12 JUNE 2022

In between worlds

New chapters, what makes a 'business' a business and the importance of drivers

It has been a month now, since my recent life transition from Perth to Melbourne. A lot has happened in that time, which can be expected from such an upheaval of norms. Much of my focus has been dedicated in getting up to speed with the world of software development, since starting in a new role as a Jr. Software Developer with a startup here in Melbourne.

How did I even get here?’ is the question I still ask myself every now and then. If making the jump from the world of process engineering and large scale cement manufacturing into the world of software-as-a-service (SaaS) and startups sounds crazy to you, trust me, I feel the same way — if not even more bewildered!

The two worlds do sound very different on the surface but actually, as it turns out, there are some core tenets that do not really change.

What makes a large scale, established cement manufacturer similar to a SaaS startup?

Well, let’s consider this question: what makes a ‘business’, a business? Fundamentally, a business can be considered as an entity that delivers something that is of value to its customers.

How does it do this? It invests resources upfront, in the form of capital and energy, into hard assets and subject matter expertise in order to convert a raw stock of material into a specific product or service that can then be sold to people who would willingly exchange their money for. This explanation could be used to understand the underlying mechanism that fuels the local neighbourhood bakery, the e-commerce stores on the internet or the S&P 500 goliaths. They are all, at the very bottom, entities that operate on the principle of value production.

In the earliest chapters of a cement manufacturing business, it first positions itself in a region that is in abundance of limestone, clay, sand, fuel and specialised labour and then invests its first capital to build up its operational plant — the machine that would convert those lower value, raw natural resources into more valuable, more usable end products of clinker and cement. The price at which these end products are sold at will, naturally, have to be greater than the cost that is consumed to feed and operate the machine.

This surplus is what allows a business to lower its time preference, as it frees up the energy that would have been expended on the lower level, immediate primitives of meeting employee payroll and keeping the lights on, to thinking about future capital investment avenues and longer term business strategy. Access to financial capital to a business is like what fuel is to a engine — the more abundant its access is to higher and higher quality sources of capital, the more power it can generate and tap into.

A SaaS business looks different on the surface, but it inherits much of the fundamental principles of more ‘traditional’ businesses. The tools and techniques are the elements that differ the most. Instead of physical vertical roller mills and rotary kilns to crush and heat rocks, the machine lives on servers across the internet and executes computations — a machine that provides a specific value to customers who willingly exchange their money for access to.

As a result of this differentiation, the problem sets that I now encounter in my work have shifted. As a process engineer, my primary stakeholders were the operators of the cement production machinery and the plant’s immediate management team, while as a developer my stakeholders are the software itself and the customers who are using it. Neither of these two directions are objectively better or worse, they are just of different… arenas to play and participate within.

A month into this new world - I am learning, at an ever increasing velocity, of how much there is that I do not know about, which serves as a source of unbridled excitement and also a source of perpetual humility. Well functioning software, just like a well oiled cement plant, demands an immense amount of human attention, technical expertise and financial capital to operate continuously and reliably, around the clock,  365 days a year. Machines, while tremendously powerful, do demand the right pair of hands and minds in order to reach their full potential.

This brings up my final point. At the core of what enables a business to commit itself into value production is within the people who operate it, the human beings who drive the tremendously powerful, but dumb and non-sentient, machines. It is not the capital or hard assets that makes a business survive against the sharks that are perpetually trying to encircle and consume it, but instead the quality of the hands and minds that enable it to first, survive, and then prosper over time.

My answer is that if you tolerate too much half-heartedness, it’s probably because you’re half-hearted.

As in: anxious and ambivalent, looking for reassurance. As in: bored, along for the ride, not really sure about your own feelings and opinions. As in: external locus of control vs internal locus of control.

You probably don’t have anything in your life that really tethers you to yourself — you don’t have conviction about what you love, so you’re hoping that someone else will provide you that certainty.