To Be And To Last #22

This week we explore a hidden Australian railway, a modern-day spy ring, and a $1M/year company that has taken no outside investment.

Were these spies caught by math?

In June 2010, the United States arrested 10 Russian sleeper agents who had been living under false names. A couple weeks later, they were deported in a prisoner exchange.

How were they caught? Part of it was a simple statistics problem: A Cuban numbers station that sent encrypted messages to these agents failed to use sufficiently random data when broadcasting fake messages. The result: FBI agents knew when real messages were being sent; something they could use to confirm suspected spies.

The vandalism repair company that went to prison for vandalism

Building a functional system - company, community, or country - requires the right incentives. But if you’re not careful, poorly designed incentives can create accidental monsters.

In the 1979, a small repair company landed a small $40k contract to repair damaged seats on BART (the Bay Area’s subway). Over the following years, that contract steadily increased as vandalism spiked. Eventually a chance police encounter revealed a conspiracy ring: the repair company was paid $16.50 per fixed seat, and they in turn were paying people $2-3 to slash seat cushions (a criminal affiliate program?).

Incentives powerfully change human behavior, and thoughtless incentives often have unintended results. I believe incentive design might just be the most important problem of our time.

An abandoned Australia train line

Beau Miles makes some wonderfully eccentric documentaries on his life in Australia, often centered around the value of a simple life close to nature. I quite enjoyed Beau’s hidden railway project, retracing an abandoned and now nearly invisible railway line that connected communities for 62 years before closing in 1954.

What does it take to build a $1M/year company?

I’ve learned a lot from the transparency of the bootstrap* community, especially on the topic of early growth ($0 - $100k). But I particularly enjoyed the way Canny’s retrospective goes deeper into what’s required to grow from medium to bigger (eg, $100k - $1M).

The secret? The work remains critical, but people take on increasing priority. Your ability to hire and motivate the right people will make or break a growing company.

*bootstrapping means building a company with no outside funding

To Be And To Last: Thinker Nate Desmond’s weekly roundup of long reads, contrarian thoughts, and hidden jewels that aren’t getting enough attention.

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