Why entrepreneurs should watch out for the ‘local maximum’

Judah Taub, author of "How to Move Up When the Only Way is Down," offers an interesting way to think about achievement based on his experiences in the military.


Why entrepreneurs should watch out for the ‘local maximum’ + ' Main Photo'

I served in the U.S. Army, and I would classify my skill set as becoming “Radar O’Reilly” from MASH. I did not get shot at.

Judah Taub, on the other hand, was with the Israeli Defense Force (IDF) where he spent his time in classified intelligence. When he got out, he took his training and founded Hetz Ventures, a $300 million venture capital firm backing early stage Israeli startups.

In his book, “How to Move Up When the Only Way is Down,” he offers an interesting way to think about achievement based on his experiences in the military.

His core premise is that many of us reach our “local maximum.” We come to a place where we have climbed to a point on the mountain that is not the highest or the best, but it is a point from which we cannot go higher.

Are we climbing the right peak in the first place? Taub offers many examples from his time with the IDF. In the simplest terms, he writes, a lot of us get stuck on a peak, and when we take a breath and go outside and look up, we see the rest of the mountain, a higher point, but the only way to get there is to go down and then go back up a different route.

A classic case is the highly paid executive with stock options. Golden handcuffs. Can’t afford to leave. It is the problem of the dating apps. Give up some of the “must haves” in exchange for what “will do?” Is it worth it to go climb a different mountain?

AI and data crunching are critical here. Amazon spends millions figuring which routes are best for its drivers. A 1% increase in efficiency across a few billion dollars — well pretty soon, you are talking about real money.

We all know about A/B testing, but the holy grail is the X. Something completely different. Taub talks about Nike (Just Do it), the Fosbury flop, the Israeli creation of the $400 ventilator during COVID-19.

Taub gives many examples of X, (leaving aside Elon Musk). X is continually reassessing the route, testing the assumptions.

Taub tells us that researchers are scouts, developers are climbers. The key for the founder is to manage the climbers before they pick the route. Think about real rock climbers (Alex Honnold) and expeditions on Everest. Hard to go back down and start over.

Most of us get stuck somewhere short of the summit. It is our local maximum. Not the highest point, but to get to the higher mountain, you have to go down the mountain you are on and start again on a different mountain. Think about giving up a good job to go back to school to get an education for a much better job.

Then factor in time and timing. The issue is to pick carefully when you have multiple options, and the cost of switching is modest. We all know about the cost of switching, ask any divorce lawyer about that one.

He discusses Netflix and Blockbuster. Reed Hastings goes to John Antioco, CEO of Blockbuster, and offers to sell his company for $50 million. Antioco laughs him out of the room. “Netflix doesn’t do anything that we can’t do ourselves.”

But John, apparently, you never did. I offer this to all entrepreneurs when they are told that anyone can write that code. OK, tell them to go ahead and write it. Netflixs current market capitalization is $320 billion.

AI is famously dependent on how you ask the question. How can I widen the playing field of answers? Taub introduces us to “random forest,” a machine learning technique developed at Berkeley by Leo Breinman and Adele Cutler. It uniquely runs multiple sets of algorithms simultaneously. The result is an improvement in not “choosing the wrong decision tree.”

To Taub’s credit, he does discuss the Yom Kippur War and Oct. 7. Let it suffice, mistakes were made.

Finally Taub talks about the “global maximum,” the highest mountain, and as you can imagine, that depends on working as a team and not as an individual. But some mountains are unattainable, too dangerous – and sometimes not worth it. Sometimes good enough is exactly that.

Paul Simon, “You know the nearer your destination, the more you’re slip slidin’ away.”

Rule No. 829: Where are my crampons?

Senturia is a serial entrepreneur who invests in startups. Please email ideas to neil@unicornhunter.ai.