Please see: Infographic -  The Higher Education Bubble]

Lets refocus on the average American since that portion of the argument is most surprising to me; essentially, the average person is price elastic when it comes to education, and therefore a rise in price would cause their demand to drop to zero. Education is mandated by the government, and as a result, is immediately free, not taking into consideration that it’s tax payers’ money. If we assume for a moment that education is no long compulsory nor provided by the government, what would the average American do? I am not part of the 50% of America that don’t have beyond a high school degree, but I will assume that most Americans won’t neglect to provide their children with some type of education, at least through primary schooling. I would hope that is the case for the sake of this country.

I don’t know exactly why more people are not paying for learning outside of compulsory education. Perhaps, it’s a complete trust in the education system. After all, shouldn’t our school system adequately prepare our children for the next level? Perhaps, it’s a complete distrust of the education system. After all, if our school system failed to provide our children with basic literacy and math fundamentals, what is the point of test-prep and higher education?

I do know, as immigrants to this country, we came to America with a clean slate in regards to the U.S. school system. There were no prior experiences on my parents part to believe that a high school diploma can guarantee a stable factory job and life. Nor, did they have any any reason to distrust the system; why would they come to America, otherwise. We also arrive inherently disadvantaged, and thus every additional bit of education matters more to us.

Avichal argues that for “the poor, correlating with being African American and Hispanic, affordable, but poor quality approaches just aren’t good enough; these communities are on the hunt for dramatically better approaches and willing to try new things.” Khan Academy’s demographic chart is used to support this.

However, my perspective is that African-Americans (152 score), with past experiences of the school system failing them, are willing to try an approach outside of the traditional classroom, while the immigrant ethnic groups, Asian and Hispanic (scores of 270 and 232, respectively) want that additional resource to catch-up with their Caucasian classmates.

Argument 2: Building in education does not follow an Internet company’s growth curve. Do it because you want to fix problems in education for the next 20 years.

I completely agree with the latter part of this argument, but not entirely with the first part. There are hard, rigid bureaucratic obstacles standing in the way of any true reform of the education system. The documentary, “Waiting for Superman“, did the best it could within 102 minutes to explain how difficult it is to advance or make changes to our current education system, a system that has not changed in the past half century.

Education might not be ripe for disruption, but that doesn’t mean it doesn’t deserve to be disrupted. Alvin Toffler believes as much and Bill Gates believes as much. It certainly won’t be disrupted at the policy level, as many educators and reformers have tried in earnest and failed. It has to be disrupted in a space where there won’t be regulations or unionized workers prohibiting change. The only area I can think of is the Internet, and what a disruptive agent the Internet can be.

To build a company that’s tackling a problem as large and important as education, it should stand to last at least 20 years. The next great education company shouldn’t have the mentality of a mobile social gaming company, nor even a social network or video-sharing website. These companies are able to have the typical Internet growth curve because it is free.

The three consumer focused education companies that Avichal provided as examples (Tutor.com, TutorVista, Globalscholar), inherently, have a scalable cost, which are their hired tutors, and they must transfer that cost to consumers. Anytime, there’s a cost associated with a consumer website, growth will always be significantly slower than expected, especially for something as immaterial as knowledge.

The other problem these companies face is that there is already an incumbent competitor, which are traditional schools. There is already knowledge dissemination at these schools for 8 hours a day. Tutoring companies, traditional or online, are supplemental services to traditional schooling, and as such, shouldn’t be expected to have a hockey-stick growth curve.

What can be considered a game-changing, direct competitor to traditional schooling? For some people, it’s Khan Academy. Khan Academy and schools are already on equal footing in terms of cost, so the only differentiator is the quality, and for some people Salman Khan’s recorded lectures are of much higher quality than that of their math teachers.

However, there are two problems I have with Khan Academy. The first is that recorded lectures, albeit great for an initial explanation, falls at the wayside when an individual is stuck on a concept or has questions; in the other words, it’s a very one-dimensional way of learning. Khan Academy is able to get away with it because Salman Khan’s explanations of mathematical and scientific concepts are so lucid and clearly-explained. In addition, industrious teachers have begun to augment their classrooms with his lectures, while concentrating on what teachers are supposed to do: providing the individual attention necessary so that all students are ready to learn the next material.

The second problem I have is that Salman Khan is one individual attempting to scale. While his lectures on math and science are superb, other subjects, as one critic pointed out, specifically citing Khan’s history lectures, are sub-par.

Khan Academy has planted the seed that online education can be effective; Stanford’s new initiative with their online computer science courses is inspired by Khan academy. However, in order for there to be lasting growth, an online education company should be a platform; a way to connect outstanding teachers with willing students, while eliminating the distance barrier. It should be a platform much like eBay is a platform that connects buyers and sellers, and eBay certainly had the Internet growth curve people are looking for.

Khan Academy and the other tutoring companies mentioned are constrained by the supply of quality teacher(s). A platform would solve the bottleneck by finding, curating, and scaling the number of quality teachers available.

Argument 3: There are opportunities in education in servicing the poor in the US and building a company in Asia — not in selling to the middle class in the US.

Argument 3 is an extension of argument 1, although the logic implied here is that since the average American considers education to be an expenditure, business opportunities can’t exist. I don’t agree that the average American considers education purely as an expenditure, as explained above. But even if they did, health care in America is considered an expenditure, yet more money per person is spent on health care in the U.S. than any other country in the world (1) and 83.3% of the population have insurance of some kind (2).

However, I won’t dispute the argument that there are opportunities to be had in Asia, but not for the reasons stated. Avichal claims that a non-educated person in Kansas won’t die homeless, while a non-educated Chinese person would. I don’t think that’s true, and it’s certainly not true in Korea and Japan, yet countries in most of Asia have similar attitudes towards education.

If we look at the societal incentive structures of these Asian countries, I think we’ll have a better understanding of why there’s such an emphasis on education in Asia, and possibly find a reason why education companies in the U.S. haven’t seen spectacular success.

The incentive structure in China is set-up in such a way that one of the few ways to advance in life is to acquire a diploma, even better multiple diplomas, and even better still multiple diplomas from prestigious universities.  This quote from a lengthy article explains the importance of scoring well on the gaokao, the national college-entrance exam:

In China, there is a time-honored career domino effect: good gaokao score, top university spot, communist Party membership, job in the government bureaucracy.

When achievement in life is tied specifically to the words found on a piece of paper, everybody’s efforts will be focused on that piece of paper. On the other hand, in America, examples of success don’t necessarily revolve around a piece of paper. When there are possibilities of acquiring wealth and happiness by pursuing passions in music, sports, fashion, entrepreneurship, etc., obtaining that piece of paper is de-emphasized. Hence, the UnCollege movement.

A lot of education start-ups in the U.S. have been focused on preparing our students to succeed in a “gaokao” society, while the reality is that achieving success in the U.S. doesn’t necessarily depend on a perfect SAT score.

Education companies have seen partial success in America because their product is made for a “gaokao” society, yet America is only partially a “gaokao” society. A startup that focuses on the mentalities prevalent in the United States would have the opportunity to succeed with the middle class.

We should ask ourselves, if a student is solely interested in becoming a musician, poker player, or fashion designer, and has seen examples of their peers achieving those same goals, why are we offering them help only in math and verbal?

Education companies work in Asia because they focus on preparing students to overcome these mandated national exams. It will be more difficult to fulfill the diverse interests of our students, and as such, learning should take place on a platform of many different types of teachers.

Argument 4: The underlying culture will change and expose interesting opportunities in the long term, but probably not for another 5 years.

The opportunities that arise are continuous and dynamic; there will be opportunities throughout every single year with each new technological advancement and with the current rate of change. The point is to be proactive in regards to that changing culture as opposed to being a waiting bystander for 5 years. 

In fact, there has never been a better time to talk about education in the context of technology. We have advanced enough to glimpse the possibility of a world educated by the powers of the Internet. That much is evident by Avichal having to meet with so many entrepreneurs and VCs to explain his viewpoints. This wasn’t the case a few years ago.

I’ll conclude with a quote from Rupert Murdoch during the e-G8 summit in May.

The greatest change of all is the digital revolution, which frees people from the “tyranny of time and distance,” and it’s occurring in every field except one — education.

A teacher waking up from a 50-year nap would find a classroom looks almost exactly the same as it did in the Victorian era. My friends, what we have here is a colossal failure of imagination and an abdication of our responsibilities to our children and grandchildren.

In putting [our] creative force into schools we can ensure the poor child in Manila has the same chance as the rich child in Manhattan. The key to our future is to unlock this potential.

Thank you Joshua and Maurice for their feedback.

How soon is too soon for a movie studio to capitalize on the death of a beloved and celebrated icon? That was the gut-reaction of many comments found on articles reporting that Sony Pictures is entering the process to acquire the rights to make a Steve Jobs biopic.

The film will be based on Walter Isaacson’s upcoming and highly-anticipated biography of Apple’s celebrated co-founder and de-factor visionary. The book is already an Amazon #1 seller based on pre-sale orders. This fact combined with Sony’s past critical and commercial success with “The Social Network,” a dramatic film about another Silicon Valley prodigy, made it quite logical for any movie studio to pursue the rights for a Steve Jobs film.

There’s no point in shaking an indignant fist at a movie studio for doing their job; it’s inevitable this biopic would be made. Based on the overwhelming number of mournful messages written by my friends, as well as leaders across the world, I think the movie would be an incredible success at the box office, regardless of quality. The sentiment and image of one of our generation’s most influential inventor will still be fresh on our minds when this movie is released in two years, or however long it takes to produce this movie.

We certainly won’t watch it in hopes of learning something new about Steve Jobs; his life story and Apple’s has been well-documented, as are anecdotes about his famously peculiar personality. We will watch it, however, to relive the life of someone who profoundly affected our lives.

And who cares if a movie studio will profit substantially?

My only gripe is that this biopic would really be of true significant good for the world if it was made for the next generation, whom might not know the hardships Steve Jobs had to endure to create the world’s first true personal computing computer and all the subsequent transformative devices thereafter.

I truly hope after the Sony Picture’s production there will be another biographical film made 50 years later that can capture the emotions our current generation felt when we lost one of our most inspiring and admirable individual. It’s imperative that our children or grandchildren are introduced to Steve Jobs the way we were introduced to Howard Huges or Oskar Schindler; I want them to feel inspired to make a difference and do good for the world, the way Steve Jobs inspired us.

Else, the story of Steve Jobs, which has positively affected countless many, might be lost with the passing of time much like the stories of many other great investors, including that of Edwin Land, the man who inspired Steve Jobs, himself.

If there’s such a thing as virtual hero worshipping, then I have it, for Marc Andreessen. I revere him not because he started Mosaic and Netscape, thus helping usher in the Internet era.

It’s also not because he married the daughter of John Arillaga, whose name I saw placard on every which building at Stanford, where I spent my happiest years and found the best of friendships.

These accomplishments have certainly built Marc Andreessen a persona that’s revered across Silicon Valley. Yet, what I most admire about Marc is the writing he did for his blog. Every sentence in every posts conveyed wisdom, that we knew, he had accumulated in the many years spent building successful and unsuccessful companies in Silicon Valley.

Through his earnest writing he was helping build a better world by educating and encouraging entrepreneurs. It had certainly affected the decisions I made in life.

I can only speculate on why he took down his old blog posts, but someone had the foresight to archive all of it. His current blog doesn’t do it justice.

I’m saying all of this because I am a bit disappointed in his interview at the D9: All Things Digital conference where he was asked: “Is there a bubble–and did you cause it?”

There was no way he could have answered, “Yes, Walt and Kara, there is a bubble.” Any start-up investor whose success depends on an optimistic public market already has his hand forced in answering that question.

However, the reasoning behind Marc’s answer seemed disingenuous.

A bunch of people think there’s a bubble, so therefore we think it is not.

If everybody’s euphoric, then I’m concerned. “If we’re back here in three years and nothing’s changed and nobody’s worried, I’ll be horrified. I’ll wet my pants on stage.” There’s no history of an equity bubble that has not affected the public markets in a major way. Read “The Go-Go Years.” Fast-forward to today, in 2011: Apple’s PE is 12, projected to be 10. Microsoft’s is 7.2, next year 6.8. Google 13.7, next year 11.3. Cisco 7, next year 5.5. “PEs in single digits are what steel mills trade at before they’re going out of business.”

What these things tell me is the public market hates tech. It’s tremendously scarred by 10 years ago.

Maybe that was an intentional homage to deceased Red Herring magazine because Marc made a classic use of red herring. None of the companies mentioned above had their roots in the tech bubble that came tumbling down in 2001. Of the companies from that era that did survive, the most well-known is Amazon, whose P/E is 83.9.

The most worrying example of the current tech bubble, as deemed by the public, is LinkedIn, whose initial pubic offering saw its stock price rise 90%, leading to a valuation that’s over 500x net income. The buyout of Skype by Microsoft received less attention, yet had valuation multiples even more outrageous than LinkedIn’s: a buyout of $8.56 billion in cash, while the company carried a net loss of $7 million and long-term debt of $686 million. Marc Andreessen invested in both companies.

Marc never bothered answering the second part of the question, “Did he cause the bubble?” No one person can be faulted for causing an equity bubble. If anything, the blame should be laid on Microsoft and LinkedIn’s institutional investors. The blame could also be shared by the U.S. government for setting interest rates so low for so long, artificially inflating the equity market, but that’s a tangent.

Regardless, Marc has no control over the investment decisions made by those parties. However, he does indirectly affect euphoria surrounding tech companies by the valuations he set for his own investments. The latest of which was his $100 million investment in Airbnb at a $1 billion valuation. The company’s previous investment was a comparatively minuscule $7.2 million.

The company is in a great market and critics don’t fully know its details, such as growth metrics, but with supposed revenue of $25 million, how quickly will Airbnb need to grow to be comparable in revenue to Skype’s ($860 million) and LinkedIn’s ($292 million). Keep in mind Airbnb’s valuation is 1/8th of those two companies.

Later on Marc backtracked and admitted there is an equity bubble but it is only affecting one company, LinkedIn.

The true answer to the bubble question is that we just don’t know. Unlike the companies of a decade ago, there’s actual substance and growth behind today’s web start-ups and, as Groupon has showed, plenty of innovative business models generating real revenue and value for the world.

Yet, could Marc have answered such a question with unbiased observation or even with some ambiguity or uncertainty? Not when his words have so much influence.