Baldur Bjarnason

Web dev at the end of the world, from Hveragerði, Iceland

Two-year review: to plan a strategy you must first have a theory of how the hell things work

This is a part of a series where I review the work I’ve done over the past couple of years.

  1. Two-year review: to plan a strategy you must first have a theory of how the hell things work (this page)
  2. Out of the Software Crisis: two year project review
  3. Sunk Cost Fallacy: chasing a half-baked idea for much too long
  4. The Intelligence Illusion: stepping into a pile of ‘AI’
  5. A print project retrospective: the biggest problem with selling print books is the software
  6. Thinking about print
  7. Disillusioned with Deno
  8. An Uncluttered retrospective: Teachable is a mess and I need to pick a lane

Oh, what a year.

“How are you doing? Did you get hit by the lay-offs?”

I was working as the technical reviewer on a training project early in 2023 that was a collaboration between two US-based tech companies.

The project was nearing its end and had gone quite well. Then I woke up to the news that one of the companies in question had been more than decimated by a mass lay-off – management had laid off over 10% of the employees. So, I checked in with the person I had been working with to see if they were okay.

They were, but their department had been all but wiped out and their budget slashed.

That was the last project I did with either of the companies involved. They’ve both been slashed – both employee count and budgets – and they’ve both since announced “AI” pivots.

A couple of years ago, details like these about lay-off numbers and specific strategies would on their own have narrowed down the list of likely organisations enough to earn me a stern email from my contact about how I clearly did not understand the basic concept of an NDA.

Today, it truly could be any tech company on either side of the Atlantic of pretty much any given size.

Over the past year or so, every long-standing consultancy project I had has ended. Some because my contacts were laid off or because their budgets were slashed. A couple of them are in the middle of their “AI” pivots, and it’s likely that writing a critical book on the business risks of generative models hasn’t endeared me to those now-former clients. Quite a few just disappeared on me. A couple that I hear from regularly have just had a much harder time than usual in getting their projects funded.

2022 was on its own a setback because COVID fog made it essentially impossible for me to work for a whole six weeks in the summer and made me much less productive for the rest of the year.

2023 effectively put a period to my work as a consultant.

The time I spent promoting Out of the Software Crisis and getting The Intelligence Illusion out into the world was time I could have spent repairing my freelance consultancy – collecting new leads and chasing old ones – after the COVID setback.

Keeping a freelance business going during one of the toughest years in tech in recent memory requires your full attention.

I then compounded the problem by spending months trying to get funding here in Iceland for a research project aiming to create a user-friendly open-source document-oriented version control system for writing text (as opposed to code). “There’s no money in that” was the reply I got everywhere, which is fair.

Every business has customer churn they constantly need to replace, but once you’re established it normally wouldn’t take that much work to keep it on a relatively even keel or manageable decline.

In a normal year, the consultancy business would have coasted along while my focus was elsewhere, but a year of being inattentive after a period of having my productivity compromised by COVID wiped it out – those months of COVID fog were probably the true death blow to my freelancing even though it took a few more months for it to actually die.

The ebooks I wrote and published did well – better than I expected, honestly – but if you have the choice between an okay freelance consultancy and a moderately successful ebook business, the consultancy is always going to be more financially lucrative. There is much less money overall in ebooks.

I’m proud of the books I wrote, and I’m looking forward to iterating on Uncluttered in the near term, but now I have a question I need to answer:

What should I be doing in 2024?

I’m obviously not going to reject interesting freelance projects and leads that come my way organically, and I’m always open to one of my former regulars suddenly resurfacing, but if I were to try to restart my consultancy and turn it back into my main bread and butter, then I would have to start lead generation from scratch, which I never had to do in the past.

Even when I first switched to freelancing I did so gradually. I began taking on freelance projects alongside the day job, and when I switched completely I had projects and contracts lined up from day one. (There were aspects of that transition that were frustrating, disappointing, and annoying, but overall it was surprisingly orderly.) My freelance business is even worse off today than when I first became a full-time freelancer, and the macroeconomic dynamics of the tech industry are much worse than they were three years ago.

One option for me would be to lean into the writing business – try to build on the ebooks with courses, more ebooks, and more media products. That has its own risks not in the least because they are affected – at least partially – by the same macroeconomics as a freelance consultancy.

I could try to build a SaaS or service of some kind – maybe that bookmarking service I ended up prototyping in 2022. I could do some more user and market research and tailor the service to an underserved segment.

Or, I could just start a job search and put the writing, media production, and research all on hold.

I know from personal experience that an interesting full-time job doesn’t leave me with enough energy to keep writing and blogging after hours and software development – contrary to what you’d expect – doesn’t really offer much in terms of non-freelance part-time jobs.

Not building on the writing I’ve done feels like a shame, not in the least because they’ve been the highlight of the past couple of years. I seem to be one of the few writers who actively enjoys writing – although I’m usually not always particularly fond of the text afterwards. Writing, under the right circumstance, is genuinely fun.

I worry that the kind of writing I do might not to be conducive to building a consultancy business. “You all keep doing dumb things”, won’t endear you to potential clients and “your new favourite thing is a misguided bubble inflated by criminals, charlatans, and the deluded” doesn’t give managers the impression that I’d do a good job of furthering their strategy.

(Which is probably true, because their strategy is shit. But, I digress.)

The job market in tech today is also the toughest it’s been in years. Finding a job that would work with my personal circumstances would be hard.

Figuring out some way to improve my circumstances by working on building an independent business might be less risky, at least in the short to medium term.

A job hunt remains an option, though, but it’s firmly “Plan B”.

But to build the business further, I need a better – more cohesive – strategy. I need to understand what worked and what went wrong in my past projects and I need to have a sound idea for how to build on the successes.

A strategic analysis of past decisions and forming a strategy for the future both require a theory – one that’s grounded in reality and has a proven track record. Otherwise, you’re just tinkering and wallowing in superstition.

Most theories on entrepreneurship have a common thread.

Centre the actor, not the outcome

One common thread through all the books and papers I’ve read on entrepreneurship, whether it’s Peter Drucker, Ricardo Semler, Henry Ford, Saras Sarasvathy, or Amy Hoy and Alex Hillman is they tend to centre the actor, not the outcome. Even Nassim Nicholas Taleb’s Antifragile has elements of this if you squint a bit.

They are all about centring the actor – yourself, the entrepreneur – and not the desired outcome.

Outcome-oriented thinking

Traditional business-thinking focuses on outcomes – goals. How can I accomplish this specific objective for the company? You start with the objective, then try to gather the talent and resources to accomplish it. The actors – people, team members, middle management – are all replaceable to the organisation. You don’t ask what goals are likely to be successful with the team and resources you have on hand. You ask how you can assemble the team and resources you need to accomplish a specific goal. Your job is to build a machine – system – and the people are nothing more than cogs and resources.

But any time you strike out on your own, whether as a freelancer, writer, or bootstrapper, you implicitly make the actor – yourself – indispensable and applying outcome-oriented strategic planning becomes more likely to be harmful than helpful.

In fact, you’re almost certain to fail.

Because when you’re working for yourself, you aren’t a disposable cog in the machinery of your business.

Actor-oriented thinking

Deciding on the product you want to make first, then figuring out the resources and market second, is exactly this kind of mistake.

Instead, actor-centred thinking asks a different question:

What can I do, with the resources I have, my capabilities, and the market I can study and reach, that will build a business.

Because it’s an open-ended question, it inevitably has many more answers, and you can pick whichever answer presents the least risk and the biggest upside.

Here’s Drucker version of this from Innovation and Entrepreneurship (p. 170, emphasis in original):

To succeed, innovators must build on their strengths. Successful innovators look at opportunities over a wide range. But then they ask ‘Which of these opportunities fits me, fits this company, puts to work what we (or I) are good at and have shown capacity for in performance?’ In this respect, of course, innovation is no different from other work. But it may be more important in innovation to build on one’s strengths because of the risks of innovation and the resulting premium on knowledge and performance capacity.

Ricardo Semler’s writing is intrinsically bound to its original context of saving an existing company from imminent collapse – his books are very much in the fluffy airport book category – but even there we have passages like this in his book The Seven-Day Weekend (p. 115):

Organisations must help workers indulge their interests and talents by seeking the same professional growth and satisfaction as musicians.

Outcome-oriented thinking has lower odds of success

Getting VC funding effectively shifts your perspective from being actor-oriented (what can we do with the resources at hand) to outcome-oriented (how can we accomplish the specific outcome we got funding to attain). This is a big part of why venture-funded startups have such an extraordinarily low success rate and why getting VC funding usually means that your odds are now lower than before. The survival rate for new companies is already low, but it’s generally lower for startups in the Venture Capital space.

Amy Hoy’s and Alex Hillman’s paid course 30x500 and their free LaunchFTW that they’ve developed over several years are probably the most cohesive “self-assembly required, but batteries are included” packaging of these concepts. They don’t work for everybody, but I’ve tried them both and they played a big part in shifting my mindset on “making stuff” over the years. But I’ve always found it hard to apply their model analytically on past actions as some actions can well be entrepreneurial without fitting perfectly in the otherwise useful 30x500 or LaunchFTW model.

The dichotomy of actor-oriented versus outcome-oriented thinking isn’t from a specific text I’ve found, but is instead my attempt to put names to the common threads I’ve found running through these texts, models, courses, and theories.

The Principles of Effectual Reasoning

Because my time in academia left me with irreparable scholar-brain I’ve found an academic theory on entrepreneurship to be of huge help, like that of Professor Saras Sarasvathy, who originally wrote about what she called effectual reasoning back in 2001.

I’ve found her principles of effectual reasoning to be an interesting lens for interrogating past actions.

These ideas have been refined considerably since the publication of her original 2001 paper, but the academic in me has a fondness for the less polished version.

The original principles are four, but one of the principles was in later works split in two, making it Five Principles of Effectual Reasoning.

(“Effectual Reasoning” is kind of a bullshit phrase, if you ask me, but let’s go with it for now.)

1. Affordable loss

Don’t avoid risk but focus on taking risks where complete failure is “affordable”.

Or, the most effective way of assessing risk is to primarily look at the worst-case scenario. If the worst-case scenario is already acceptable then you’ve turned your risk assessment from being a complex prediction involving scenario-planning, contingency analysis and probability calculations into a more straightforward Return-On-Investment (ROI) calculation. Given that complete failure is affordable, what’s the potential upside if it isn’t a failure?

2. Co-creation

Partnership and collaboration are usually more productive for entrepreneurs than competition. A good example of this in software development would be thoughtful use of, or participation in, free or open source software projects. It could also mean looking at other forms of informal partnerships or collaboration. The ad hoc collaborations on informal standards and conventions you used to see between indie Mac OS X developers are another good example.

3. and 4. Favour exploiting contingencies over exploiting expertise (Means and Lemonade)

This principle (later two principles) may sound counterintuitive, but that’s because of the academic phrasing Sarasvathy used in her original 2001 paper. It makes much more sense once you translate it into normal English:

Available means, resources, and situations matter more than expertise when it comes to deciding on a plan of action.

Later papers rephrase and divide this principle into two separate ones, which makes for our third and fourth principle:

  1. Means. What can I do with the resources and capabilities I have available? What can you accomplish with the means you have available?

  2. Lemonade. How can I turn the unexpected into something productive? How can you turn lemons into lemonade?

Most of us who have some level of expertise are trained to attain specific outcomes. But, as I outlined above, asking yourself “how can I attain this objective?” almost always has a substantially lower chance of success than asking yourself “what useful things can I attain with my current means and resources?”

Both questions build on your training and knowledge, but the latter one is much more likely to have a positive outcome because you aren’t limiting yourself to a specific result. Any positive result is acceptable.

The third and fourth principles require you to change your thinking from focusing on outcomes and instead focus on the actor, which is a change of mindset that seems to be absolutely integral to entrepreneurial practice.

4. Controlling an unpredictable future rather than predicting an uncertain one (Control the Unpredictable)

This might sound completely counterintuitive. Unpredictability is unpredictable, right? That’s what it means? How can your specific actions control that unpredictability and make it predictable?

Well, they can’t. That’s not what this is about. This principle is all about how an actor-oriented mindset helps you leverage unpredictability instead of being threatened by it.

As I described above, trying to attain a specific future outcome is always fraught. Every action that future requires will only reduce your odds of success. Every change, every ounce of unpredictability in your way will threaten your progress towards that specific outcome and reduce our odds of success.

But if you’re working from the actor – yourself – first, you are always primarily focused on what you can do, today, with the means and resources you have available. From that perspective – because you aren’t tied to a specific future – unpredictability tends to represent changes in opportunities, not opportunities being closed off. Some unpredictable events are inherently bad, of course, but most of them – even the ones that would have completely scuttled a pre-planned, outcome-oriented project – are just change. That change becomes part of the context for your assessment

Unpredictability is no longer exclusively a negative.

Spoiler alert: I do not fair that well in this analysis

Over the next few days, I’ll be posting the result of my using these principles (and, in some cases, the 30x500 model) to analyse how my projects and work have gone, with an outline of what might make sense for me to do in the future.

That will include everything I’ve done over the past two years:

What surprised me during my first pass at the analysis was just how well the actor-oriented model explained why any given project did or didn’t work.

The one project that did really well was the one I had planned and thought through using an actor-oriented model.

The biggest failure was the project where I deliberately avoided the model and was instead outcome-oriented all the way.

Most of the rest are a mixed bag because I only partially applied the model as I planned and executed them.

The hard part will be to come up with a thoughtful strategy for 2024 as a whole.

Then over the next year or so, we will see how well the plan worked, whether it paid off, or whether I had to fall back to “Plan B” to be able to pay the bills.

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