Monday, February 6, 2017

An Unlucky Engineer’s Guide to Wealth


Pirate Treasure. Startup IPOs. 3X bonuses. Scratch-off lotteries. Hypersonic stocks. Marrying royalty.

We think up clever windfalls to rationalize our dreams. We can own handmade sports cars, azure watered tropical islands, and concealed safes reeking of hundred dollar bills. It helps us believe we can live a Hollywood lifestyle if only the we make the right bet.
Getting Rich With Pirate Treasure


Get-rich-quick schemes poison our ambition and self control. They trade a million pennies for a swipe at one $10,000 bill. While chasing extraordinary events we miss out on concrete opportunities for building wealth.

None of us will wake tomorrow morning laying in a pile of gold doubloons. None of us will cash a ten million dollar check, or ring the New York Stock Exchange bell. Not even if you fall to your knees and whisper “pretty please.”

I still see friends trying to build a magical money fountain in their spare bedrooms. Our engineer’s inclination to cleverness can distract us from a deliberate approach to goals. Our addition of engineering skill to the equation makes long shots seem more reachable. Making millions at a software startup seems more likely when you’re a software expert. If only you join the right company with the right idea at the right time, you’ll get rich at the IPO. We want to believe that our skills will magnify our chances of a jackpot. Maybe we can engineer some luck!

It’s a trap magnified by our poor grasp on who is rich and how they got there. We think of wealth like the Robb Report does: ostentatious homes, slick gizmos, and over-the-top vacations. For an engineer, luck is the only visible path to 300 foot yachts and six-figure dirigible ski trips in the Andes. Our vision confuses spectacle and splurging with real wealth.

Yachts large enough for Forbes to report are the product of ludicrous spending. Submariner watches look impressive, but they don’t pay dividends. Luxury only tells us about spending, not the path to riches.

Spending money on fancy stuff proves nothing. Paying for luxury with debt takes no special talent. Extravagance doesn’t confirm riches any more than a snobby attitude and a prejudice against hot dogs for lunch. Unsustainable spending surely leads to poverty and frowning bankers, but there is no easy trick to know it when we see it.

From the outside we can’t tell if an autonomous two-masted schooner is worth 1% or 400% of the owner's net worth. A crazy boat that makes up less than 1% of your net worth might make sense. A boat that makes up the majority of someone’s wealth belongs to a fool. Why benchmark our level of success against a situation that might be idiotic?

We need a better measure of wealth than fancy crap. You can’t plot your course to riches without a goal and a tool to measure progress. Discussion won’t mean much without a good metric to judge against.

Measuring Wealth

My preferred measure of wealth compares your resources to your income. It doesn’t care what your neighbors or colleagues own or do. It doesn’t care if you ride a dirt-crusted Huffy mountain bike or a Ferrari F12berlinetta. Do you get your clothes at Walmart? Or do you only go to a boutique where they taylor each garment? This measure doesn’t care.

I love the The Millionaire Next Door. It’s my favorite book about wealth. It proposes a wealth benchmark of ten percent of your annual income multiplied by your age. If your net worth is at that level or above, you have what they consider the expected level of wealth. If you build a net worth that is above twice that level, you are what the book calls a prodigious accumulator of wealth.

The Wealth Formula

Using this measure requires only honesty and math. The terms are simple. Net worth means assets minus liabilities (debt). Bank accounts, stock, mutual funds, ETFs, real estate, and cars are all assets. Credit cards, mortgages, student loans, and car loans are liabilities. Don’t cheat. Never list consumer goods as an asset: most clothing, electronics, and furniture have little value after purchase.

Your income should include your salary, any supplements you get from relatives, and any income that comes from investments like rental property.

More than the superficial signs of wealth involving fashion labels and cars, this measure reveals what proportion of your own income you hold on to and grow. It measures your savings and investment efficiency rather than your appearance.
Income Vs. Wealth

Put another way, it measures how much of the income flowing through your hands stays in your pockets. A river of wealth flows through our bank accounts. If we can divert enough of the river’s current into a reservoir, we will naturally grow wealthy. If we allow our river of income to entirely flow into the sea, we’ll always depend on it.

Does that excite you? It should. No matter what happens in the external world, we can control ourselves. We don’t need much luck to accomplish that. Just habits.

Wealth achieved through our own behavior may seem disappointing. It’s much less convenient than finding a Liberty Head Nickel stuck to your Chucks. Changing your behavior requires tradeoffs and long-term thinking. It may mean sacrificing your desires now to have wealth later.

But have hope. Wealth is a skill. Anyone with more than a poverty-level income can practice it.

Paths from Zero to Wealth

If you graduate college at age 22 and have an income of 100000, our formula expects your net worth to land at $220000. An impressive and unlikely sum for a recent graduate.

My eyes bugged out when I first did this calculation for myself a dozen years ago. I was shocked. I was a few years out of school, in a good job and contributing to a 401k and Roth IRA. Yet on this measure of wealth I fell far behind the curve. I was earning a C or a D grade on wealth, and I itched to improve it.

Consider how you might get from zero to wealth over the ten years. Let’s still assuming an income $100,000. And to keep it easy, let’s also assume that your income and the value of our investments didn’t increase. How would you become wealthy within that decade?

The expected net worth at age 32 is $320,000. To get there from a net worth of zero implies that you saved $32,000 each year. That's a savings rate of 32% of pretax income, or around a 44% savings rate of after tax income (assuming a 28% tax rate). Every month over 10 years, you must drop $2,666 into your piggy bank.
Building Wealth by Saving 40%
Building Wealth from Zero with $100K Income (32% pretax savings)
Incidentally, that amount is about 1.8 times maximum pre-tax income you can contribute to a 401k over 10 years. I’m not necessarily recommending a 401k, but it is a very simple way to automatically accumulate wealth and reduce your tax burden.

What if you procrastinate the wealth question until you’re 30? I know engineers older than that who have saved very little. For this case let's again assume that from 30 to 40 years old you earn $100,000 per year. Your expected wealth level is $300,000 at 30.

If you have very few assets at this point and want wealth by your 40th birthday, you better get busy. You now have to save $40,000 per year over the next ten years, 40% of your pre-tax income, or about 56% after taxes (assuming a .28 tax rate).  You’d need $3,333 per month, 25% more than you needed at 22, and 2.2 times maximum you can contribute to a 401k pre-tax.

The delay stings. If you’re used to a monstrous income-devouring lifestyle, it cuts deep. The earlier you start building your net worth, the gentler the climb to the top. And if you’d like to qualify as a prodigious accumulator of wealth, you need to double these numbers.

Once you reach your target level of wealth, maintaining it won’t hurt as much: you just need to preserve 10 or 20% of your income each year.

Hopefully you noticed some assumptions in my math. The income remains consistent over ten years, and the savings has no growth. If you invest wisely, your net worth will grow faster than your savings rate. If your salary grows, so too will your expected net worth.

Unexpected Implications

The wealth formula leaves clues about money management. Wealth isn’t absolute. Wealth only has meaning relative to your age and income.You can be wealthier on this scale than a neighbor who has a much higher net worth.

Wealth does not necessarily require more income. Controlling spending is just as important. Wealth might mean moving where the cost of living is less. It might mean spending less on things we don’t care about. Or it might mean making good investments. Our wealth isn’t one-dimensional, it’s a landscape of possibilities.

This story also tells us that as we grow older, we require a higher net worth to keep the same level of wealth. Does this represent the cost of healthcare as we age? The prospect of retirement? Inflation? The expectation of the growth of our investments? All of these interpretations seem fair.

As our income grows with raises, promotions, and income-producing investments, our wealth is also expected to grow in turn. Each salary bump requires another step up in the net worth we need to be considered wealthy. Those bumps are also expected to continue to expand our wealth at ten to twenty percent of our age per year. Those consequence almost demand that we invest a large part of our raises instead of spending them.
Building Wealth with Income Growth
Building Wealth With 3% Annual Income Growth (40% pretax savings)
It also suggests that we can be wealthier by having a less expensive lifestyle. The Millionaire Next Door shocked me when I read it. I realized for the first time how misleading the Hollywood and media representation of riches is. The rich people we see on TV and in Magazines are outliers. The conspicuous spenders we regularly encounter are walking lies, often poor by the standards of The Millionaire Next Door.

If you repeat the calculations for a prodigious accumulator of wealth (20% of your annual income times age), you will notice that the pre-tax savings rate over the ten years from age 22 to 32 is 64%. After taxes that leaves very little money (about 12% with the same assumptions). A prodigious accumulator of wealth will almost certainly need excellent investment growth to supplement their income. Saving 40% of your pre-tax income still works with enough time though:
Building Prodigious Wealth by Saving 32% Pretax
Building Prodigious Wealth by Saving 32% Pretax

Practicalities of Building Wealth

More than twelve years after reading The Millionaire Next Door, I have made reasonable progress against its measure of wealth. And I did it despite working at a failed startup that resulted in a more than 50% paycut for a year. Am I rich when compared to the people in magazines and TV? Not even close. But against my own income and my financial needs, I am doing well.

A few key decisions helped me grow my net worth:

  • automated savings and investment in index funds
  • buying and holding on to investments instead of selling when the markets did poorly
  • buying and sticking with a “starter home” even while my income doubled
  • refinancing my home for a lower interest rate and additional 30 years to reduce expenses
  • owning and sticking with a reliable car for the long term

Obviously this isn’t investment advice. You should make your own calculations and talk with an accountant or other professional before making any changes. For instance, buying a house can be a really dumb idea in some parts of the country.

Automated savings and investment let you grow your net worth without having to think. A 401k or Roth 401k let you easily invest in the stock market with every paycheck. Often your employer will even chip in extra money for you. While they might not be perfect for every situation, they are easy to use. If a 401k isn’t enough, or you prefer a more liquid place for your money, many brokerage firms can periodically move money into an investment account from your bank account.

Holding on to investments saves you taxes (in the case of non-retirement accounts) and transaction fees. It also discourages you from trying to time the market or chase higher performing investments.

Buying and sticking with my “starter” home helped me because my income has grown while my mortgage has remained the same.  I can’t say that buying a home is right for everybody, but it has helped my situation. The cost of Austin housing has gone up dramatically. If I had sold this home and bought a new one, not only would it likely have meant a higher mortgage and property tax, it also would have cost me 6% or more in realtor and other transaction fees. If I had rented an apartment, I would probably now be paying more in rent than the cost of my mortgage, insurance, and property tax combined.

One caveat: homes aren’t a great place to store wealth. They aren’t very liquid in poor economic times — more expensive homes become especially difficult to sell. Even if you do sell your home at the right time, where do you plan to live next? Few people manage to do more than roll the sale of one house into the purchase of the next.

Selling my fun but unreliable Jetta and sticking with my reliable used Honda for years has let me save lots of money by not encouraging me treat my car like a status symbol. Also the repairs, insurance, tires, and oil are all much cheaper.

If you are going to do one thing today to get started, calculate your current net worth. See how you compare the wealth formula. Just knowing where you stand can feel motivating. I suggest using Personal Capital to track your investments over time, and Mint for monitoring your spending and current net worth.



†Moving Average Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com. Buying items through this link helps sustain my outrageous reading habit and is much appreciated!

Sunday, November 27, 2016

Painlessly Traveling with International Data

We might waste time on our smart phones at home, but a data connection is a practical luxury when traveling. Wasting time on Facebook is the last thing on our mind on vacation. Our focus returns to the planet around us and to more practical needs. We might translate a menu, navigate to a hotel, or research how to get from Brussels to Maastricht.

Despite the benefits, many of us rely on cafe wifi instead of buying a local mobile plan. We don't want to waste time finding a shop and haggling over a SIM card in French. We want to go directly from our plane to the incredible spectacle of Sainte-Chapelle. We also don't want to pay our carrier expensive roaming fees and risk shocking overage fees.

I spent weeks researching solutions. I found many past-as-you-go international plans offered, but not many good reviews of them. Most of these providers make it difficult to understand how much they charge per megabyte and what kind of connection they provide. I would hate to pay more than my domestic carrier would charge for international roaming. I also want to have access to modern LTE speeds. I don't want to starve to death before finding a decent restaurant!

After a lot of digging, I ordered a GigSky SIM from Amazon. GigSky seemed to offer clear, reasonable rates and seemed to offer LTE connections in most countries. Other providers did offer lower “starting” rates, but I was unable to find documentation of the specific rates I would get. Very few of the other providers gave any indication that more than 3G speeds were available. I was astonished and skeptical that such basic information couldn’t be found for many providers.

In October 2016, I used the GigSky SIM in my unlocked iPhone 6s Plus in the Netherlands, Belgium, and Germany.

GigSky sells data by country. When I was in the Netherlands, I purchased data for that country. As my train to Brussels crossed into Belgium the data stopped. Data service in Belgium required a separate purchase.

As fussy as that may seem, GigSky accommodates even spontaneous travel. The GigSky SIM is configured to provide data to the GigSky app even before you buy data. This means you can purchase a plan without needing WiFi. Within minutes of payment, data is available to all other apps.

Aside from the national boundaries of the GigSky plans, there are also time limits and data caps. For the Netherlands, a $15 plan buys you 100MB of data that lasts 3 days. $25 equals 400 MB over 7 days, $35 is 800 MB for 14 days, and $50 gives you 3 GB lasting 30 days. Prices can vary by location, but this illustrates the trend. More expensive plans give you much more data per megabyte. You can find details on the pricing in each country here https://www.gigsky.com/pricing.

During my travels I usually was able to get a fast LTE connection using GigSky, although occasionally I would have 3G in more remote areas. Aside from a few understandable situations in buildings with thick walls or in caves, the service never left me without data. I was quite thankful to have GigSky at one fancy hotel — the GigSky LTE connection was much faster than the crummy hotel WiFi.

To prepare for my trip, I took several steps to minimize my data consumption. First of all, I downloaded map data in the Google Maps app for most cities I would visit. Downloaded Google Maps lets you see your location and also the map data without any sort of data connection. It also means that when you do have a connection, less data will need to be downloaded when using the app. Despite the local map data, to get directions Google Maps still requires a data connection.

I also disabled background app refresh for all apps on my phone. Background fetch allows apps to fetch data even when you’re not using them — not something I wanted to pay for. I especially didn’t want to pay for social media apps to distract me on vacation.

The GigSky sim was fairly easy to use. I ejected the iPhone’s sim tray using a safety pin and swapped in the GigSky SIM as my 777 descended upon Amsterdam. The one tricky bit was adjusting the cellular settings after installing the SIM card. I saved the GigSky APN configuration file on my iPhone using an Evernote Premium offline notebook to make it easier. A few minutes after landing I was connected to the local carrier and able to buy data through the GigSky app. Seconds after clearing customs, I hailed an Uber.

When I returned to the US, I simply swapped the SIM cards back and my phone was back to normal.

My data usage for the entire ten-day trip averaged about 100 MB a day. Some days I used a little more data, others a little less. I took advantage of free wifi where possible, and I mostly used the data for directions, researching attractions, and communicating with people we were meeting.

My main frustration with GigSky was that the SIM only provides a data connection. If you’d like to send a text message or make a call, you’re (sorta) out of luck. I planned to meet a friend in the Netherlands, and I needed the ability to make phone calls and send SMS messages to make the rendezvous.

Although Skype will let you send cheap SMS messages and inexpensive international phone calls, you can’t receive text messages. Also, unless you buy a phone number from Skype, you can’t receive phone calls either. In both cases, the sending number is one just temporarily used for that purpose.

Other popular solutions for free international text messaging turned out to require verification through a traditional text message. Bah! The whole point was that I couldn’t SMS. Even a SMS app that I previously configured seemed to realize that my SIM had changed and wanted to re-verify by sending me a traditional SMS.

Ultimately I used Skype to communicate with my friend. I explained the odd phone situation so everything worked out.

Since Apple’s iMessage uses data instead of the SMS system to deliver messages to other iMessage users, it worked fine with GigSky. I did have one problem though: for some time I had been inadvertently saving my contacts to my SIM card instead of iCloud. Since I had removed my domestic SIM card, I lost access to many of my contacts. Many of the messages in the Messages app had been reduced to phone numbers. Everything worked fine when I returned to the US and installed my T-Mobile SIM. I’ve since migrated all my contacts off the SIM card.

Upsides

  • Buying data is quick after the initial setup
  • Data is affordable in larger increments
  • GigSky offers flexibility — an impromptu crossing of borders isn’t a bit deal
  • No contracts
  • The cost of the GigSky SIM Card is offset by offering a free 100 MB plan in the first country you use it in (it expires in 3 days)
  • In most places I received fast LTE connections


Downsides

  • You can’t use an iPhone as a wifi hotspot with GigSky
  • SMS messaging and Phone calls won’t work with the GigSky SIM card installed
  • You lose access to any contact information you store on your main carrier’s SIM card 
  • Initial configuration will take a little time — I suggest installing the app and activating the card before a trip
  • Smaller data plans are pricey and expire quickly
  • Data plans are tied to a single country
  • The GigSky instructional and marketing material can be confusing

*Moving Average Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com. Buying items through this link helps sustain this blog and is much appreciated!

Sunday, October 30, 2016

A Popular System for Guaranteed Investment Losses

“This market sucks; I just sold all my stock.”
– A friend, first quarter of 2016.

My friend panicked because the stock market dug a hole in his net worth. In his frantic state, he sold all his stock thus purchasing the hole and moving in. 


He wasn't alone feeling dread. Analysts discussed what the drop meant for the economy and our portfolios. Maybe this was “the bubble” popping! Maybe this is a recession. Maybe none of us will ever be able to retire. Or maybe the market was “taking a break” for a while. In any case, I heard no positive interpretations.

Fear of loss damages our capacity for rational thought. My friend didn’t predict the market’s loss — he sold in the dip, not before it. His predictive powers missed the dip. Why did he try to predict again? Selling stock prophesies loss. You wouldn’t sell an asset if you thought the value would increase. He bet a second time on a skill that failed him once.

My friend was so worried about losing money that he didn’t honor the premise of long-term investing. Instead he looked at the trend of the last few days and extrapolated the future. He engaged in market timing – acting on a prediction of the future. My friend was scared of the market’s future.

I felt excited about the dip. Instead of catastrophe, I saw discounts. Now I could buy my favorite investments even cheaper. People like my friend were selling me their stock cheaper because they were nervous about the future.

I went on an index fund shopping spree. I had some extra cash that I didn’t need to spend or keep in my emergency fund. Instead of my scheduled, once a month investment, I accelerated my purchases to several times a week. I didn't use money I would need in the short term. I still invested for the long term. I just did it faster.

Was I timing the market? Yes, I was. I feel a little guilty about that. I invested more frequently because I predicted the market would eventually recover from the dip. I didn’t anticipate a date for a recovery, but a purist would still call it timing. Perhaps I am too emotional in the opposite direction of my friend. Better that than defeating my entire investment plan!

To mitigate my investment risks, I always spread my long-term investments over a variety of index funds owning a diverse collection of assets. If I owned mostly individual stocks and bonds, I may have felt differently. Sometimes individual companies continue to suffer even when the larger market recovers. Sometimes businesses or even nations have permanent problems they never recover from. But I had diversity across asset classes, markets, and sectors.

I also didn’t expect to need the money from my investments any time soon. If I did, I wouldn’t call it long-term investing. I don’t plan to retire in the next ten or twenty years. Barring a cataclysm, the market should be out of the dip before I'd want to retire. Even the Great Depression was over after a dozen years.

My net worth dropped by thousands of dollars. Perhaps that should worry me. Obviously I want the market to shoot up and make me rich, but fluctuation is a natural part of the stock market. Life means fluctuation and change. Seasons come and go. Unexpected events happen. Even the best cities can experience natural disaster. Hurricanes hit New York. San Francisco has earthquakes. Floods fill the basements of the Louvre.

But when the Seine jumps its banks, Parisians didn't sell their homes hoping to buy them back after the flood recedes. We instinctively understand the impracticalities of selling property during a disaster. Stock? Not so much. Investing in the stock market without a tolerance for a drop in value is a guaranteed recipe for losing money. Drops happen. To make money you need to sell with gains, not losses.

Even though we might not have an immediate need for the money, we hate watching our net worth falter. We feel a loss in our net worth much more painfully — and for longer — than an equivalent gain in our net worth. Investment success requires the right mentality.

Instead of thinking “losses”, think discount. Don’t worry about what investments you already have. Pretend you have no investments. Worry instead about whether at this new price you’d like to buy these investments. Or, if you’re capable of more rationality than I am, ignore it all and continue your investment plan unchanged.

Gains in the stock market come from steady growth, dividend re-investment, and occasional periods of rapid growth. Other than scheduled dividends, I know I can’t predict when gains would happen. I’ve lost money trying silly technical analysis ideas. I’ve also lost money reading quarterly reports and looking at fundamentals. I’ve lost money following expensive financial advice. None of that saved the the pain and embarrassment of bleeding money through short-term trading. Predictions have terrible track records.

Since I now admit I can’t predict the future, I no longer sell when things look bad. If I abandoned the market, I would transform my current losses into cash and risk missing out on market gains gains. Was I really prepared to skip dividends and a potential leap in the market? Not a chance. Instead of fleeing, I continue to add money when the markets are down.

My friend? His fear cost him dividends, gains during a fast climb out of the dip, and steady growth of the market to levels above the beginning of 2016. He probably locked in a 8% loss from the start of the year. Meanwhile the market has experienced about a 10% gain from January 1st 2016.

If he continued investing instead of selling when he felt the pain, he could have experienced an 18% gain on his new investments, along with the 10% gain on his previous investments. That’s a missed opportunity turned into a painful loss.

Do you intend your investments for the long term? Do you use a balanced, diverse index fund strategy? Do the research. Does it make sense to stay invested even when the markets are down and CNN is predicting the end of the world? Does it make sense to invest more money in that situation? I think so.

If you agree with me, be strategic. Arrange your investments so that fear won’t motivate the wrong decisions. Automate your investments. Ignore the financial news. Don’t invest money that you will need in the next ten years.*


* This isn’t personalized financial advice. Agree with me at your own risk. Do your own research, run some simulations in a spreadsheet, and consult with professionals who understand your financial situation. Beware brokers and “free” financial advisors. Use professionals who you directly compensate and who don’t have a conflict of interest!

Sunday, October 2, 2016

We Adopted Agile. Where Did We Go Wrong?

Or, how methodologies can lead to misery

Lean. Adkins. Extreme Programming. Paleo. TDD. Agile. South Beach. Scrum. They're all lovely tools for either dieting or organizing the process of software development. Poorly used, they’re a fast path to misery and disillusionment.

Like diets, development methodologies require discipline, effort, learning, and social support to adopt. If on Monday you abruptly adopt a strict diet, you'll feel depleted by Thursday. Unless you possess great willpower and motivation, you’re at risk to slip back to your old eating. A diet builds on many habits buried deeply into our routines and physiology. Changes require more than simple knowledge of the new diet and it’s benefits  Why do we expect an easier time switching software development processes?

Software development methodologies are designed to address specific deficiencies in outcomes. They assume a certain level of proficiency, and a certain ability to change from your current methodologies. If you don’t meet those table stakes, if you have different deficiencies, or if you have additional deficiencies, the methodology won’t be enough.

If you can’t stick to a diet, it can’t help you. Even if you diligently stick to the diet, your lifestyle isn’t healthy unless you also exercise. Failure is also possible if you exercise and eat according to the diet, but do a poor job managing stress. Successfully achieving your goals requires a holistic approach.

The consequences of a poorly implemented software development methodology change read like fine print in a pharmaceutical ad: loss of productivity, attrition, missed goals, and painful meetings.

The Agile Team Myth

One rainy Monday the boss drags my team into our largest conference room. The boss has exciting news: we’re switching to scrum! So begins our development crash diet.

The boss just read a great article about scrum. Unlike our waterfall process, scrum will allow us to ship more feature-rich, higher quality software in less time. Their friend at Initech uses it too, and the whole company adores it. Eighty three minutes and 16 slides later it’s official: we have a new methodology.

Fast forward two months.The visible parts of the process have changed: daily scrum meetings and org charts with scrummy titles and scrummy  shapes. Guess what? Our output may have had a brief spike, but productivity has settled back to the pre-scrum levels. It’s probably somewhat worse.

The team doesn’t work quite like the methodology says it should. Some team members have more political power than others, so they get to skirt the principals of scrum to varying degrees. Other exceptions to the scrum process occur because “we can’t do that here”. Our team also continues some old processes under the cover of borrowed vocabulary from the “new methodology”.

Where we do adhere to scrum, we feel anxious because we’re not comfortable with the new process. Because we make mistakes learning our new methodology, things take longer, and we receive frequent negative feedback. Sometimes the boss makes a mistake and reprimands us for following scrum. Relationships between QA, product management, developers, and management become strained. Everyone looks tired.

Some team members feel cynical about the change. They note that now team successes are attributed to the boss’s scrum decision while scrum failures land on the team or individual members. Others are starting to reply to recruiters.

Some individuals are confused or distracted by the chaos of a new process. Others withdraw, ignore scrum and just focus on their area of expertise.

The team suffers from change indigestion. New methodologies require a stack of new skills and habits. Each one requires practice and feedback to master. Teaching one person a new skill requires a lot of effort. Teaching ten people thirty skills all at once requires magic. Teaching ten people thirty skills while they continue their normal work lies beyond even magic’s abilities. We have too many new tasks — we can’t be good at them all.

The team resists scrum. Because a manager imposed the process without input from the rest of the team, we don’t feel committed, nor do we have the same expectation of benefits. Forcing such a large change steals autonomy. Crippled autonomy means less ownership and motivation. The reduced feeling of control over our work environment makes us less happy.

Methodologies Promise Better Teams But Only Deliver Better Tools

Like fad diets and nutritional supplements, the library of software development methodologies promise a cure for every potential team problem. This methodology helps you deliver more of what the customer needs? Perfect, that’s what we want to fix!

Just like protein powder doesn’t build muscle without exercise, sometimes you need improvements outside the methodology. Diets don’t address broken legs, how you handle stress, or gym time. Methodologies don’t address missing skill-sets, cynical attitudes, sloppy communications, or poorly defined roles.

Do members of your team have difficulty writing clearly? It won't matter if they are writing stories, tickets, features, or specifications. Poor writing makes poor feature descriptions, which causes confused development processes.

Does your leadership have trouble getting along with the developers? It won't change things if the leadership role is named team lead, manager, tech lead, scrum master, product manager, or sorcerer. The team will still feel mistreated, untrusted, or confused by their interactions.

Maybe your developers just build whatever they feel like. Will they become more obedient because you've gone from waterfall to agile? Nope. If they didn't obey before, they won't obey under your new methodology. Waterfall isn’t the issue: team dynamics are.

You’re not alone if you confuse great teamwork with great methodologies. Software teams talk a lot more about methodologies than team dynamics. We look at what other teams are doing and compare ourselves. We call ourselves agile. We debate code style and programming languages. But we rarely take the same time to discuss the human interactions that happen in our teams

Tactics For a Happy Productive Team

Review your team’s strengths and weaknesses. Is the code quality great, but the velocity too low? Is too much time spent in rework? Are the team members happy? Who needs help or training in what areas?

Examine your team’s fundamentals: communication skills, mutual respect, customer feedback loops, hiring practices, organizational skills, etc. Invest money and time teaching deficient skills and offering feedback. Tune the team. Help them do better planning, work on empathy, or practice writing.

Make individual roles clear to the entire team. Everyone should understand the work product of the other team members, including the leadership and business roles: product management, technical leads, and managers. The output of everyone’s work should be public and visible.

Once you address skills and habits at the individual level, you can work on changing the habits of the team itself.

If you eat two pounds of fries every day, you can't expect to switch to a kale diet overnight. That's crazy talk. You’ll crave those fries at every meal. You can resist for a while, but one day you'll snap. A tiny moment of weakness and you drain the neighborhood Wendy's of their entire potato supply. You'll sit in their plastic booth feeling sick, wondering why changing your diet is impossible.

Changing isn’t impossible when you set reasonable milestones to reach a larger goal. Success changing habits means catering to your psychology. Don't immediately drop the fries and pick up the kale. Measure your current fry consumption. Set a goal for a small but meaningful reduction. Adapt to it. Add a little kale. Figure out how you enjoy preparing it. Aim for the diet you want, move towards it. But don't trebuchet yourself into a new diet expecting an instant drastic change in your behavior. Catapults work against fortresses, not against behavior.

Perhaps your team designs and plans the wrong features. Just because you’re experiencing poor product-market fit, doesn’t mean you should toss your whole methodology in the trash. That's like selling your old car because the oil needs changing. The car isn't the issue, the oil is. To keep a car running, change the oil. To build the right features, you talk to your customers.

Yes, some methodologies directly address customer feedback. That doesn’t mean you have to start with the entire methodology! Pick one tactic from your favorite methodology and adopt it. Once it becomes a habit, pick the next tactic. Repeat until your customers send you love letters.

As you change things, use teamwork rather than pure authority. Habits are difficult to dictate. Collaboratively pick the “habit” to change with your team. Present your goals and seed some ideas. Maybe you’re consider changing how you review code, how features are prioritized, or how planning works. Whatever it is, socialize it. Get consensus. Present the change as an experiment to make it less threatening.

Allow the habit time to stabilize before making another change. Measure the results. Ask people what they think. Celebrate any successes, and quickly address any failures. If the experiment isn’t working, use the team again. Change the experiment. Make the process fun.

My team changed our code review process a several months ago. We started it as an experiment. We didn't just declare that we had a fix for code reviews. We discussed the shortfalls of our old process and tried some ideas that might fix it.

As we reviewed code over the next month, we reflected on the results of the experiment. Were the new habits sticking? Did the code quality improve? Are we learning from each other, and beginning to understand new areas of the project? Did we enjoy it?

Because we examined the results from the perspective of our goals, we felt free to make tweaks along the way. If we just imitated a methodology, we would have focused on imitation. We wouldn’t feel ownership of the outcome. Owning the change meant that we adjust it to get a better outcome, and that we felt responsibility for success.

If we made a mistake, we just said “oops” as a team and briefly discussed if there was something we should change. Because our mistakes were usually a forgetful flop back to old habits, nothing exploded. There was no breakdown of some huge new process. No other process  depended on a new code review process, so there couldn’t be a cascading failures. Our one mistake wouldn’t get us blamed for three more.

Messing up meant we reviewed code the old way; no big deal. That’s the cost of trying something new, and a useful opportunity to reflect on our new process. We didn't feel exhausted, lost, or overwhelmed.

As the team masters each new habit, add another to the stack. If you’re diligent, the team will develop a talent for mastering new habits. Your ability to improve the team will accelerate. Eventually you’ll make so many changes that you’ve landed in the new methodology. Perhaps you’ll build a bizarre Franken-methodology that you can brand and write a book about. Either way, congratulations. You have a product-building machine.

Stop switching methodologies like fad diets. Worry about the right methodology after you have the basics of running a development team under control. When your team runs smoothly you’re positioned to experience the benefits of an appropriate development methodology. When you do adjust your methodology, minimize risk by making gradual changes, letting the team own them, and by measuring the impact.

Sunday, September 18, 2016

Recommended Books and Educational Resources from The 2016 Business of Software Conference

Update: 20 Sept, 2016: added Predictable Revenue and Selling with Noble Purpose.

I'd rather read a cereal box than most business books. They either put me to sleep faster than an antihistamine overdose, or retell the same wilted business ideas. Who has time for that?

Now I only read books recommended by people I admire. People like those at the Business of Software Conference. They consume an elephant's weight in books every year, so they make a great filter for recommendations.

Every year, I ask the folks at the conference what books they've read in the last year that really made an impression on them. Most of these suggestions come from attendees, but a few were mentioned in the talks too. If one of the books below catches your eye, it will almost certainly be worth your time.

Oversubscribed: How to Get People Lining Up to Do Business with You by Daniel Priestley.

Thinking, Fast and Slow, by Daniel Kahneman.

Predictably Irrational, The Hidden Forces that Shape Our Decisions, by Dan Ariely.

Gut Feelings: The Intelligence of the Unconscious, by Gerd Gigerenzer.

Everybody Writes: Your Go-To Guide to Creating Ridiculously Good Content, by Ann Handley.

Made to Stick: Why Some Ideas Survive and Others Die, by Chip Heath.

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant, by W. Chan Kim.

Shoe Dog: A Memoir by the Creator of Nike, by Phil Knight.

Tribe: On Homecoming and Belonging, by Sebastian Junger

The Chimp Paradox: The Mind Management Program to Help You Achieve Success, Confidence, and Happiness, by Dr. Steve Peters.

The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business, by Clayton M. Christensen.

Consumption Economics: The New Rules of Tech, by J.B. Wood.

Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers, by Geoffrey A. Moore.

The Advantage: Why Organizational Health Trumps Everything Else In Business, by Patrick M. Lencioni.

Badass: Making Users Awesome, by Kathy Sierra. If you want to improve anything, you probably need to read this book. Or watch Kathy's Business of Software talks. Not only does Badass tell you how to get your customers great results, it teaches you how learn skills. 

Predictable Revenue: Turn Your Business Into a Sales Machine with the $100 Million Best Practices of Salesforce.com, by Aaron Ross and Marylou Tyler.

Selling with Noble Purpose: How to Drive Revenue and Do Work That Makes You Proud, by Lisa Earle McLeod.



*Moving Average Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com. Buying items through this link helps sustain my outrageous reading habit and is much appreciated!

Tuesday, September 6, 2016

Revisiting the Lightest Camera Bag

Are you tired of hauling around a camera bag that weighs more than your camera does? Did you spend a lot on lenses, but avoid carrying them because of a sore and sweaty back?

You're not alone. I enjoy photography, but I hate feeling like a pack animal. I also felt dumb traveling with a camera luggage advertisement on my back. Expensive camera inside! That's the last thing I want strangers to think as I explore Barcelona.

I started testing different bags more than four years ago. Camera equipment has changed a lot since then, but the core of my solution remains the same: a light, unpadded bag and separate padding for the camera and lenses. The unpadded bag I use and recommend is the Patagonia Lightweight Travel Courier Bag. My courier bag has traveled the world. Taipei, Boston, Barcelona, Cologne, Amsterdam. It''s still in great shape, and still my favorite container for camera gear.

Over the past few years, the design of the bag has changed, but it still weights very little: only 8.2 oz. There are different colors available, and it appears the there are now two smaller zippered compartments on the front rather than one. Also, the zipper pulls appear to be attached by knots rather than a bit of plastic.

The bag's strap adjusts length with a nylon toggle, and the excess strap feeds into the bag so nothing dangles. The strap is made of a mesh that offers a little padding and allows your shoulder to breath. Breathability matters in the Texas summer. On each end of the bag there are elastic pockets useful for water bottles, sunglasses, or a compact umbrella. The exterior zipper pockets are great for carrying spare camera batteries or memory cards.

The travel courier easily repels a light rain,. A surprise deluge in Venice taught me that a heavy downpour will get through the zippers and seams of the bag. Fortunately my guidebook soaked up most of the rain, sparing my electronics. The new bag claims to be weather-resistant, but I'd still carry an umbrella or plastic bag to protect anything sensitive.

The bag has enough space to squeeze in my camera, two lenses, a jacket, and a pouch containing extra batteries, a Lens Pen, charging cables, and spare memory cards.When I carry a jacket, I put my camera and lenses on top to enjoy a little extra padding. A benefit of a bag without built-in padding is that it actually takes up less space when you carry less gear.

The bag is designed in such way that the main compartment is unlikely to spill while being worn over the shoulder. I often use the interior of the bag to hold my lenses as I change them to reduce the chances of dropping anything on the ground.

If you don't have a pouch for your camera accessories, I highly recommend the Tom Bihn clear organizer pouches.  They're well made and make it easy to find your gizmos without spilling them on the floor. I put all my camera essentials into a medium pouch so I can easily transfer my phone charger, cables, camera batteries, and SD Card Wallet between bags without forgetting anything.

Over the past year, I've sold both of my Canon cameras and most of my Canon lenses. dSLRs are great for weddings and sports events, but the size and weight make travel photography miserable. Recent mirrorless cameras now match or exceed the quality of typical dSLRs, with a fraction of the weight and bulk.

Today I carry a Sony Alpha a7II Mirrorless Digital Camera body with the Sony Zeiss 55mm f1.8 lens attached. You can read more about this camera and lens combination in my review here. Depending on my plans, I sometimes carry a second lens in the bag - usually the Sony 28-70 lens.

The decision to go mirrorless shrank my equipment weight and bulk. I have plenty of room in the courier bag to add a lens pen,  pocket umbrella, cheap sunglasses, spare batteries,  USB backup batteries, and sometimes a jacket or coat.

My padding has changed with my camera choice. I no longer use the Domke wraps to pad the camera. Now I protect the camera with the LensCoat LCBBLBK BodyBag with Lens (Black). It's a neoprene shell shaped roughly like a camera with lens attached.
LensCoat BodyBag with Lens
The BodyBag has a flap that comes over the top and back of the camera that secures with velcro. Your camera straps poke out of the sides of the shell, so you can still carry the camera over your shoulder. I frequently wear the camera in the BodyBag over my shoulder when it's not in the courier bag. It offers protection from bumps in crowded places and a little shelter from dust and rain.
LensCoat BodyBag with Lens open to reveal a Sony Alpha a7II
Inside the BodyBag, there is a small loop of material that opens with a snap -- a leash to attach the BodyBag to your camera strap. You can see it peeking out of the middle of the BodyBag in the photo above. When you want to used the camera, you just open the velcro, peel off the BodyBag, and let it dangle from the strap. If you prefer, remove the BodyBag completely and stuff it into your pocket.

Inside the "snout" of the BodyBag, the part that sits in front of your lens, the LensCoat folks thoughtfully built a small pocket containing a disc of rigid foam. The foam gives another layer of protection to one of the most vulnerable parts of your camera: the front lens element.

I hate missing shots, so I store my camera setup in the BodyBag with the lens cap off. Who wants to suffer the embarrassment of trying to take photos with the lens cap on?

I store the lens cap in the same pocket BodyBag pocket that contains that disc of foam. That way I'll won't have misplaced my lens cap when it comes time to swap lenses. Please use common sense if you copy this technique. I always have a lens hood installed on my lens,  creating some extra space between that pocket and the front element of my lens. I wouldn't recommend storing anything hard like a lens cap where the glass of your lens might rub against it.

This setup with the BodyBag just fits my Sony Alpha A7 II with the Sony Zeiss 55mm f1.8 lens. It fits snugly with the lens hood installed in the extended position. It looks like a tailored fit, which I love since this is my favorite lens on my favorite camera. LensCoat offers different sizes of the BodyBag; I suggest comparing your camera measurements to the measurements of the BodyBags. The BodyBags have a small amount of stretch.

To carry a second lens, I've adapted an different LensCoat BodyBag. This one was designed for holding a dSLR body without a lens attached. My 28-70mm lens fits in it fine, but a properly-sized LensCoat lens pouch is probably a better bet if you're buying something new. The lens-specific models feature a disc of hard foam to protect the front glass of your lens. They offer a variety of different size neoprene Lens Pouches.
Patagonia Lightweight Travel Courier Bag with my LensCoat BodyBag with Lens on top
For walking around town, I feel like the BodyBag plus the Travel Courier offers a perfect compromise between convenience and protection. It doesn't provide a half-inch-thick foam sarcophagus around my camera, but it also doesn't weigh ten pounds.

When I travel by air, I empty the courier bag and put it with my clothes (the courier stuffs into it's own interior pocket). The camera and lenses I leave in their LensCoat bags and jam into my well-padded Think Tank Photo Urban Disguise 60 v2 bag. The LensCoat padding works fine for a long hike, but not for getting thrown around by TSA officers, squeezing under airplane seats, and getting rammed by rolling suitcases. That's where you want an expensive foam sarcophagus like my Think Tank.

Once I'm at my destination, I move my camera equipment back to my lightweight courier for exploring.

This camera bag setup has changed my life. I take so many more photos now.




 


*Moving Average Inc. is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com. We also participate in Patagonia's affiliate program. Buying items through this link helps sustain this blog and is much appreciated!

Sunday, September 4, 2016

iOS 10 Development for Executives: Notifications


Imagine those big, old fashioned movie theater marquees. The kind with those plastic letters that you snap in to spell the name of a film? Today in iOS 9, notifications are like that. Fixed, boring text. It’s like apps are sending you text messages. Some overachieving apps have actions you can tap. Most are just words inviting you in to the app.
iOS 10 Push Notification Banner
In iOS 10, notifications work more like a modern theater kiosk. The contents are now updatable, can include media, and can be expanded into a customizable view that acts like a simplified version of an app. 

iOS 10 has many new notification features, fight churn, improve customer on-boarding, and increase your app’s utility. Expanded notification user interfaces will increase user engagement by allowing you to build a more useful and visually exciting notification experience

Images, Video, and Audio

You can now attach images and video to your local or remote notifications. Careful use of video, audio, or animation will let you communicate more clearly with your users and create more engagement.

Stores and marketplace apps will be able to show physical goods in notifications. Media apps like Netflix are an obvious use case too: they can preview content. Productivity apps can push down brief tutorials to help new users get started. You can also use media to convey urgency in business-critical apps. 

Note that since the attachments are represented as URLs to files already downloaded, you will need to develop a UNNotificationServiceExtension to download and attach the necessary media files to support this. There are limits on the maximum file sizes and formats.

Carefully design your notifications. If your notifications seem more obnoxious that useful, your customers may deny your app’s notification privileges or wipe your app. You may wish to offer a “mute” button in your notification’s actions so that users turn down the volume of notifications rather than adding to your churn statistics.

Done right, media-rich notifications can be a great way to reduce churn, on-board your new customers, and increase engagement.

Custom Notification UI

You can now design a custom expanded view for your notifications. Your push notifications initially appear as they did in iOS 9: banners that appear at the top of the screen when the user is using the device, or a stack of batters on the lock screen. If your app offers an expanded view for a particular category of notifications, the user will be able to pull down, 3-d touch, or select the view action of the banner to show your custom view. This is called a UNNotificationContentExtension.

You create a this user interface using a subset of the the same UI frameworks your app already uses. This lets you visually represent much more nuanced data. Instead of some text and a photo thumbnail, you could show part of a map, the remaining steps in a checklist, shopping cart contents, or even a snippet of video from a security camera. Developers can even use the standard UIView animation blocks to create slick animations.

The screenshot you see above show a “quote of the day” notification from my app Passages on the home screen. The little bar at the bottom of the banner indicates that the user can swipe down to reveal the expanded view, which you see below. The expanded view allows the user to read the full quote and author name using the same fonts used in the app.
iOS 10 Notification Custom Expanded View (UNNotificationContentExtension)
iOS 10 limits user interaction to a list of buttons and text input, the same actions that you could attach to notifications in iOS 9. The custom part of your expanded view doesn’t respond to touch except by launching your app. You can’t enable sophisticated interactions like panning maps, but the extension can update it’s view in response to button or text input.

In iOS 9 notifications like “Something changed” or “You have a new event” were quite common. These simple messages were useful (and you’ll still need it for the compact view), but not very compelling to users. They also weren’t very actionable. For instance, drivers for a delivery company might not want to accept a job without seeing a map or traffic conditions.

Location can still be used to trigger notifications, but expanded views give them more utility. If your coffee shops are offering a coupon, why not cue up a notification reminder that triggers a few blocks from each shop? An expanded notification can make this more useful because you can present the user with a map or directions to the location.

Simple text notifications are often painful because without enough context it can be difficult to know if you’ve already handled the task behind a notification. The additional context you can provide will give the user more confidence to take action or dismiss the notification.

Unless you intend to build a complicated expanded view, your developers may be able to build a decent extension in a day or two of work. Since you build the expanded view with Storyboards and UIView controllers, you hopefully will be able to recycle views right out of your existing app. Your customers already know how your app works, so why not keep it consistent?

Modifying Notifications 

iOS 10 lets your app modify notifications even after they are delivered. This means there is no reason for users to see out-of-date notifications in notification center.

You can update a shipping notification with the latest status. Bills notifications can be switched to show payment. Expiring coupons can be updated to show urgency, and you can remove expired coupon notifications. If you update a notification, it will be moved to the top of the notification center.

You can also modify and enhance your notifications as they arrive by creating a UNNotificationServiceExtension. This can be useful if your app might have access to data your servers don’t, or if you wish to attach media to your notifications.

For instance, a notification service extension for a taxi driver app might use location data to show how far away a fare is. Or you might use end-to-end encryption for all your notifications, using the service extension to decrypt the message before it displays to the user.

For an stock app, you might update a share price in a notification to ensure the freshest possible data. For a messaging app, you might use the service extension to download the message and any attachments for instant display when the user opens the app.

Conclusions

WWDC 2016 had a strong theme of letting users get more done without opening apps. These notification improvements will let you make your customers more productive without ever launching your app.  

Advertisers and ad-funded apps will worry about this outside-of-app trend. Users who spend less time in apps spend less time looking at ads. Apps that don’t follow this trend may lose users to apps that do.

App makers who get their revenue from their customers instead of advertisers shouldn’t be as concerned. These enhancements should help keep your users more engaged, even if the traditional app metrics like session length may not show it.