My friend Andy Traub is a man who ships things. He regularly ships the Linchpin Podcast, one channel of his Take Permission Media Network.

In June, Andy was nice enough to interview me for his Linchpin Podcast. The episode is pretty long at almost 90 minutes but we had a great conversation on the following topics:

• The two traits of an incurable entrepreneur (hint: you have both)
• A free website to launch and spread your idea in 15 minutes
• Why the cost of failure has approached zero
• We Work Labs – a new innovation co-working space in NYC
• How to pivot your idea for success
• The difference between ideas and shipping
• My first failed business (a non-profit involving an Atari 2600 and my brothers when I was 8 years old)
• How to finally write that book in your head (can you write a page a day?)
• How to meet more relevant people in your organization
• How Elliot Bisnow changed the world by dropping out of college and organizing an impromptu ski trip that spawned a world-changing organization.

Click here to head over to Andy’s blog to listen or click here to listen directly.

I hope you enjoy the show and look forward to your thoughts.

On Wednesday, Vinicius Vacanti, founder and CEO of Yipit, the most popular daily deal aggregator on the web, delivered an excellent session for startup founders titled, “From Idea to Product to Traction.”  The session was jam-packed with actionable nuggets.  Some highlights and a link to the full post below.

Identify a real problem. The biggest mistake most entrepreneurs make at this stage is getting excited about an idea that isn’t solving a real problem that people have.

Make sure it’s a very big problem. Vacanti used a personal example of replacing a broken remote control for one of his televisions. Problem? Yes. Big problem (market)? No. Vacanti explained that when pitching entrepreneurs need to convince VC’s they’re building a billion dollar company.

Come up with a name and setup a landing page. Collect emails while you’re working away getting a product up to speed.  To do this quickly and easily, Vacanti recommended one of my favorite new startups, Launchrock.com. He explained a few simple ways to promote the landing page, such as including the problem you’re solving and the landing page URL in your email signature.

Come up with a less than 7 word description that succinctly explains the problem you’re solving. Tumblr’s is simple, “The easiest way to blog.” Yipit’s is “All the best daily deals in your city.” The original Apple iPod was, “A thousand songs in your pocket.” The shorter the better.

Don’t add features, throw them out. Vacanti explained that by trimming features and functionality, Yipit reduced it’s production time from a year and a half for v1.0 to four months for v2.0 and then down to three days for the current iteration of the product.

You can read the rest of the post over on Yahoo! Scene here.

Woody Allen used to say 90% of success in business was just showing up.

He’s right. Now more than ever.

In the social web, showing up is 90%. The other 10% is knowing what to do when you show up.

It doesn’t mean tweeting about your latest product or service or why someone should do business with you.

It means listening and engaging.

It means reacting quickly to negativity.

It means being generous. To a fault.

It means being transparent and building trust.

It means being a Connector.

It means being there before the sale.

It means being consistent and reliable.

Showing up isn’t hard but it’s critical. It means more than it ever has.

Quick. Take 30 seconds and list your main competitors.

(don’t worry, I’ll wait)

Done?

Good.

Sorry, but your list is wrong.

Unless of course, you listed Zappos, JetBlue, Southwest Airlines, Trader Joe’s, Wegman’s, Netflix, The Container Store and Apple.

Your customers are doing business with these companies, who are constantly raising the bar on engagement and customer delight.

Every time your customer’s online order arrives earlier than expected from Zappos…

Every time your customer chuckles at a Southwest flight attendant who weaves humor into the emergency exit script…

Every time your customer feels a human connection with a checker in line at Trader Joe’s…

Every time your customer is glad that there are so many helpful colored shirts at the Apple Store…

It’s happening right now. Your customers are experiencing this kind of interaction (notice I didn’t say transaction) today.

The bar has been raised.

What are you going to do?

This is often how I feel.

When I work with clients, I try hard to teach them about marketing, about customer engagement and how to listen and participate in the social web.

Some consultants prefer to do instead of teach. They are worried that if the client learns how to run everything on their own, they wouldn’t need the consultant anymore.

I would welcome that.

If I can teach my way out of a job, that means the clients are engaging with their customers and running a more successful, more social, more human business.

How can that be a bad thing?

Full disclosure…

I’m a huge fan of the team over at 37 Signals. They bleed simple brilliance. David Heinemeier Hansson gave one of my favorite talks ever at Startup School 08 and in May, Jason Fried delivered another gem at Big Omaha 2009.

Everyone should make time to watch Jason’s video, but if you can’t carve out 20 minutes my summary is below.

Jason Fried @ Big Omaha 2009 from Big Omaha on Vimeo.

Failure is not cool
The phrase “fail early, fail often” is overused. Failure is actually not necessary. Failure is not a character-building thing and it’s not a prerequisite to success. Focus on the things that are going right and parlay that.

Planning is overrated.
Business plans are just guesses. You can’t predict what’s going to happen. What matters is what you’re doing right now. You know more about something after you’re done with it.

Interruption is the enemy of collaboration.
A big open loft space does not necessarily mean more collaboration and higher productivity. With so many interruptions, workdays become work moments.

Try this in your company or department. Every Thursday, nobody can talk to each other. Email and IM and other tools are fine but no talking. See if it’s the most productive day that week. Or that month.

You create valuable byproducts.
When you make something, you make something else. We are all making byproducts.

When building houses, the sawdust created from all the lumber was initially thought of as waste. Then, people found multiple useful applications for it and it ended up being a valuable byproduct, sold for money.

When 37 Signals built Basecamp, the byproduct was Ruby on Rails and they didn’t even know it at the time.

Sometimes the valuable byproduct is knowledge.

Share like a chef.
Emeril Lagasse, Mario Batali, Bobby Flay. They share what they do on TV. They tell you exactly what ingredients they use and show you step-by-step how to do what they do. If you want to do it at home, you can buy their cookbook for a fraction of the cost of a single meal.

This doesn’t make them less money, it makes them more. More people know about them. More people buy the cookbooks. More people eat at the restaurants.

Traditional business thinking would shut down this blatant sharing of intellectual capital.

The best thing you can do is share your knowledge.

What is your cookbook? Publish it. It helps you…

Build an audience.
Every company has customers. Great companies have fans. At the least, you need an audience.

90,000 people read the 37 Signals blog everyday. It takes time to build but it doesn’t cost them a penny to reach this large captive audience.

Focus on the things that don’t change.
What are the core, important things in your business that don’t change?

Amazon invests in distribution. Shipping. Customer service. Price. These things will be important to their business in 10 years.

37 Signals makes web-based software. They focus on making it fast, easy and usable. It may not be sexy but that is what will be important to their business in 10 years.

Ideas are immortal. Inspiration is perishable.
We all have ideas. Ideas are immortal.

Inspirations however, are like fresh fruit or milk. They are very perishable. If you’re lucky enough to be inspired, do it. Do it now. The most energy you’ll ever have about an idea is at the beginning. You can’t sustain it.

Thanks to Jason and the whole crew over at 37 Signals. Keep leading, guys.

Amazon just announced that it was acquiring Zappos, one of my favorite companies, for $807 million in Amazon stock, and about $40 million in cash and restricted stock.

Here are 5 reasons everyone wins in this deal:

1) Culture
Amazon gets to learn directly from Zappos, the company that wrote the book on culture as the DNA of success.

2) Leadership
Amazon gets Tony Hsieh, Fred Mossler, and Alfred Lin, three leaders who understand the new business paradigm as well as anyone.

3) Vision
See #2. Imagine sitting in “future of the company” brainstorms with Jeff, Tony, Fred and Alfred.

4) (Repeat) Customers
Here is Zappos’ repeat customer data from March 2001 – March 2007. (click to see larger)

5) Transparency
From living his life publicly on Twitter to the heartfelt letter Tony Hsieh wrote to Zappos employees, Zappos bleeds honesty and transparency. I love Amazon but I’ve always felt like I’m dealing with a website. With Zappos, I know there are humans behind the curtain.

The transparency seems to be rubbing off already. Here is Jeff’s video:

Now if you’ll excuse me, I have to go buy some AMZN.

My friend Dan passes along the great essay “I, Pencil”, originally published in 1958 by Leonard E. Read (the founder and president of the Federation for Economic Education).

(Compared to my typical posts, this is a longer read but an important one.)

I agree with Dan’s assessments:

1) it is quite simply one of the greatest things ever written on any subject.

2) It highlights my faith in the natural tendency of individuals to unknowingly self-organize for mutual benefit.

3) It makes it completely apparent that central planning could never hold a candle to the organizational power of millions of individuals acting solely for their self betterment.

In the words of a subsequent president of the FEE Donald Boudreaux:

“No newcomer to economics who reads “I, Pencil” can fail to have a simplistic belief in the superiority of central planning or regulation deeply shaken. If I could choose one essay or book that everyone in the world would read, I would unhesitatingly choose “I, Pencil.” Among these readers, simplistic notions about the economy would be permanently transformed into a new and vastly more subtle�and correct�understanding.”

Some comments on the piece from Milton Friedman included at the end.

I, Pencil
My Family Tree as told to Leonard E. Read

I am a lead pencil�the ordinary wooden pencil familiar to all boys and girls and adults who can read and write.

Writing is both my vocation and my avocation; that’s all I do.

You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery�more so than a tree or a sunset or even a flash of lightning. But, sadly, I am taken for granted by those who use me, as if I were a mere incident and without background. This supercilious attitude relegates me to the level of the commonplace. This is a species of the grievous error in which mankind cannot too long persist without peril. For, the wise G. K. Chesterton observed, “We are perishing for want of wonder, not for want of wonders.”

I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me�no, that’s too much to ask of anyone�if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because�well, because I am seemingly so simple.

Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.

Pick me up and look me over. What do you see? Not much meets the eye�there’s some wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser.

Innumerable Antecedents

Just as you cannot trace your family tree back very far, so is it impossible for me to name and explain all my antecedents. But I would like to suggest enough of them to impress upon you the richness and complexity of my background.

My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!

The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents.

Consider the millwork in San Leandro. The cedar logs are cut into small, pencil-length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill’s power!

Don’t overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation.

Once in the pencil factory�$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine�each slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat atop�a lead sandwich, so to speak. Seven brothers and I are mechanically carved from this “wood-clinched” sandwich.

My “lead” itself�it contains no lead at all�is complex. The graphite is mined in Ceylon. Consider these miners and those who make their many tools and the makers of the paper sacks in which the graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships and those who make the ships. Even the lighthouse keepers along the way assisted in my birth�and the harbor pilots.

The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the refining process. Then wetting agents are added such as sulfonated tallow�animal fats chemically reacted with sulfuric acid. After passing through numerous machines, the mixture finally appears as endless extrusions�as from a sausage grinder-cut to size, dried, and baked for several hours at 1,850 degrees Fahrenheit. To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats.

My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would think that the growers of castor beans and the refiners of castor oil are a part of it? They are. Why, even the processes by which the lacquer is made a beautiful yellow involve the skills of more persons than one can enumerate!

Observe the labeling. That’s a film formed by applying heat to carbon black mixed with resins. How do you make resins and what, pray, is carbon black?

My bit of metal�the ferrule�is brass. Think of all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to explain.

Then there’s my crowning glory, inelegantly referred to in the trade as “the plug,” the part man uses to erase the errors he makes with me. An ingredient called “factice” is what does the erasing. It is a rubber-like product made by reacting rape-seed oil from the Dutch East Indies with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.

No One Knows

Does anyone wish to challenge my earlier assertion that no single person on the face of this earth knows how to make me?

Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others. Now, you may say that I go too far in relating the picker of a coffee berry in far off Brazil and food growers elsewhere to my creation; that this is an extreme position. I shall stand by my claim. There isn’t a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how. From the standpoint of know-how the only difference between the miner of graphite in Ceylon and the logger in Oregon is in the type of know-how. Neither the miner nor the logger can be dispensed with, any more than can the chemist at the factory or the worker in the oil field�paraffin being a by-product of petroleum.

Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me. Each one wants me less, perhaps, than does a child in the first grade. Indeed, there are some among this vast multitude who never saw a pencil nor would they know how to use one. Their motivation is other than me. Perhaps it is something like this: Each of these millions sees that he can thus exchange his tiny know-how for the goods and services he needs or wants. I may or may not be among these items.

No Master Mind

There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred.

It has been said that “only God can make a tree.” Why do we agree with this? Isn’t it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable!

I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies�millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.

The above is what I meant when writing, “If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing.” For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand�that is, in the absence of governmental or any other coercive masterminding�then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.

Once government has had a monopoly of a creative activity such, for instance, as the delivery of the mails, most individuals will believe that the mails could not be efficiently delivered by men acting freely. And here is the reason: Each one acknowledges that he himself doesn’t know how to do all the things incident to mail delivery. He also recognizes that no other individual could do it. These assumptions are correct. No individual possesses enough know-how to perform a nation’s mail delivery any more than any individual possesses enough know-how to make a pencil. Now, in the absence of faith in free people�in the unawareness that millions of tiny know-hows would naturally and miraculously form and cooperate to satisfy this necessity�the individual cannot help but reach the erroneous conclusion that mail can be delivered only by governmental “master-minding.”

Testimony Galore

If I, Pencil, were the only item that could offer testimony on what men and women can accomplish when free to try, then those with little faith would have a fair case. However, there is testimony galore; it’s all about us and on every hand. Mail delivery is exceedingly simple when compared, for instance, to the making of an automobile or a calculating machine or a grain combine or a milling machine or to tens of thousands of other things. Delivery? Why, in this area where men have been left free to try, they deliver the human voice around the world in less than one second; they deliver an event visually and in motion to any person’s home when it is happening; they deliver 150 passengers from Seattle to Baltimore in less than four hours; they deliver gas from Texas to one’s range or furnace in New York at unbelievably low rates and without subsidy; they deliver each four pounds of oil from the Persian Gulf to our Eastern Seaboard�halfway around the
world�for less money than the government charges for delivering a one-ounce letter across the street!

The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth.

Leonard E. Read (1898-1983) founded FEE in 1946 and served as its president until his death.

From Milton Friedman:

Leonard Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand�the possibility of cooperation without coercion�and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”

We used Leonard’s story in our television show, “Free to Choose,” and in the accompanying book of the same title to illustrate “the power of the market” (the title of both the first segment of the TV show and of chapter one of the book). We summarized the story and then went on to say:

“None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. Some among them never saw a pencil and would not know what it is for. Each saw his work as a way to get the goods and services he wanted�goods and services we produced in order to get the pencil we wanted. Every time we go to the store and buy a pencil, we are exchanging a little bit of our services for the infinitesimal amount of services that each of the thousands contributed toward producing the pencil.

“It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another�yet none of these differences prevented them from cooperating to produce a pencil. How did it happen? Adam Smith gave us the answer two hundred years ago.”

“I, Pencil” is a typical Leonard Read product: imaginative, simple yet subtle, breathing the love of freedom that imbued everything Leonard wrote or did. As in the rest of his work, he was not trying to tell people what to do or how to conduct themselves. He was simply trying to enhance individuals’ understanding of themselves and of the system they live in.

That was his basic credo and one that he stuck to consistently during his long period of service to the public�not public service in the sense of government service. Whatever the pressure, he stuck to his guns, refusing to compromise his principles. That was why he was so effective in keeping alive, in the early days, and then spreading the basic idea that human freedom required private property, free competition, and severely limited government.

Milton Friedman (July 31, 1912 � November 16, 2006) was an American economist, statistician and public intellectual, and a recipient of the Nobel Memorial Prize in Economic Sciences.

Last week, I wrote an email to a friend who is visiting Costa Rica and is going to try surfing. As I crafted the email, I noticed some key similarities between surfing and starting a new business.

Conditions are critical
SURFING:
Even excellent surfers can’t surf when the water is flat. On a day with perfect waves, even amateur surfers catch a few good rides. (On rough days, you can spend 80% of your effort just paddling to get into position.)

BUSINESS:
When market conditions are perfect, even average businesses can succeed. When conditions get worse, only the very best can thrive.

Experience trumps tools
SURFING:
Experienced surfers can make do with average equipment, whereas rookies aren’t helped by a brand new surfboard.

BUSINESS:
A spreadsheet does not make someone a financial analyst. Keynote does not make someone a good speaker. A twitter account does not make someone a social media expert. Good tools reward experience.

Timing is everything
SURFING:
Paddle too early and you’ll burn out when the wave comes. Paddle too late and the wave will pass you by.

BUSINESS:
Burn through your cash too early and you won’t be around to sustain the tough periods. Wait to long to change your business due to an industry paradigm shift (like the end of traditional publishing) and you’ll be left underwater.

The closer we get to a situation, the less clear we see it.

Next time you want advice on a new product or service or an honest evaluation of your current business, ask an expert…

…outside your industry.

We’re often too close to the situation, the nuances, the terminology and our perceived needs of our customers to evaluate an idea completely objectively.

Get advice from someone you trust who works in a completely separate industry. Buy them lunch and explain the idea. They will ask you questions that matter without the cloud of bias that you bring to the table.

Wise perspectives are all around you. Welcome a more naive one. Let an outsider hold your business at arm’s length and give you honest feedback.

Then listen. You’ll be surprised what you learn.

(repeat as necessary)