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  ON THURSDAY, we have our first Operations Committee: Nick, Andy, Will, Dave, and Bob, each representing a link in the production chain. They sit and stare at me, a little nervous. It’s not Monday. We’ve never had meetings any other time.

  I start by repeating what I told Will last week: that we’ve all been working in isolation for too many years. Each person has been a Heroic Solitary Craftsman, dealing with their problems by themselves. That approach leaves us with no way to collectively solve our many problems—no avenues for good ideas to be brought to the attention of management; no forum for discussing ideas to determine whether they work for all of us, or cause problems for someone else in the shop. And no way to make sure that good ideas are still being used a week, month, or year later. This committee is intended to solve all those problems.

  I outline for them how I think it will work: anyone can bring up a problem, anyone can suggest a solution, and everyone should think about whether that solution raises a different problem. We will meet weekly, every Thursday at eleven-thirty. I don’t want the meetings to be very long, and if the topic raised doesn’t affect every part of the production chain, then the people who aren’t concerned can leave and get back to work. I conclude with a question: “Who wants to start?”

  Silence. All the guys are waiting for somebody else to go first. Then Will Krieger says that he’s noticed an issue with the data-port lids we’re making. There’s a visible sense of relief from the others. This is the kind of problem they understand: technical, finite, and fixable. For the next forty-five minutes, they kick around ideas, and by the end of the meeting, we’ve found a solution that we all agree will work.

  We don’t have any whiteboards or chalkboards. So I screwed a large sheet of cardboard to the wall. At the end of the meeting, I take a Sharpie and write:

  11/15 Data-port lids: Concept Done Sustain

  I tell everyone that we’ll list the problems we discuss each week on the cardboard. We’ll start every meeting with a review of past problems. We’ll be able to see exactly how each is progressing, whether they need more work or are now consistently being done. I’ve been mulling over how we can track what we’ve worked on, and this seemed like a simple idea to start with. The next day I ask Will how he thought it went. “It was good,” he says. “I think we should keep doing it.”

  —

  HENRY ARRIVES HOME on the Saturday before Thanksgiving. He’ll stay for a week. Next Monday, he’s sitting with the crew, eyes on the donuts, while I go through the numbers. Last week was good in all respects. We booked $52,150 in new orders and received deposits from a couple of them. It was a light spending week—just my AdWords credit card and some vendor bills. We ended the week with $6,561 more than we started it, and we now have $102,105 on hand. I have payroll and a bunch of other bills, and I have to give my defense customer their money back—more than $70,000 altogether. If I don’t get some cash, I’ll have less than a week of funds on hand.

  I’m worried, but not as panic-stricken as I was in June and July. All the military jobs are shipped, and the first three have been installed without problems. I should be receiving the money in mid-December. Sales have been OK, and we still have lots of work from October in our queue. If I’m prudent, and we sell anything in December, I should be OK.

  Thanksgiving and Christmas are the biggest upcoming problems. The guys often skip the day before or after a holiday, and this year Christmas falls on a Tuesday. We’ll lose six of the next thirty working days. Even worse, shipping slows down as well. Truck drivers like to see their families, and so our shipments take longer than usual. I’ll need to make sure that jobs are crated and ready to go well before Christmas.

  Thanksgiving week, sales are usually slow. Not this year. We book three more orders, worth $38,953. Two are Dan’s, totaling $31,048. Nick does the other. I spend a lot more time watching Henry than working, but I do stop in to pick up checks that have arrived. We receive $27,468 and spend $70,674. I finish the week with $58,899 on hand—my lowest balance since July. I’m down $78,256 from my position at the start of the year. If I can even get back to a $100,000 balance by year’s end, I’ll be satisfied.

  The following Monday, I report to the crew. Five working days left in November. Sales so far: $110,744. What are the chances that we’ll close $90,000 in new orders this week? History would say low, but we had weeks in October that were better than that. Should I follow my most optimistic estimate or the worst-case scenario? I prudently assume that nothing more will come in this week, but that we’ll get some sales in December. It shouldn’t be a bad cash week: no payroll, and the credit cards, health insurance, and rent have been paid. I can last a week with no new sales, but they’d better pick up after that.

  I spend the rest of Monday and Tuesday doing all the things that I do every day, but not really concentrating much. On Wednesday, I fly to San Francisco to see Peter. I’ll be staying with my sister, and Nancy is staying home with our youngest boy, Hugh. Henry is back at school.

  On Thursday, I visit Peter’s office, a couple of blocks from Union Square. It’s smaller than mine, and crowded. Peter and his coworkers sit shoulder-to-shoulder at a single long table. They’re peering at oversize monitors. In the rest of the space are a couple of small conference rooms, a very well-stocked kitchen, and a hang-out area with comfy sofas. There are maybe fifteen people working this morning. I’m greeted with brief smiles and handshakes, but they all quickly return to their screens.

  I ask Peter to show me what he does. His screen shows two columns of text—computer code. It looks like gibberish to me. The lines on the right match the lines on the left, with a few discrepancies—a letter or comma, or sometimes a couple of lines that are different from its counterpart. These are highlighted in a different color. The left side shows the existing code, the right shows whatever changes Peter is making. He spends long days parked in his chair, staring at this mess, and thinking.

  I ask him: how do his bosses know who’s doing a good job? He tells me that, first and foremost, good workers solve the problems they are given. The code that runs a Web site is an ever-evolving entity. The Web site is updated constantly as new functions are added, and it has to be rebuilt to handle more traffic as the user base grows. It’s tricky. Updating the code without crashing the site is like trying to build a boat while sailing it across the ocean. You start with a rowboat, and if things go well, end up with an aircraft carrier.

  That scenario guarantees problems. The engineers do their best to test the code before it goes live, but everyone is under incredible pressure to launch, whether it’s perfect or not. So new blocks of code get shoved into the existing code base, often with little documentation. This can cause strange, unforeseen interactions with what’s there already.

  In our shop, once a table is shipped, it no longer interacts with our ongoing processes. If we lived in Peter’s world, we might find that a change in how we build a table suddenly caused all the tables we’d ever built to collapse or burst into flames. On the other hand, software engineers can fix their whole code base from any place that has Internet. Our logistics challenges don’t exist for them.

  Peter’s company measures productivity by the number of lines of code that have been tested and integrated into the new site. He’s currently near the top of the whole team. He’s working such long hours that sometimes he stays at the office for a couple of days in a row. “How does anyone know what to work on? How do the bosses know where everyone is?” Peter explains that the bosses hold regular meetings with each staffer and give regular updates to everyone about the overall state of the Web site and the company. His Web site, like many start-ups, generates no revenue. Cash comes from investors, who hope for a huge payout if the company is acquired by one of the monsters in the industry—Facebook, Google, Apple, or Amazon. There are also smaller investors looking for any company that can gain traction.

  For Peter, the
dream is still alive and well. His new company is getting repeated injections of cash, and their user base is growing. Peter and his coworkers have been told that they can expect substantial year-end bonuses, and if he stays for a year, he’ll have stock in the company.

  The site is functioning smoothly for the moment, so Peter and I spend a couple of days sightseeing. He seems to be very glad to have a break from the office. He tells me that he’s given up exercise, and that his life consists of working and sleeping, nothing more.

  As we walk around town, we keep seeing sleek white motor coaches: the famed tech buses, equipped with Wi-Fi and food, that shuttle employees back and forth between San Francisco and Silicon Valley. One has a Google logo painted on the side. Later, I look up how much they cost: about five hundred thousand dollars each. I’ve paid Google $627,416 since I started using AdWords. I’ve bought them a bus, and paid for food and a driver for a year.

  This reminds me of something odd that happened last year. In my mail I found a smallish cardboard box. The return address: “Google, Mountain View, CA.” It’s a mug, with “Google” on the side. No note. Apparently this is their attempt to express gratitude to a steady customer. I had already spent more than seventy-five thousand dollars with Google that year, and I got a two-dollar mug. I haven’t heard anything from them since. Granted, Google makes searching for anything on the Web cheap and easy, and connects me with buyers whom I would never otherwise meet. But how would a hotel, casino, or restaurant treat a customer who spent six hundred dollars a day, every day? Any of them would do something a little more impressive to keep me happy.

  I fly back to Philly on Sunday. It’s been a good visit. Peter seems to be doing well as a software engineer, at least professionally. His personal life is more of a struggle, since he doesn’t have time to try to make friends, and San Francisco is not a good place for someone too young to go to a bar. But he insisted that he’s doing well, and that he wants to stay until next fall.

  DECEMBER

  DATE: MONDAY, DECEMBER 3, 2012

  BANK BALANCE: $66,033.55

  CASH RELATIVE TO START OF YEAR (“NET CASH”): -$71,120.77

  NEW-CONTRACT VALUE, YEAR-TO-DATE: $1,917,928

  The temperature plummeted last night, and the office is freezing. The shop is warmed with gas-fired heaters, but the office, facing the wind, is always much colder. The chill is incentive to keep the Monday meeting short. I start with November sales—just $121,971. I’d rather concentrate on better news. The build total was good: $195,699 in a month that was two days shorter than normal. Our shipping total was better: $239,579. I dismiss the crew and think about what I didn’t say. One decent month has not brought us to profitability. Year to date, we’ve built $1,834,731 and shipped $1,851,423. And spent $1,906,454. No matter how you measure it, either on a cash flow or accrual basis, I’ve lost money.

  And individual performances? Dan won November, with $71,290 sold. Nick sold just $40,087, although he still has a commanding lead for the year. I’m even further behind, with just $9,670. Is that success or failure? I don’t want to be selling and haven’t made much effort recently. I’ll call it success. I decide to ignore these low sales totals. It looks like the pattern of the previous three Novembers has repeated itself, despite our new methods.

  On Tuesday, I have my sixth session with Bob Waks. We review how Dan and Nick have done since July: much, much better. Bob reminds me that I’m still far behind my targets and that I should probably replace Dan. I know that I’m not going to fire him before Christmas. That would be cruel. I promise a long, hard look after that.

  —

  ON SATURDAY, I lunch with a friend who is struggling with his own business. Mike Vogel first met me in the summer of 2011, shortly after he quit his last job. He described his vision: a mash-up of a gym, a school, and a woodworking studio. He would open a nicely equipped woodshop, then sell memberships to people who lacked their own space and tools, and offer woodworking classes as well. I asked him how far along he was. “I’ve rented the space. Now I have to renovate it. It’s just an empty warehouse right now.” The location was good, not far from wealthy neighborhoods full of potential customers.

  I asked when he’d be opening his doors. He said that, with luck, it would take a year to fit out the shop. Uh-oh. “That’s a long time. How much money have you got?” Mike had spent ten years working on Wall Street and he’d been frugal. He had two hundred thousand dollars in cash, and equity in his home worth about a hundred thousand. He had opened a seventy-thousand-dollar line of credit. He planned to use all of it for the build-out and to operate until he reached positive cash flow. He’d signed a five-year lease that, like most commercial leases, required him to personally guarantee the cost of the whole term. He was betting his cash and his house that the idea would succeed.

  I met with Mike regularly, and every time I remembered my own business launch. For years I struggled with problems that can now be solved in a few seconds on Google, but in other ways I had it very easy. I didn’t need a large amount of starting capital. A five-thousand-dollar inheritance covered a simple set of tools and my first six months of rent. Nancy had a full-time job, which covered our living expenses. I didn’t need to hire people in order to get started—I worked by myself for two years. And I didn’t need to present myself as anything other than what I was: a very small operator. Before the Internet, there was no requirement that I build a Web site or dominate social media. It was understood that beginners looked like beginners.

  Mike had to solve a lot more problems before he could open his doors. Before he could expect a penny in income, he had to build a shop, stock it, and hire workers to interact with his members and teachers to teach his classes. He had to come up with courses. He had to establish pricing schemes for both membership and classes and build a marketing campaign, including Web site, Facebook page, and e-mailed newsletter.

  Opening day, this last April, brought a new set of challenges. I thought that he would have difficulty finding customers. A membership woodshop? What’s that? He’d have to educate an indifferent world about this new thing. Mike wasn’t worried about that; he was more focused on his lack of woodworking skills. He wasn’t sure he could teach his staff if he wasn’t a master craftsman himself. I reassured him that basic woodworking isn’t all that difficult and I was happy to help him with whatever technical issues came up.

  Neither of us predicted his biggest headache, the issue that has dominated our conversations since opening day: staffing. Mike had no experience being a boss to a group of workers and wasn’t sure how many people he’d need. Even worse, he needs skilled and competent people, but his business model doesn’t allow for high wages. So he’s stuck with young folks, just out of college, who haven’t found steady work elsewhere. Mike has hired enthusiastic people, but they have no experience and can barely support themselves on the salaries he can afford: twelve dollars an hour to start. I told him that he won’t get much for that and he certainly won’t keep anyone worthwhile for very long. This has turned out to be true. The people he wants to keep have left for better pay, and the ones that have stayed are less competent. One key employee, Amelia, is extremely loyal and reliable, but she constantly makes idiotic mistakes. Which is a problem when she’s in charge of maintaining the Web site and Facebook page, dealing with members, and collecting payments.

  He’s been complaining about her for as long as I’ve known him. I’ve challenged him to fire her. He won’t. For better or worse, she’s the only one who understands the systems that she’s cobbled together. He can’t imagine how he’ll get through the period between her dismissal and the arrival of a new person, and he doesn’t want to interview a potential hire while Amelia is around.

  I wouldn’t call Mike a mellow guy, and the stress of the situation is eating at him. At lunch, he’s working through a long list of complaints. I point out that in a lot of ways he’s done well. I didn’t expect him to even op
en his doors, but he got to that happy day without going broke. It cost him $225,000 or so. He’s been surprisingly successful at signing up members, and he’s been cash positive since August. Really, he should be proud of himself. He took a huge risk and he hasn’t failed yet. That’s success for a very small business.

  He counters with a litany of negatives: he’s not paying himself, and he’ll never get his $225,000 back, let alone make any return on the investment. And he’s really tired of dealing with faulty employees. I tell him I know how he feels, although I’ve never had his staffing problems. Mike and I discuss my wage scale. I’m sure that I’m paying more than I need to, since nobody has ever quit, but I’m able to attract and keep competent people. I lay out my expectations for different amounts of money:

  Minimum wage (in Pennsylvania, $7.25/hr): I don’t hire at this wage. It might work for unskilled, youth, or temporary workers, but that’s not what I want.

  $10/hr: My starting wage. I expect a reliable worker who shows up on time and works at a steady pace, but not much in the way of skills. Should be able to perform simple tasks (taking out trash, unloading materials) correctly and understand enough English to follow simple directions.

  $12/hr: If the $10/hr person can learn some technical tasks, and perform entry-level work without supervision, I can pay more. They also need a valid driver’s license and should be willing to work extra hours when required. (They would be paid overtime per Pennsylvania law.) They should understand complex spoken English. This is also where I start workers who want to become skilled woodworkers but have had no training. These workers require significant attention from management and coworkers, so we can’t pay them much. They must immediately demonstrate a good work ethic, curiosity, and willingness to take direction. And they must have “good hands”: woodworking talent. This is not evenly distributed in the population and can’t be taught.