For years, the company has moved billions in profits to Puerto Rico to avoid taxes. When the IRS pushed it to pay, Microsoft protested that the agency wasn’t being nice. Then it aggressively fought back in court, lobbied Congress and changed the law.
Finite players play to beat the people around them. Infinite players play to be better than themselves.
I could’ve been reading an article analyzing Roger Federer and Rafael Nadal. Except I wasn’t.
ENTER: Simon Sinek
I was listening to Sinek (he was talking at Google) use game theory to describe the kinds of ‘games’ companies engage in: finite games, where the objective is to win (or cause all other participants to stop playing), or infinite games, where the objective is to continue the game as long as possible.
I first came across this line a few months ago. It has stayed with me since then. Suddenly, companies and leaders were falling into either one of these categories for me. If you are an entrepreneur, quite likely Sinek’s line speaks to you too. And you’ll start placing companies into one of these categories. I hope you will, at least.
Take Sinek’s examples as a starting point. Microsoft (under Ballmer’s leadership) executives used to tout how much better their products were compared to Apple. Apple, at the same time, however talked more about end results they were working to achieve. Microsoft, says Sinek, was playing a finite game, whereas Apple was onto an infinite game of self-improvement. Which approach is better did you ask? The business results of both Microsoft and Apple from the time speak volumes about the merits of each approach.
ENTER: Paul Graham
Understanding finite vs infinite games isn’t merely an exercise in the abstract. There is more. Lace it with investor and writer, Paul Graham’s mental model of good vs bad test, and I’d argue that we have a conceptual framework that is critical for business leaders anywhere.
Graham’s recent post about unlearning is a masterclass in understanding the merits of startup life relative to life at institutions like schools or large corporations.
The most damaging thing you learned in school wasn’t something you learned in any specific class. It was learning to get good grades.
Graham’s core idea is that it’s important to know whether you’re spending energy solving a challenge that’s directly connected to reality (studying for a good test), or a challenge that isn’t, usually imposed by an authority (bad test). Recognizing and destroying bad mental models may be even more valuable than adding new ones.
What is the litmus test for a good or bad test? Bad tests are inherently ‘hackable,’ meaning that with clever and directed energy, we can often find a shortcut to ‘scoring well’ on that test and acquiring a label of success without fully solving the underlying challenge. Good tests, on the other hand, are ‘unhackable,’ so we can either succeed at solving the challenge to a varying extent, or fail entirely.
A test in a class is supposed to measure not just how well you did on that particular test, but how much you learned in the class.
Good tests like curing cancer, making education free for anyone, or even winning a tennis match are inherently more engaging because the best scientist, entrepreneur, or player will typically win in each respective scenario.
ENTER: Elon Musk
Sinek and Graham’s models seemed familiar the first time I encountered them, and I wondered why. In filing away these new mental models, I was reminded of their neighbor in the idea world: thinking from first principles, especially as popularized by Elon Musk:
Physics teaches you to reason from first principles rather than by analogy. So I said, okay, let’s look at the first principles. What is a rocket made of? Aerospace-grade aluminum alloys, plus some titanium, copper, and carbon fiber. Then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two percent of the typical price.
SpaceX went on to cut the cost of rocket launch by ~90%, while still making a profit.
Why didn’t the giant aerospace incumbents figure this out first?! In my view, the incumbents were busy playing finite games against their competitors, hacking bad tests, and thinking derivatively from their last quarterly results, rather than from first principles. Textbook opportunity for disruption.
Sinek + Graham + Musk For the Win
Good tests map beautifully to infinite games and first principles thinking. All three mental models seem to reinforce a simple message: think like a scientist.
Infinite leaders, says Sinek, filter decisions first through the unchanging values of a company. And only then, factor in the company’s dynamic interests. This may result in sub-optimal single decisions and failures along the way. However, over the years, the long string of decisions strung together will be more cohesive and, therefore, valuable (assuming the company’s values are well set up).
The political environment of a classroom, or large company, is often set up to reward those that hack bad tests and finite games, since the isolated outcome looks favorable. We don’t consider how that outcome will eventually be strung together with other outcomes in order to fully connect with reality.
The book What Have You Changed Your Mind About? chronicles painful realizations by experts playing a finite game in their area of expertise. In it, a successful hedge fund manager, Nassim Taleb (author of the excellent book Antifragile), talks of how he lost faith in probability as a guiding light for making decisions.
Good tests, infinite games and first principles thinking aren’t for everyone. For others, it’s the only way to go.
Helpfully, and devastatingly, startups afford little-to-no buffer from the real world. The company either solves the challenge, or dies. This kind of instant feedback and intolerance for ‘hacks’ forces infinite game leadership at startups – painful in the short term, but ultimately more rewarding for everyone involved. And the true test of an entrepreneurial leader? As Satya Nadella said, while transitioning Microsoft from a finite game to an infinite game, leaders must find the rose petals in a field of S#$@.
What bad tests or finite games are you putting energy into? Where have you applied first principles thinking?
In this, the first episode of the Exponent podcast, we talk about our background, Microsoft and disruption, and the meaning of culture. We also explore our goals for this podcast, and just a bit about Taiwanese garbage trucks.
- If Steve Ballmer Ran Apple link
- The Halo Effect:…and Eight Other Business Delusions that Deceive Managers link
- Skating Towards the Goal link
- Bill Gates’ Steve Jobs Moment link
- Friction link
- Note: The Internet Explorer rendering engine is called Trident, not Triton
- Companies get disrupted when they focus on maximizing profit and less on building the best product.
- Steve Balmer was a sucessful CEO from the standpoint of maximizing shareholder value for a ~10 year period.
- But what about in the long run: 30 or 50 or 100 years
- What is the purpose of corporations?
- Should companies milk their core business over a lifecycle and not try to maintain themselves after that.
- Would it be better for Microsoft to generate billions for shareholders and have them reinvest in a bunch of startups.
Oct. 17 – Bill & Melinda Gates Foundation Co-Chair and Microsoft Co-Founder Bill Gates talks about global warming, carbon emissions, regulating big tech, and why he thinks Impossible Foods and Beyond Meat can help the environment. He appears on “The David Rubenstein Show: Peer-to-Peer Conversations.” The show was recorded on June 24 in Washington.
For active duty military members, playing video games can help release stress, build camaraderie and offer comforting familiarity in foreign environments. For veterans returning from combat, gaming can reduce isolation, renew connections with fellow service members and provide therapeutic benefits.
Recognizing the unique value of gaming for the military community, Microsoft is partnering with the U.S. Department of Veterans Affairs to provide Xbox Adaptive Controller units to 22 initial VA rehab centers across the U.S.
Launched in 2018, the Xbox Adaptive Controller was created to make gaming accessible to players with limited mobility by enabling them to customize their setups and connect with external devices like buttons, switches and joysticks that accommodate their playing. The controller, which can be used to play Xbox One and Windows 10 PC games, was developed after extensive consultation with gamers, accessibility advocates and nonprofits that work with gamers with limited mobility, including veterans.
Ken Jones, the founder of Warfighter Engaged, a New Jersey-based nonprofit organization that provides gaming devices to wounded vets, says the Xbox Adaptive Controller makes gaming accessible to a broader range of veterans.
“People just want to participate, and it’s going to allow them to do that,” he says. “It allows for a much bigger population of people to be included in gaming.”
Gaming is a popular activity among the military community, but navigating a traditional controller can be difficult or impossible for injured veterans. The inability to game can mean the loss of connection to veterans’ military communities and to an activity that was a significant part of their lives during service.
The partnership with Microsoft aims to give veterans with limited mobility the opportunity to game again, get them more involved with their rehabilitation and increase social interaction, says Dr. Leif Nelson, director of National Veterans Sports Programs & Special Events for the VA.
“We’re looking for platforms for veterans to interact with each other, and the Xbox Adaptive Controller can be that access point to get involved in this world and in the gaming community,” Nelson says. “Gaming is now everywhere in the world, and while people tend to think of it as isolating, we’re finding that it actually has the opposite effect and can increase interactions with other veterans and folks who are non-veterans. I think this can be a tool in the rehabilitation process to achieve a lot of different goals.”
“One of the biggest things kids and adults with disabilities face is the stigma of being different. Online, we’re all the same.”
— Jamie Kaplan, recreation therapist
For Jeff Holguin, gaming was a way to cope with the depression and post-traumatic stress disorder he experienced after being discharged from the U.S. Coast Guard in 2003 following an injury. He’d planned on a career in the military, but that identity was suddenly gone. Facing a series of surgeries and feeling adrift in the civilian world, Holguin isolated himself. He turned to gaming, an activity he’d enjoyed since childhood, and found the sense of inclusion he was craving.
“It gave me an outlet, a virtual efficacy within a world that I didn’t feel like I had a place in anymore,” says Holguin. “I made a lot of social connections and friends through that virtual space.”
Holguin went back to school, studying clinical psychology with a focus on trauma and PTSD. He has designed research for Microsoft around mixed-reality devices and learning outcomes and is also a clinical psychology doctoral intern at the Northern Arizona VA Health Care System in Prescott, Arizona. For Holguin, gaming provided a space where he could gradually reintegrate into post-military life.
“It was a sense of belonging and a sense of safety,” he says. “When you have trauma and you’re depressed, sometimes even just a little bit of stimulation is too much and you just don’t have the cognitive or emotional resources to deal with other people’s well-meaning interactivity.
“Gaming gives you what we might call exposure therapy, meaning you get a little bit of socialization, but when you’re ready to turn it off you can turn it off,” Holguin says. “Gaming provided some significant therapeutic value for me.”
Jamie Kaplan, a recreation therapist at James A. Haley Veterans’ Hospital in Tampa, Florida, has been using gaming as therapy with his patients — about 25 percent of whom have had traumatic spinal injuries — for seven years.
Kaplan, himself an avid gamer, says gaming provides a range of therapeutic benefits. Manipulating a controller and pressing buttons, for example, can help with motor skills. Decisions made throughout a game, from choosing which character to play to which moves to make, require cognitive processing and visual processing, he says.
“It’s fine motor skills, gross motor skills, decision-making ability, information processing, cognitive processing,” Kaplan says. “We can assign a number of therapeutic values to gaming.”
Kaplan used various gaming systems and consoles with patients before getting an Xbox Adaptive Controller last fall. He particularly likes the Copilot feature, which was developed for Xbox One and links two controllers as if they were one, allowing players to team up on a game and share controls. The feature quickly became one of Xbox’s most popular and was built into the Xbox Adaptive Controller.
One of his patients, Kaplan says, was able to play with his brother for the first time in three years by using Copilot. “It’s amazing,” Kaplan says. “It allows me as the therapist to make up for whatever deficit the patient has in utilizing a regular controller or the adaptive controller.”
“We thought it was a perfect opportunity to bring our focus on gaming and the great work that the VA is doing together.”
–Phil Spencer, Microsoft executive vice president of gaming
Kaplan uses games ranging from sports and racing games to virtual reality games and programs that allow veterans with limited mobility to try activities such as scuba diving, fishing or hiking. VR is useful for helping amputees work on balance, Kaplan says, and VR-guided relaxation and meditation programs can help veterans reduce stress and anxiety — and potentially reduce reliance on pain medications such as opioids.
“I see chronic pain patients every day and tell them, ‘I’m not going to cure your pain; we’re just hoping to trick it for a little while,’” he says. “You’re distracting them from the pain by engaging them in gaming.”
Gaming has been part of Mike Monthervil’s life since his childhood growing up in Carrefour, Haiti, a suburban area southwest of Port-au-Prince. Monthervil’s family was one of the only ones in the neighborhood with a gaming system, but electricity was only available for part of each day. When the lights would come back on, Monthervil recalls, “every kid would be banging on our door to come and play a game.”
For Monthervil, gaming was a passion that also provided escape from a challenging environment. “It was a very tough place to live. Kids don’t have a lot to do there,” he says. “Gaming made my childhood better. It took a lot of stress out for me.
“To this day, I still talk to the guys who are over there that I grew up with, that are still going through the hardship of being there,” he says.
Monthervil continued gaming after moving to the United States and later enlisting in the U.S. Army. Stationed in Afghanistan, he passed time playing games with his fellow soldiers between missions. But in July 2014, Monthervil sustained a serious spinal cord injury after falling backward into a ditch during a training session, leaving him unable to use his legs. He underwent surgery and spent nine months at James A. Haley Veterans’ Hospital. There he met Kaplan, who helped him adapt his gaming to accommodate the dexterity limitations caused by his accident.
Kaplan gave Monthervil an adaptive controller to try several years ago, but it was cumbersome and difficult for him to use. After getting an Xbox Adaptive Controller, Kaplan created a custom set-up for Monthervil by adding a few additional buttons. Monthervil recently got one of the controllers at home and says it works better for him than any device he’s tried since his injury.
“Of all the adaptive stuff I’ve tried, it’s by far the best one,” says Monthervil, who’s 26.
The Xbox collaboration to help vets is part of a strategic partnership between Microsoft and the U.S. Department of Veterans Affairs dating back more than 20 years. Recent efforts under the partnership have focused on equipping VA employees with productivity and collaboration technologies, migrating VA legacy systems to the cloud and using advanced analytics in VA call centers to give veterans better information to make decisions about their benefits and medical care.
“Gaming provided some significant therapeutic value for me.”
— Jeff Holguin
Toni Townes-Whitley, president of U.S. Regulated Industries at Microsoft, says the Xbox Adaptive Controller collaboration is part of a broader effort to improve therapeutic and clinical care for veterans. But its fundamental goal is to harness technology to improve veterans’ lives, she says.
“It’s an example of using technology as a means to a much more significant end, which is a sense of belonging, being part of a team, a sense of reconnection, a sense of family,” she says.
Phil Spencer, executive vice president of gaming at Microsoft, sees the collaboration as an ideal pairing of Microsoft’s efforts to increase diversity and inclusion in gaming with the vast reach of the VA, which serves more than 9 million veterans nationwide in its health care system.
“Everyone can play games, and we really focus on that as an organization,” he says. “With the VA being the largest integrated health care provider in the U.S., we thought it was a perfect opportunity to bring our focus on gaming and the great work that the VA is doing together.”
Microsoft will use feedback and data collected by the VA centers to determine how effective the Xbox Adaptive Controller is in serving veterans and how the device might be improved going forward, Townes-Whitley says. Nelson believes the initiative will serve not just existing gamers, but also veterans who weren’t previously into gaming.
“If we do our job well and we’re able to expose veterans to (the Xbox Adaptive Controller) as a possible tool or intervention in their rehab process, I expect to find successes even in those folks who have never gamed before in their lives,” he says.
A 2018 study found that gaming can relieve stress for veterans, help them cope with moods and provide a way to connect. Kaplan also sees the Xbox Adaptive Controller as an equalizer for veterans and others with disabilities.
“One of the biggest things kids and adults with disabilities face is the stigma of being different. Online, we’re all the same,” he says. “I could be missing my arms or my legs and you wouldn’t know it. Gaming really helps to promote that feeling of normalcy and feeling of belonging.
“I have a lot of respect for Xbox seeing and filling a need for making something that allows military members and anyone who has a disability to be able to game,” Kaplan says.
“I think it’s great for a mainstream company like Microsoft to be the one to take the first step. I hope it encourages other companies to do that.”
Lead photo: VA recreation therapist Jamie Kaplan, left, watches U.S. Army veteran Mike Monthervil play a game. All photos by Jeff Young Photography.
Microsoft’s renaissance may herald a nascent boom in software-driven productivity and economic growth
Like-minded technological evangelists have long argued artificial intelligence, machine learning, big data and other technological advances were about to unleash a new boom. But the boom refused to show: growth in productivity—the best measure of how technology enhances worker output—remained mired near generational lows.
Recently, however, there have been intriguing signs a boom may be in the offing. In the first quarter, American companies for the first time invested more in software than in information-technology equipment. Indeed, outside of buildings and other structures, software surpassed every type of investment, including transportation equipment such as trucks and industrial equipment such as machine tools. Software spending is even higher if the cost of writing original software programs, now classified as research and development, is included.
Adjusted for inflation, software investment grew 11% from the first quarter of 2018 through the first quarter of 2019. By contrast, investment in equipment grew less than 4% and in structures, just 1%. (Revised data are due out Thursday.) The headwinds buffeting capital spending broadly, whether the waning tax cut, trade war or slumping commodity prices, have largely spared software. Meanwhile, productivity growth has picked up to 2.4% in the past year, the fastest since 2010.
Whether that can continue is debatable: business investment and productivity growth appear to have slowed in the current quarter. Nonetheless, a recent survey by Morgan Stanley & Co. found chief information officers planning to boost software budgets this year by 5%, and hardware budgets just 2%. Their main target is cloud computing, under which businesses pay external providers to host their data and supply tools to analyze that data.
After Chief Executive Satya Nadella took the company’s reins in 2014, Microsoft shifted focus to cloud-based services. Dubbed “Azure,” the services now account for half of the company’s revenue. Microsoft lacks the hipness factor of consumer-facing Amazon, Alphabet Inc.’s Google and Apple Inc. Yet it has achieved comparable growth by making itself a partner for businesses bent on “digital transformation,” a nebulous term that means using technology to remake processes or products.
I’ve been reminded of this ancient history a lot in the last year or two as I’ve looked at news around abuse and hostile state activity on Facebook, YouTube and other social platforms, because much like the Microsoft macro viruses, the ‘bad actors’ on Facebook did things that were in the manual. They didn’t prise open a locked window at the back of the building – they knocked on the front door and walked in. They did things that you were supposed to be able to do, but combined them in an order and with malign intent that hadn’t really been anticipated.
It’s also interesting to compare the public discussion of Microsoft and of Facebook before these events. In the 1990s, Microsoft was the ‘evil empire’, and a lot of the narrative within tech focused on how it should be more open, make it easier for people to develop software that worked with the Office monopoly, and make it easier to move information in and out of its products. Microsoft was ‘evil’ if it did anything to make life harder for developers. Unfortunately, whatever you thought of this narrative, it pointed in the wrong direction when it came to this use case. Here, Microsoft was too open, not too closed.
Equally, in the last 10 years – that is is too hard to get your information out and too hard for researchers to pull information from across the platform. People have argued that Facebook was too restrictive on how third party developers could use the platform. And people have objected to Facebook’s attempts to enforce the single real identities of accounts. As for Microsoft, there may well have been justice in all of these arguments, but also as for Microsoft, they pointed in the wrong direction when it came to this particular scenario. For the Internet Research Agency, it was too easy to develop for Facebook, too easy to get data out, and too easy to change your identity. The walled garden wasn’t walled enough.
.. Conceptually, this is almost exactly what Facebook has done: try to remove existing opportunities for abuse and avoid creating new ones, and scan for bad actors.
Microsoft Remove openings for abuse Close down APIs and look for vulnerabilities Close down APIs and look for vulnerabilities Scan for bad behavior Virus and malware scanners Human moderation
(It’s worth noting that these steps were precisely what people had previously insisted was evil – Microsoft deciding what code you can run on your own computer and what APIs developers can use, and Facebook deciding (people demanding that Facebook decide) who and what it distributes.)
- .. If there is no data stored on your computer then compromising the computer doesn’t get an attacker much.
- An application can’t steal your data if it’s sandboxed and can’t read other applications’ data.
- An application can’t run in the background and steal your passwords if applications can’t run in the background.
- And you can’t trick a user into installing a bad app if there are no apps.
Of course, human ingenuity is infinite, and this change just led to the creation of new attack models, most obviously phishing, but either way, none of this had much to do with Microsoft. We ‘solved’ viruses by moving to new architectures that removed the mechanics that viruses need, and where Microsoft wasn’t present.
.. In other words, where Microsoft put better locks and a motion sensor on the windows, the world is moving to a model where the windows are 200 feet off the ground and don’t open.
.. Much like moving from Windows to cloud and ChromeOS, you could see this as an attempt to remove the problem rather than patch it.
- Russians can’t go viral in your newsfeed if there is no newsfeed.
- ‘Researchers’ can’t scrape your data if Facebook doesn’t have your data. You solve the problem by making it irrelevant.
This is one way to solve the problem by changing the core mechanics, but there are others. For example, Instagram does have a one-to-many feed but does not suggest content from people you don’t yourself follow in the main feed and does not allow you to repost into your friends’ feeds. There might be anti-vax content in your feed, but one of your actual friends has to have decided to share it with you. Meanwhile, problems such as the spread of dangerous rumours in India rely on messaging rather than sharing – messaging isn’t a panacea.
Indeed, as it stands Mr Zuckerberg’s memo raises as many questions as it answers – most obviously, how does advertising work? Is there advertising in messaging, and if so, how is it targeted? Encryption means Facebook doesn’t know what you’re talking about, but the Facebook apps on your phone necessarily would know (before they encrypt it), so does targeting happen locally? Meanwhile, encryption in particular poses problems for tackling other kinds of abuse: how do you help law enforcement deal with child exploitation if you can’t read the exploiters’ messages (the memo explicitly talks about this as a challenge)? Where does Facebook’s Blockchain project sit in all of this?
There are lots of big questions, though of course there would also have been lots of questions if in 2002 you’d said that all enterprise software would go to the cloud. But the difference here is that Facebook is trying (or talking about trying) to do the judo move itself, and to make a fundamental architectural change that Microsoft could not.