Universities have standards they use to judge whether applicants deserve to join.
We have elections to decide who should serve on city council or in state legislatures.
Venture capitalists and banks have criteria for deciding whether or not to fund a startup or business.
Given that all of those processes can be gamed and all of those processes depend on judgement against a set of criteria that may turn out to be a really poor predictor of success, we should set aside 10 percent of all slots for a randomly chosen group.
This would have a host of benefits.
One, given these people would be randomly chosen from the population, they would be more representative. Right now, more than 90% of money venture capitalists give is given to men. Blacks and Hispanics are under-represented at universities. The folks who win elections tend to be good looking. The processes we use are skewed and a random process would help to partially offset that.
Two, it would be a chance to test the null hypothesis. All of these institutions have theories about what predicts success. Inevitably those theories have flaws. One way to discover those flaws is to compare the success rates of those randomly chosen with those intentionally chosen. To the extent that unpredictable things happen, it will be a chance to update the choice algorithm, throwing out criteria that turn out to be unrelated to success and adding criteria that - surprisingly - turns out to be very predictive.
Three, it would be an experiment to test the notion that access to these institutions will improve anyone's life, and not just the lives of those carefully chosen. Perhaps 4 years of Harvard will improve the life of a kid with a 2.4 GPA at least as much as it will a kid with a 4.2 GPA. Perhaps the community will be improved as much by the startled bartender or civil engineer who learns she or he has been chosen to serve in the state legislature by lottery as any politician capable of getting big financial donations. Institutions are powerful and it is important to better understand how much of the benefit they yield comes from their careful selection of who gets access to them vs. who those people are. That is to say, we need to understand when the goal should be to widen access to these institutions as a means to improve everyone's life or when we should narrow access to make sure that only people with a certain potential should be given access.
R World (Ron Davison muses aloud)
Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
02 April 2019
06 September 2018
The American Way - What Amway and Shaklee Had to do with the Popularization of Entrepreneurship
Richard DeVos died today. In 1959 he co-founded Amway with his friend Jay Van Andel. Like Shaklee - founded just three years earlier - Amway had an interesting business model. Rather than manufacture products to be sold in stores by someone else, these new businesses recruited sales people to be part of the business. The bad thing about the model is that it is wildly inefficient compared to, say, a Walmart where sales costs are so much lower and less labor intensive. The good thing about the model is that the product is being sold by people who can explain why it deserves a price premium and - most interesting of all - make money for recruiting people better than them.
My mother was in Shaklee [note that I'm not as familiar with Amway but think it generally has the same model] and one of the really fascinating things about it is that if she recruited someone who was downstream from her, she got some credit for their success. I don't know the exact formula but I do know that she partly had incentive to sell product and partly had incentive to recruit people even better than her. With the right people "downstream" from her, her income was enhanced. She was an entrepreneur (or at the very least a salesperson) who could make more money by recruiting other entrepreneurs (or salespeople) - some of whom might even be better than her.
I think this should be emulated by more traditional Fortune 500 firms.
Imagine that when hiring someone to join the Fortune 500 firm, each manager wasn't just trying to recruit someone able to do the job and report to that manager. Imagine instead managers trying to bring on board "employees" who had the entrepreneurial drive or perspective that could result in their transcending their designated role to build the business. And imagine that these managers who hired employees who turned out to be even better at the entrepreneurial effort of building the business saw an increase in their income because of the success of the people they'd hired.
For one thing, managers would be happy to hire someone who quickly advanced beyond that hiring manager. You would be happy to have people who quickly outgrew a role and forced you to - sigh - go through the hassle of hiring again. For another, managers would do a lot to develop these new hires because of this incentive. (We invest in things that offer a return.) And the focus on the business would be less about finding people to fill roles in an existing business than in finding people who could build the business. This is not a bad mechanism (albeit just one mechanism) for the popularization of entrepreneurship.
I kind of like the idea of this being the American Way (or as those two cool Dutch guys abbreviated it, Am'way).
That's a fairly cool business legacy.
07 August 2017
The Pyramids of North Africa You've Never Heard of (or, how Islam spread so rapidly throughout Africa and Eurasia)
In Peter Frankopan's new book, The Silk Roads, he offers one explanation for the spread of Islam that I'd never heard before: it was a pyramid scheme.
Context:
In 614, the Persians conquered Jerusalem, the most holy city in Christendom. It is hard to overestimate how alarming this was to the Christians of the Roman Empire. "The True Cross on which Jesus was crucified was captured and sent back to the Persian capital as a trophy of war."
The Byzantine Empire (what was left of the Roman empire) won back Jerusalem in 627, seriously weakening the Persian Empire in the process. By that point, the Persian and Byzantine empires had both been decimated. Between 628 and 632, the Persian Empire dramatically collapsed and anarchy took its place through much of its old empire. It was into this milieu that Islam emerged.
Revelation:
In 610, Muhammad began to receive revelations. In 622, he fled to Medina, a date that would become year one in the Islamic calendar. His revelations came out of a time when the old empires were crumbling and the holiest city was under hostile occupation.
How Islam Spread:
As the Persian Empire collapsed, Muslims began to conquer the lands and cities they lost.
"Willing to sanction material gain in return for loyalty and obedience, Muhammad declared that goods seized from non-believers were to be kept by the faithful. This closely aligned economic and religious interests.
"Those who converted to Islam early were rewarded with a proportionately greater share of the prizes, in what was effectively a pyramid system. This was formalized in the early 630s with the creation of diwan, a formal office to oversee the distribution of booty. A share of 20 percent was to be presented to the leader of the faithful, the Caliph, but the bulk was to be shared by his supporters and those who participated in successful attacks. Early adopters benefited most from new conquests while new believers were keen to enjoy the fruits of success. The result was a highly efficient motor to drive expansion."
Given the Muslims were filling in a vacuum left by falling empires, conquest sometimes required little in the way of battle. "Damascus, for instance, surrendered quickly after terms were agreed between the local bishop and attacking commander." Basically, the folks in Damascus could keep their churches open but were now expected to pay tax to the prophet rather than Constantinople. Later, the Muslims' conquest of Egypt tripled their income from taxes and often just the threat of military force against other people was enough to provoke negotiation and surrender. The Muslims ignored Europe because it was so poor, concentrating instead on the Middle East and eastward to the border of China. The result was worth billions of dollars (in today's terms), making the Muslims and all of those conquering converts rich. Very rich. One wedding in what is now Baghdad included presents from the groom to people all over the country: "gold bowls filled with silver and silver bowls filled with gold were taken around and shared out ..."
In the wake of these conquests, the Muslim world was incredibly wealthy. They were not only materially rich but intellectually rich, with leading thinkers in philosophy, physics and geography. Their thought leaders wrote about medicine and lovesickness, how the world revolves around the sun, and the concept of zero. Money funds leisure and even the pursuit of knowledge. Not all of these great thinkers were Muslim but they were drawn to its world and resources.
Islam is a religion. Curiously, its expansion seems to have been fueled by a very clever business model: profit sharing from conquest for anyone who converted. It was a model that seemed, in retrospect, to ensure plenty of converts and plenty of cities and territories in which they could live.
Context:
In 614, the Persians conquered Jerusalem, the most holy city in Christendom. It is hard to overestimate how alarming this was to the Christians of the Roman Empire. "The True Cross on which Jesus was crucified was captured and sent back to the Persian capital as a trophy of war."
The Byzantine Empire (what was left of the Roman empire) won back Jerusalem in 627, seriously weakening the Persian Empire in the process. By that point, the Persian and Byzantine empires had both been decimated. Between 628 and 632, the Persian Empire dramatically collapsed and anarchy took its place through much of its old empire. It was into this milieu that Islam emerged.
Revelation:
In 610, Muhammad began to receive revelations. In 622, he fled to Medina, a date that would become year one in the Islamic calendar. His revelations came out of a time when the old empires were crumbling and the holiest city was under hostile occupation.
How Islam Spread:
As the Persian Empire collapsed, Muslims began to conquer the lands and cities they lost.
"Willing to sanction material gain in return for loyalty and obedience, Muhammad declared that goods seized from non-believers were to be kept by the faithful. This closely aligned economic and religious interests.
"Those who converted to Islam early were rewarded with a proportionately greater share of the prizes, in what was effectively a pyramid system. This was formalized in the early 630s with the creation of diwan, a formal office to oversee the distribution of booty. A share of 20 percent was to be presented to the leader of the faithful, the Caliph, but the bulk was to be shared by his supporters and those who participated in successful attacks. Early adopters benefited most from new conquests while new believers were keen to enjoy the fruits of success. The result was a highly efficient motor to drive expansion."
 |
| The city of Baghdad from about the 10th century |
Given the Muslims were filling in a vacuum left by falling empires, conquest sometimes required little in the way of battle. "Damascus, for instance, surrendered quickly after terms were agreed between the local bishop and attacking commander." Basically, the folks in Damascus could keep their churches open but were now expected to pay tax to the prophet rather than Constantinople. Later, the Muslims' conquest of Egypt tripled their income from taxes and often just the threat of military force against other people was enough to provoke negotiation and surrender. The Muslims ignored Europe because it was so poor, concentrating instead on the Middle East and eastward to the border of China. The result was worth billions of dollars (in today's terms), making the Muslims and all of those conquering converts rich. Very rich. One wedding in what is now Baghdad included presents from the groom to people all over the country: "gold bowls filled with silver and silver bowls filled with gold were taken around and shared out ..."
In the wake of these conquests, the Muslim world was incredibly wealthy. They were not only materially rich but intellectually rich, with leading thinkers in philosophy, physics and geography. Their thought leaders wrote about medicine and lovesickness, how the world revolves around the sun, and the concept of zero. Money funds leisure and even the pursuit of knowledge. Not all of these great thinkers were Muslim but they were drawn to its world and resources.
Islam is a religion. Curiously, its expansion seems to have been fueled by a very clever business model: profit sharing from conquest for anyone who converted. It was a model that seemed, in retrospect, to ensure plenty of converts and plenty of cities and territories in which they could live.
04 October 2016
Confusing Business and Economics
After the USSR collapsed, a lot of American business people and economists went to Russia to help. My own impression was that the American business people were of little help because all of their experience came out of the American economy and the American economists were of little help because they could assume American business people.
There are a number of differences between economics and business but one is fairly simple.
A business person is successful if they rise to the top. They don't necessarily have to create anything but they can expand more rapidly or drive costs down by scaling up or whatever. If you are successful it doesn't matter whether your competition or suppliers or employees become wealthy as well or are crushed.
An economic policy is successful only if the community prospers. Not even everyone, necessarily, but certainly the median or average. If wages and wealth for 40 year olds in 2000 is double what they were in 1980, then the economy has done well.
The emphasis is very different.
Business success is for the individual. It's competitive. You want to do well and it's the rare person who can worry about the whole community or even industry and their place in it. You try to win market share. (I know. Some focus on creating markets and market share. That's wonderful but it isn't necessary for business success.) In business, you can succeed in a zero-sum game.
Economic success is for the whole. Good economic policy shows no regard for who ends up on the top or the bottom but instead just measures itself by how much better life is for those on the top and the bottom. Economics is variable sum; some policies create more for most people and some policies only benefit a few.
Which brings me to Trump. He came to fame with the Art of the Deal. What is that? It's an approach to negotiating that will get you more than the other guy. Your business practices leave suppliers short-changed? Force bankers and investors to accept pennies on the dollar for loans? Result in employees losing their jobs? Oh well. The only question is whether or not you got a good deal. Whether you - as the individual - came out ahead.
It's no wonder that Trump puts so much emphasis on trade with China and Mexico and other countries. He likes the idea of getting a better deal. By contrast, he says almost nothing about policies that would actually grow the economy. (Or, more precisely, nothing coherent or credible. For instance, his website has a healthcare plan. What is the plan? To "replace Obamacare with something terrific." That's the plan. In its entirety.)
Business and economics certainly overlap but they are not the same thing. Showing that you can come out on top of the group is not the same as showing that you can make things better for the group.
Today Trump asked of America's trade deficit, "Who negotiates these deals?" suggesting he doesn't understand trade deficits and expect to walk up to the "trade deficit" counter on day one of his presidency to demand a better deal. He's talked about getting the country's debt re-negotiated (as he has with his own debt), suggesting he doesn't understand triggers for international financial crises. No reputable economist has approved of his economic plan and many have claimed it's likely to trigger a recession.
It's perfectly consistent to say that Trump knows how to get rich and would be a disaster for the economy. His failure at economics seems as certain as his success at marketing.
There are a number of differences between economics and business but one is fairly simple.
A business person is successful if they rise to the top. They don't necessarily have to create anything but they can expand more rapidly or drive costs down by scaling up or whatever. If you are successful it doesn't matter whether your competition or suppliers or employees become wealthy as well or are crushed.
An economic policy is successful only if the community prospers. Not even everyone, necessarily, but certainly the median or average. If wages and wealth for 40 year olds in 2000 is double what they were in 1980, then the economy has done well.
The emphasis is very different.
Business success is for the individual. It's competitive. You want to do well and it's the rare person who can worry about the whole community or even industry and their place in it. You try to win market share. (I know. Some focus on creating markets and market share. That's wonderful but it isn't necessary for business success.) In business, you can succeed in a zero-sum game.
Economic success is for the whole. Good economic policy shows no regard for who ends up on the top or the bottom but instead just measures itself by how much better life is for those on the top and the bottom. Economics is variable sum; some policies create more for most people and some policies only benefit a few.
It's no wonder that Trump puts so much emphasis on trade with China and Mexico and other countries. He likes the idea of getting a better deal. By contrast, he says almost nothing about policies that would actually grow the economy. (Or, more precisely, nothing coherent or credible. For instance, his website has a healthcare plan. What is the plan? To "replace Obamacare with something terrific." That's the plan. In its entirety.)
Business and economics certainly overlap but they are not the same thing. Showing that you can come out on top of the group is not the same as showing that you can make things better for the group.
Today Trump asked of America's trade deficit, "Who negotiates these deals?" suggesting he doesn't understand trade deficits and expect to walk up to the "trade deficit" counter on day one of his presidency to demand a better deal. He's talked about getting the country's debt re-negotiated (as he has with his own debt), suggesting he doesn't understand triggers for international financial crises. No reputable economist has approved of his economic plan and many have claimed it's likely to trigger a recession.
It's perfectly consistent to say that Trump knows how to get rich and would be a disaster for the economy. His failure at economics seems as certain as his success at marketing.
10 August 2014
"Corporate entrepreneurship and innovation will be the next big thing for the next 10 years" - Steve Blank
Steve Blank recently said,
I think that the popularization of entrepreneurship is going to transform the corporation because so many of us are employees now. We couldn't leave knowledge work to autodidacts last century and we can't leave entrepreneurship to the innovative few outside of corporations in this.
Some people are beginning to understand that entrepreneurship will lead development now the way that capital did in the 19th century or the way that knowledge work did in the last. I'm still not hearing much about how that will transform business, but if people aren't talking about that, they still don't fully understand what we're facing. Popularizing entrepreneurship within the corporation will transform it as much as mutual funds and credit cards transformed finance and as much as democracy transformed the nation-state.
Corporate entrepreneurship and innovation will be the next big thing for the next 10 years, and the business school that sets up a program for that will be printing money from executive education and gradating a cadre of MBAs who will be snapped up by large companies that are desperate to reintroduce innovation inside their corporations.
Are any business schools making strides in corporate innovation? Corporate innovation is something that’s coming down the pipe. But I haven’t seen a business school that has understood that this is a big idea. The first couple that do will own the space. It’s wide open. We’re going to have a great time in the next five to 10 years.I find this affirming because Blank has been ahead of the curve for probably a decade and the fact that he's seeing the need to make corporations more entrepreneurial aligns with the ideas I've been advocating for decades.
This is a huge opportunity and unmet need – business schools haven’t pivoted yet. Now they’re getting the startup innovation courses right, but corporate innovation is a lot more complicated, and the startup techniques and classes don’t apply. There has been very little literature and research on the subject.
I think that the popularization of entrepreneurship is going to transform the corporation because so many of us are employees now. We couldn't leave knowledge work to autodidacts last century and we can't leave entrepreneurship to the innovative few outside of corporations in this.
Some people are beginning to understand that entrepreneurship will lead development now the way that capital did in the 19th century or the way that knowledge work did in the last. I'm still not hearing much about how that will transform business, but if people aren't talking about that, they still don't fully understand what we're facing. Popularizing entrepreneurship within the corporation will transform it as much as mutual funds and credit cards transformed finance and as much as democracy transformed the nation-state.
Market Economy
|
Period
|
Big Social
Transformation
|
Where Power is
Dispersed
|
First,
Agricultural
|
1300 to 1700
|
Religion
|
Church
|
Second,
Industrial
|
1700 to 1900
|
Politics
|
Nation-state
|
Third,
Information
|
1900 to 2000
|
Finance
|
Bank &
Financial Markets
|
Fourth,
Entrepreneurial
|
2000 ~
|
Business
|
Corporation
|
20 May 2014
Why The Rapid Recovery in Startups Might Not Be Enough
The good news is that the number of
startups is rebounding to where it was in the late 1990s. The bad news is that
because of economic changes, it takes more startups than ever to employ the
same number of people.
There has been a sharp uptick in the number of startups in just the last few years. (The bureau of labor statistics has reported numbers only through March of 2013.)
In 2013, the
number of companies less than 2 years old rose by 14%.
The problem is not just that it is
taking the rate of business formation a few years to return to normal. The
problem is that startups don't create as many jobs.
Software is now automating knowledge
work just as machines have been – for centuries – automating physical work.
While this raises productivity it destroys jobs.
It’s cliché – but still true – to
say that the pace of innovation is obsoleting products, companies and jobs more
rapidly than ever. As companies rapidly expand, shrink, and shift focus, they
more rapidly create and destroy jobs.
Outsourcing is more common and
that’s one reason that even successful entrepreneurs don’t need as many
employees. The Kauffman Foundation reported that startups that needed about 8
employees in 2000 could support the same level of sales with only 5 employees
today.
Automation, innovation, outsourcing
and greater efficiencies contribute to an incredibly dynamic job market. In the
second quarter of 2013, the US economy created 7.1 million jobs and destroyed
6.5 million. The net result was 603,000 more jobs than we had at the beginning
of the quarter. That’s nice. But given the rate at which jobs are being
destroyed, the economy has to create 12 new jobs in order to gain one. Compared
to the number of entrepreneurs we’d need in a fictional world where jobs are
created and kept for the length of a career, in this world we need about 12
times as many entrepreneurs.
The good news is that the rate of
startups is recovering. The bad news is that it needs to be higher than it has ever
been before in order to create enough jobs to bring back wage growth and full
employment.
23 March 2014
The Most Important Government Policy for Determining Unemployment Rate
In most EU countries, the majority of people report that their government makes it hard to start a business. Sadly for them, this matter of ease in starting a business seems to be a simple determinant for unemployment. And it makes sense. The harder it is to start a business, the harder it will be for successful entrepreneurs to hire people.
Here you can see the relationship between how hard it is to start a business and the unemployment rate. Do you want a high unemployment rate in your country? Make it hard to start a business.
Obviously unemployment rates depend on a variety of factors, but governments sincere about lowering their unemployment rates would great a great return from making entrepreneurship easier. (I argue incessantly that the task for policy makers in this new economy is to popularize entrepreneurship just as successful policy makers popularized knowledge work in the Information Economy.)
If you want to stymie economic growth in an Industrial Economy, make it difficult to attract or create capital. If you want to stall growth in an Information Economy, make education expensive and unattainable for large swaths of people. And if you want to frustrate growth in an Entrepreneurial Economy, make it hard to aspiring entrepreneurs to start a business. It certainly seems to work for countries like Italy, Greece, and Spain.
Data for the above graph.
Here you can see the relationship between how hard it is to start a business and the unemployment rate. Do you want a high unemployment rate in your country? Make it hard to start a business.
Obviously unemployment rates depend on a variety of factors, but governments sincere about lowering their unemployment rates would great a great return from making entrepreneurship easier. (I argue incessantly that the task for policy makers in this new economy is to popularize entrepreneurship just as successful policy makers popularized knowledge work in the Information Economy.)
If you want to stymie economic growth in an Industrial Economy, make it difficult to attract or create capital. If you want to stall growth in an Information Economy, make education expensive and unattainable for large swaths of people. And if you want to frustrate growth in an Entrepreneurial Economy, make it hard to aspiring entrepreneurs to start a business. It certainly seems to work for countries like Italy, Greece, and Spain.
Data for the above graph.
| Hard to Start Biz | Unemployment | |
| Italy | 96% | 20% |
| Greece | 93% | 24% |
| Spain | 82% | 25% |
| Portugal | 80% | 16% |
| Lithuania | 72% | 13% |
| Latvia | 71% | 15% |
| Slovenia | 69% | 9% |
| Ireland | 69% | 15% |
| Romania | 68% | 7% |
| Slovakia | 68% | 14% |
| Cyprus | 67% | 12% |
| Bulgaria | 66% | 12% |
| France | 66% | 10% |
| Czech Republic | 61% | 7% |
| United Kingdom | 59% | 8% |
| Belgium | 58% | 8% |
| Croatia | 57% | 16% |
| Denmark | 54% | 8% |
| Poland | 52% | 10% |
| Netherlands | 49% | 5% |
| Hungary | 48% | 11% |
| Finland | 46% | 8% |
| Germany | 46% | 5% |
| Estonia | 44% | 10% |
| Austria | 43% | 4% |
| Luxembourg | 33% | 5% |
| Sweden | 25% | 8% |
| Malta | 21% | 6% |
24 May 2011
Why Cities Keep Growing, Corporations And People Always Die, And Life Gets Faster | Conversation | Edge
Why Cities Keep Growing, Corporations And People Always Die, And Life Gets Faster | Conversation | Edge
Geoffrey West shares some fascinating things that he and his team have learned about systems dynamics. (Click through on the subtitle to see his talk or scroll down to read the transcript.)
One, growth in cities provides some economies of scale. Give him the number of people in a city and he can give you the number of gas stations, miles of roads, etc. The good news is that these kinds of things grow more slowly than the population.
Economic activity, however, grows faster than the number of people. Incomes and innovation within a city grow faster than the population. This, too, is a good thing.
His team has recently analyzed data on companies and he's found a few odd things. One, the profits to sales ratio shrinks as a company gets larger. Two, the rate of innovation also slows. Three, the volatility of sales each year actually becomes greater than the profit percentage. (For instance, at a particular stage, volatility in annual sales of 10% might accompany a profit rate of only 5%.) Companies die as they become less tolerant of crazy ideas and crazy people (their rate of innovation, consequently, slows).
Oddly, as cities become larger they foster more innovation yet as companies become larger they become less innovative. This - it seems to me - has to do with how citizens are "managed" less than employees.
Oddly, as cities become larger they foster more innovation yet as companies become larger they become less innovative. This - it seems to me - has to do with how citizens are "managed" less than employees.
One of the things that makes this so fascinating to me is that it suggests that these dynamics explain more about rates of growth and life expectancies (yes, even of companies) than more traditional explanations like culture, history, and conscious policies. For me, it is further confirmation that an understanding of systems is not just going to be nice in this new economy: it will be necessary.
17 May 2011
Corporate Immaturity
The 1990s were a good time for economics and business in America.
During Clinton's administration, median incomes rose $6,000, more jobs - 22.5 million - were created than under any other administration, unemployment and inflation were at the lowest in 30 years, and the number of people living in poverty dropped by 15 million.
About the same time, Jack Welch was CEO of General Electric. He, too, presided over record performance. During his 20 years, GE's revenues rose from $27 billion to $130 billion, and its market value rose from $14 billion to $410 billion.
Two popular leaders who presided over great business / economic performances.
In Jack Welch's best year, he made $125 million.
In Clinton's best year, he made the same amount as he did in his worst year: $200,000.
Jack's salary could have paid Bill's for 625 years.
Such disparity was not an anomaly of the 90s. Last week, oil company CEOs appeared before the Senate. All three of the American CEOs made more than the entire US Senate. (Well, nearly all. Chevron's CEO made only $16.3 million, about a million less than the 100 senators 's combined salary of $17.4 million. Conoco and Exxon's CEOs made $17.9 and $29 million.)
This seems like a serious clue that the corporation is still immature, about where the nation-state was at the dawn of the Enlightenment.
After he’d removed the Finance Minister from his position, Louis took the man’s wealth and added it to his own. Suffice to say, Louis lived well. And in this we see the final problem with absolute monarchies: they make the state a tool for the few.
Unemployment is persistently high. Median wages have been largely stagnant for decades. Yet CEO pay continues to steadily - and spectacularly - rise. Is anyone out there talking about reform?
[1] Will & Ariel Durant, The Age of Louis XIV: a History of European Civilization in the Period of Pacal, Moliere, Cromwell, Milton, Peter the Great, Newton and Spinoza: 1648 – 1715 [New York, NY, Simon & Schuster, 1963] 19
14 May 2011
Senator & CEO - the roles that rob you of your humanity
This week, Senator Schumer asked five oil executive CEOs whether they thought that any other budget item that could be cut from the federal budget might be more important than their tax breaks. They were unable to think of one that was. Schumer, quite rightly, used their hesitancy to point out the inherent (fill in the blank with either immorality, stupidity, or just plain oddity) of their positions. Tax breaks to companies making billions in profits were more important than, say, healthcare for children or the elderly? Funding that might actually save lives?
But the CEOs could have turned the tables on Schumer and asked him if an action would take the lives of 10 Serbs, say, but save the life of one American, would Schumer vote for it. As a US Senator, Schumer is in a position that requires him to save American lives above all others. He'll spend more money for TSA rather than more money for nutrition to Africa. He'll vote for policies that are more likely to kill Iraqi civilians if they save the lives of more American soldiers.
The choices of Schumer and the CEOs are not choices that reflect their humanity. They are choices that reflect their position. CEOs are hired to (mostly) maximize profits for stockholders, no matter what condition that leaves suppliers, competitors, employees, or the governments that regulate their behavior. Senators are hired to hold up the national interest. Neither are supposed to do what is best for humanity.
Pity, really. Because both CEOs and Senators are in a position to do so much good. Too bad that they are, instead, focused on only doing good for so few.
But the CEOs could have turned the tables on Schumer and asked him if an action would take the lives of 10 Serbs, say, but save the life of one American, would Schumer vote for it. As a US Senator, Schumer is in a position that requires him to save American lives above all others. He'll spend more money for TSA rather than more money for nutrition to Africa. He'll vote for policies that are more likely to kill Iraqi civilians if they save the lives of more American soldiers.
The choices of Schumer and the CEOs are not choices that reflect their humanity. They are choices that reflect their position. CEOs are hired to (mostly) maximize profits for stockholders, no matter what condition that leaves suppliers, competitors, employees, or the governments that regulate their behavior. Senators are hired to hold up the national interest. Neither are supposed to do what is best for humanity.
Pity, really. Because both CEOs and Senators are in a position to do so much good. Too bad that they are, instead, focused on only doing good for so few.
America - Where One CEO can Afford to Buy an Entire Senate
This week, alpha males squared off against each other: Oil company CEOs and US Senators. Given that nothing confers respect like money, it was no contest.
So far this year, the five oil companies represented (Shell, Chevron, Exxon, Conoco, and BP) have made profits of $36 billion. More interestingly, each American CEO made more than the entire American senate before which they appeared.
Combined, the 100 Senators made $17.4 million last year (each makes $174,000).
Chevron's CEO made $16.3 million, Conoco's CEO made $17.9 million and Exxon's made $29 million.
America is nothing if not predictable. It doesn't matter that the oil companies are so profitable when the the deficit is so large. Their $2 billion in tax breaks will continue.
Senator Schumer asked, did any one of these CEOs want to go on the record as saying that perhaps their tax cuts were less important than any other, single program or issue? This after reminding them that cuts to education, health care, and social security were likely.
Not a single CEO could see how any of those programs were more important than their tax breaks.
Let me make an obvious but important point. These CEOs are not paid to show an interest in the American economy or the American people. They made it clear that if the marginal cost of producing oil in Texas were higher than producing it in Indonesia, they would shift production overseas. Their loyalty is to company profits.
A tax break of $1 will benefit Exxon. That dollar may be used to create a job in Saudi Arabia or Houston. Or be paid in dividends to an investor in Japan or San Francisco. There is no guarantee that the money will benefit the American economy. In fact, there is a guarantee that the money will be dispersed globally.
That, it seems to me, is worth remembering.
So far this year, the five oil companies represented (Shell, Chevron, Exxon, Conoco, and BP) have made profits of $36 billion. More interestingly, each American CEO made more than the entire American senate before which they appeared.
Combined, the 100 Senators made $17.4 million last year (each makes $174,000).
Chevron's CEO made $16.3 million, Conoco's CEO made $17.9 million and Exxon's made $29 million.
America is nothing if not predictable. It doesn't matter that the oil companies are so profitable when the the deficit is so large. Their $2 billion in tax breaks will continue.
Senator Schumer asked, did any one of these CEOs want to go on the record as saying that perhaps their tax cuts were less important than any other, single program or issue? This after reminding them that cuts to education, health care, and social security were likely.
Not a single CEO could see how any of those programs were more important than their tax breaks.
Let me make an obvious but important point. These CEOs are not paid to show an interest in the American economy or the American people. They made it clear that if the marginal cost of producing oil in Texas were higher than producing it in Indonesia, they would shift production overseas. Their loyalty is to company profits.
A tax break of $1 will benefit Exxon. That dollar may be used to create a job in Saudi Arabia or Houston. Or be paid in dividends to an investor in Japan or San Francisco. There is no guarantee that the money will benefit the American economy. In fact, there is a guarantee that the money will be dispersed globally.
That, it seems to me, is worth remembering.
03 February 2011
Living Somebody Else's Life - Beyond Inherited Goals to Corporate Transformation
We inherit goals. Personally, we find ourselves living within systems that have been designed by previous generations for their goals. Not just people but even institutions inherit goals.
The new nation-state first saw itself in a role like that of the Medieval Church. The church made itself responsible for the souls of its congregants and the early kings' gave themselves a similar role. The resultant chaos and bloodshed that came from centuries of religious wars was atrocious. It literally took centuries for the nation-state to ignore the goal of the church and instead focus on goals like the safety and prosperity of its citizens.
The corporation, too, seems to have first accepted the goal of the previously dominant institution. In this case, the corporation tries to imitate the goal of the bank, to make money, or, more specifically, to provide a return on capital. This misses the point. I've heard Russell Ackoff and Peter Drucker each make the point that profit is to a corporation what oxygen is to a person: vital but by no means its goal.
Corporations today, like the nation-state after the Reformation, is the most dominant institution. One of the keys to it realizing its potential to make life better for communities is that it treat profit not as the goal but as just one of its necessary conditions. Even if this were all that were involved in transforming the corporation, it would mean a large shift in how we think about our world. The good news is that once people begin thinking about the goal of the corporation beyond making money they will begin the process of reinvention. Then we will more often see the many and way cool things it can be.
The new nation-state first saw itself in a role like that of the Medieval Church. The church made itself responsible for the souls of its congregants and the early kings' gave themselves a similar role. The resultant chaos and bloodshed that came from centuries of religious wars was atrocious. It literally took centuries for the nation-state to ignore the goal of the church and instead focus on goals like the safety and prosperity of its citizens.
The corporation, too, seems to have first accepted the goal of the previously dominant institution. In this case, the corporation tries to imitate the goal of the bank, to make money, or, more specifically, to provide a return on capital. This misses the point. I've heard Russell Ackoff and Peter Drucker each make the point that profit is to a corporation what oxygen is to a person: vital but by no means its goal.
Corporations today, like the nation-state after the Reformation, is the most dominant institution. One of the keys to it realizing its potential to make life better for communities is that it treat profit not as the goal but as just one of its necessary conditions. Even if this were all that were involved in transforming the corporation, it would mean a large shift in how we think about our world. The good news is that once people begin thinking about the goal of the corporation beyond making money they will begin the process of reinvention. Then we will more often see the many and way cool things it can be.
25 January 2011
Tipping Point: The Corporation Eclipses the Nation-State
In this era of globalization, quality of life is increasingly a function of corporate, not government, policy.
52 of the 100 largest organizations in the world are corporations. Over half. [fn1]
This is even more remarkable given that corporations did not exist 150 years ago. [fn 2]
Just one of the many things suggested by this is that if the media wants to remain relevant, they may want to consider playing reporters within and for these corporations in the same way that they've learned to do within and for governments. It is within the corporation that our futures are being defined. It is time for communities to act like it.
------------
[fn 1] Jointly ranking companies by sales and countries by government spending.
[fn 2] More precisely, the modern, joint-stock, limited liability corporation did not exist. Lest you think that a legal technicality, in 1800 there was not a single organization that employed 500 or more employees, whereas today about half of all workers are employed by such organizations.
52 of the 100 largest organizations in the world are corporations. Over half. [fn1]
This is even more remarkable given that corporations did not exist 150 years ago. [fn 2]
Just one of the many things suggested by this is that if the media wants to remain relevant, they may want to consider playing reporters within and for these corporations in the same way that they've learned to do within and for governments. It is within the corporation that our futures are being defined. It is time for communities to act like it.
------------
[fn 1] Jointly ranking companies by sales and countries by government spending.
[fn 2] More precisely, the modern, joint-stock, limited liability corporation did not exist. Lest you think that a legal technicality, in 1800 there was not a single organization that employed 500 or more employees, whereas today about half of all workers are employed by such organizations.
10 December 2010
Time for Real Business News
In today's world, we rightfully praise brave reporters who work inside of repressive countries, struggling to report and analyze facts. But right here in the US, we have closed societies that get even less objective reporting than what comes from these countries: the corporations that define so much of our societal norms, incomes, and menu of products and services are largely exempt from real reporting.
Imagine even something as simple as the approval ratings of CEOs and senior management by a companies' employees, something akin to the approval ratings of presidents or Congress. "Do you approve of the strategic direction of your senior management team?" Or, "Do you think that the CEO is adding value to the company?" would be incredibly revealing questions that could be asked of employees at, say, Fortune 500 firms. Investors, prospective employees, strategic partners, customers and - of course - current employees would greatly benefit from such an insight. As it is now, though, the thing that passes for business news is simply movements in stock price and new product announcements. And when reporters talk to anyone about the company, it is inevitably a CEO or other Chief of some kind. This is akin to taking the word of only the president in a country when trying to understand it.
Modern corporations define far too much of the modern world to be exempt from reporting standards similar to what we subject democratic countries and their leaders. (And as the Wikileaks brouhaha has revealed, even supposedly open Western nations react badly to the equivalent of diplomatic gossip being leaked.) It's time for this to change. The question is, what network is brave enough to pioneer a new standard for business reporting? And speaking of business, it seems to me that such reporting would make for good business.
Imagine even something as simple as the approval ratings of CEOs and senior management by a companies' employees, something akin to the approval ratings of presidents or Congress. "Do you approve of the strategic direction of your senior management team?" Or, "Do you think that the CEO is adding value to the company?" would be incredibly revealing questions that could be asked of employees at, say, Fortune 500 firms. Investors, prospective employees, strategic partners, customers and - of course - current employees would greatly benefit from such an insight. As it is now, though, the thing that passes for business news is simply movements in stock price and new product announcements. And when reporters talk to anyone about the company, it is inevitably a CEO or other Chief of some kind. This is akin to taking the word of only the president in a country when trying to understand it.
Modern corporations define far too much of the modern world to be exempt from reporting standards similar to what we subject democratic countries and their leaders. (And as the Wikileaks brouhaha has revealed, even supposedly open Western nations react badly to the equivalent of diplomatic gossip being leaked.) It's time for this to change. The question is, what network is brave enough to pioneer a new standard for business reporting? And speaking of business, it seems to me that such reporting would make for good business.
18 January 2010
A New Kind of Manager
I suspect that in the future, work teams will increasingly be coordinating their activities through the Internet and be less reliant on companies. And this will set the stage for a new kind of manager.
Decades ago, if you had told a new recruit that people would pay for the (admittedly kinder and gentler) experience of boot camp, would HIRE someone to push them beyond what they'd do on their own, they would have laughed at you. And yet (probably) millions of people hire personal trainers.
One of the biggest differences between the personal trainer who pushes you and the drill instructor who pushes you is whether the experience is voluntary. The person who is drafted - or even volunteers - has no choice about the experience, however "good" it may be for him. And in this I think that we potentially have a new model of management.
Imagine a future where managers are brought in by teams who realize that they need someone to coordinate their efforts, even to push them at times, in order to realize their potential. Such a model is not so very odd, really. Personal coaches are very common, but personal coaches work with individuals.
Management is a really crucial skill. More so as our world and projects become more complex. It's probably not enough to leave tasks to individual initiative, even if we have more natural (e.g., market) consequences and inducements for such tasks. Able managers will probably always make a good living.
But one of the big problems with current institutions is their reliance on extrinsic motivation - the use of carrot and stick to make things happen. Employees, like the boot camp recruit, have little or no choice about what to do or any ability to define goals or the tasks they want to try. These are assigned. This is good enough in a world where products are scarce and the definition of economic goods is generally limited to goods to have.
Philosophers talk about three kinds of goods: goods to have, goods to do, and goods to be, each higher and more meaningful than the last. Economic progress will shift soon from an emphasis on economic goods to have to economic goods to do. Work is an essential part of this. (We know that Darwin, Jonas Salk, Galileo, Michelangelo, and Andrew Carnegie were historic figures. We tend to forget that they defined themselves - and our civilization - by their work.) And as people come to work more often as a way to (in part) create goods to have and (in part) create for themselves goods to do, a management that is based on intrinsic rather than extrinsic motivation will be essential. The drill instructor you have no choice but to obey is replaced by the personal coach you hire to help you to realize your potential.
Of course the paradox is that as we focus more on intrinsic motivation and goods to do, we'll actually get more and better goods to have than in the old system. People who are intrinsically motivated are typically more creative, more productive, and do higher quality work. Call me an optimist, but one reason that I'm convinced that such a model will eventually emerge is because it gets better results.
Management as a service rather than form of control. Think about it.
Decades ago, if you had told a new recruit that people would pay for the (admittedly kinder and gentler) experience of boot camp, would HIRE someone to push them beyond what they'd do on their own, they would have laughed at you. And yet (probably) millions of people hire personal trainers.
One of the biggest differences between the personal trainer who pushes you and the drill instructor who pushes you is whether the experience is voluntary. The person who is drafted - or even volunteers - has no choice about the experience, however "good" it may be for him. And in this I think that we potentially have a new model of management.
Imagine a future where managers are brought in by teams who realize that they need someone to coordinate their efforts, even to push them at times, in order to realize their potential. Such a model is not so very odd, really. Personal coaches are very common, but personal coaches work with individuals.
Management is a really crucial skill. More so as our world and projects become more complex. It's probably not enough to leave tasks to individual initiative, even if we have more natural (e.g., market) consequences and inducements for such tasks. Able managers will probably always make a good living.
But one of the big problems with current institutions is their reliance on extrinsic motivation - the use of carrot and stick to make things happen. Employees, like the boot camp recruit, have little or no choice about what to do or any ability to define goals or the tasks they want to try. These are assigned. This is good enough in a world where products are scarce and the definition of economic goods is generally limited to goods to have.
Philosophers talk about three kinds of goods: goods to have, goods to do, and goods to be, each higher and more meaningful than the last. Economic progress will shift soon from an emphasis on economic goods to have to economic goods to do. Work is an essential part of this. (We know that Darwin, Jonas Salk, Galileo, Michelangelo, and Andrew Carnegie were historic figures. We tend to forget that they defined themselves - and our civilization - by their work.) And as people come to work more often as a way to (in part) create goods to have and (in part) create for themselves goods to do, a management that is based on intrinsic rather than extrinsic motivation will be essential. The drill instructor you have no choice but to obey is replaced by the personal coach you hire to help you to realize your potential.
Of course the paradox is that as we focus more on intrinsic motivation and goods to do, we'll actually get more and better goods to have than in the old system. People who are intrinsically motivated are typically more creative, more productive, and do higher quality work. Call me an optimist, but one reason that I'm convinced that such a model will eventually emerge is because it gets better results.
Management as a service rather than form of control. Think about it.
17 October 2009
The Game Show Restaurant
Perhaps you need a place to invest your money or want to start a business. In either case, you've come to the right post today because I have an idea that seems sure to succeed: the game show themed restaurant.
There are so many possibilities for the game show restaurant, a place themed in garish colors and loud sounds, but I'll just list a few here. Imagine walking in past food supplies - stacks of canned peas next to the canned laughter and applause.
You can order from the menu or get called up by the emcee of your section to choose between three doors.
"Okay Bob, you picked door # 2. Let's see what was behind door # 1."
Dramatic music ...
"Oh no! You missed the filet mignon for only $4.95!" So, do you want to switch to door # 3 or could I interest you in this thai chicken salad for only $9.50?"
"Go for the tied chicken salad," the studio audience yells.
Every time food comes to your table, the waiter bounds up to your table with your meal and says, "Tell 'em what they won, Bob." And the overhead voice from the kitchen intones, "Our guests have won a lovely grilled chicken sandwich on sourdough, a cheeseburger, and a cup of lentils (I told him he should have chose the thai chicken salad)! And all for a price less than a weekend in New York at the Grand Hotel."
The menu up front will be in board form. One column, Tastes like chicken, has items priced at $5, $7.50, $10 ... etc. and other columns have labels like chef surprise; things we do with beef; once lived underwater; faceless, not tasteless; and food you eat before you eat your food. Ordering would have an element of risk.
"I'll take 'food you eat before you eat your food' for $7.95."
"Okay. The answer is, 'Thousand island on the side.'"
"Uh, 'What would you like on your house salad?"
"Close enough. Anything else?"
You can, of course, fill in other fun-filled activities and ways to spice up the inevitability of eating. And tell me, when is the last time that Newsweek, the New York Times, or Fox so generously offered their readers or viewers an opportunity to make millions? Blogs - because there is just no better bargain than free.
There are so many possibilities for the game show restaurant, a place themed in garish colors and loud sounds, but I'll just list a few here. Imagine walking in past food supplies - stacks of canned peas next to the canned laughter and applause.
You can order from the menu or get called up by the emcee of your section to choose between three doors.
"Okay Bob, you picked door # 2. Let's see what was behind door # 1."
Dramatic music ...
"Oh no! You missed the filet mignon for only $4.95!" So, do you want to switch to door # 3 or could I interest you in this thai chicken salad for only $9.50?"
"Go for the tied chicken salad," the studio audience yells.
Every time food comes to your table, the waiter bounds up to your table with your meal and says, "Tell 'em what they won, Bob." And the overhead voice from the kitchen intones, "Our guests have won a lovely grilled chicken sandwich on sourdough, a cheeseburger, and a cup of lentils (I told him he should have chose the thai chicken salad)! And all for a price less than a weekend in New York at the Grand Hotel."
The menu up front will be in board form. One column, Tastes like chicken, has items priced at $5, $7.50, $10 ... etc. and other columns have labels like chef surprise; things we do with beef; once lived underwater; faceless, not tasteless; and food you eat before you eat your food. Ordering would have an element of risk.
"I'll take 'food you eat before you eat your food' for $7.95."
"Okay. The answer is, 'Thousand island on the side.'"
"Uh, 'What would you like on your house salad?"
"Close enough. Anything else?"
You can, of course, fill in other fun-filled activities and ways to spice up the inevitability of eating. And tell me, when is the last time that Newsweek, the New York Times, or Fox so generously offered their readers or viewers an opportunity to make millions? Blogs - because there is just no better bargain than free.
30 September 2009
Modern Corporation: modeled on the medieval church
In two earlier posts, I concluded that the medieval church became evil. This matters because the medieval church is still a model for institutions who could follow it down the same path. It is difficult to overcome a blueprint at the foundation of Western Civilization, a blueprint referenced in the design of the modern corporation. The medieval church had popes and priests who discerned the will of God and directed the congregants; the modern corporation has CEOs and mangers who discern the will of the market and direct the employees.
The US represents for many the apex of progress yet 84% of people here are unhappy in their jobs.
Job dissatisfaction hardly compares with burning at the stake. In the grand scheme of history, it is a fairly petty and pathetic complaint to be unhappy at work. Yet if one can’t enjoy what one does all day – what defines one’s life – it makes one question the progress up to this point. Is this really the culmination of thousands of generations of genetic and social evolution? Or could it be that the transformation of work and what it means to create value and to be valued is the next personal frontier, the domain for the next revolution?
About a decade ago, I went into GM to do some training and consulting work. I left appalled. The managers were conscientious and the employees seemingly sincere and yet they seemed more like parents and children than consenting adults. The distribution of power constrains employees from acting like adults.
The corporation – GM and nearly every business – could learn something about needed change by looking at the huge transformation of the church over the last half millennia.
Two big changes to come out of the Protestant Revolution were the entrepreneurial approach to religion and the shift in authority to the individual. These two are inextricably linked.
Post- Protestant Revolution religion is wildly entrepreneurial. Luther claimed that we are all priests and the germ of this idea – the notion that individual revelation and conviction ought to be the root of religious belief – continues to spark new denominations. The World Christian Database tracks 9,000 denominations.
In terms of freedoms granted, the church may be the most evolved and modern of our institutions. Churches either meet the need of their congregants or the congregants go elsewhere – or nowhere. It is not just freedom across religions but within. Even people who call themselves Catholic can profess and practice very different things from each other.
If the medieval church is the model for the current corporation, we can hope that the post-Protestant Revolution church is the model for the future corporation.
There is a great deal that will be different in the next version of the corporation, but most of these changes will begin with a shift in the notion about where authority ought to lie: in central authorities or in the individual. It means trusting the individual with true freedom. All the needed design changes for the corporation can follow from this profound shift.
The US represents for many the apex of progress yet 84% of people here are unhappy in their jobs.
Job dissatisfaction hardly compares with burning at the stake. In the grand scheme of history, it is a fairly petty and pathetic complaint to be unhappy at work. Yet if one can’t enjoy what one does all day – what defines one’s life – it makes one question the progress up to this point. Is this really the culmination of thousands of generations of genetic and social evolution? Or could it be that the transformation of work and what it means to create value and to be valued is the next personal frontier, the domain for the next revolution?
About a decade ago, I went into GM to do some training and consulting work. I left appalled. The managers were conscientious and the employees seemingly sincere and yet they seemed more like parents and children than consenting adults. The distribution of power constrains employees from acting like adults.
The corporation – GM and nearly every business – could learn something about needed change by looking at the huge transformation of the church over the last half millennia.
Two big changes to come out of the Protestant Revolution were the entrepreneurial approach to religion and the shift in authority to the individual. These two are inextricably linked.
Post- Protestant Revolution religion is wildly entrepreneurial. Luther claimed that we are all priests and the germ of this idea – the notion that individual revelation and conviction ought to be the root of religious belief – continues to spark new denominations. The World Christian Database tracks 9,000 denominations.
In terms of freedoms granted, the church may be the most evolved and modern of our institutions. Churches either meet the need of their congregants or the congregants go elsewhere – or nowhere. It is not just freedom across religions but within. Even people who call themselves Catholic can profess and practice very different things from each other.
If the medieval church is the model for the current corporation, we can hope that the post-Protestant Revolution church is the model for the future corporation.
There is a great deal that will be different in the next version of the corporation, but most of these changes will begin with a shift in the notion about where authority ought to lie: in central authorities or in the individual. It means trusting the individual with true freedom. All the needed design changes for the corporation can follow from this profound shift.
25 August 2009
Profit is Not a Vision
I'm reading The Devil in the White City - a wonderful book about the 1893 Exposition in Chicago that reads like a murder mystery novel threaded into a business fiction book - and yet all of it is true. Along with Larson's incredible research and writing, what strikes me is the breadth of vision for the men behind this Exposition. They wanted a profit - but more than that, they wanted to create something amazing. Olmsted, the man who was the "landscape architect" for this Exposition, created New York's Central Park and determined not to worry about any results less than 40 years into the future when designing Central Park. At the Exhibition, "a single exhibit hall had enough interior volume to have housed the U.S. Capitol, the Great Pyramid, Winchester Cathedral, Madison Square Garden, and St. Paul's Cathedral, all at the same time." These guys were intent on creating something amazing.
Peter Drucker once wrote that profit to a firm was what oxygen is to a man. (And recovering from my wretched cold, I've come to appreciate anew the importance of oxygen.) Vital but by no means the purpose. The purpose of business is something grander than just profit. These guys understood that. They weren't focused on pushing the limits of profits - they were focused on pushing the limits of architecture, imagination, and the human experience.
Could you even imagine - in today's world of technology and information exchange and population what we could do with that kind of an approach? It boggles the mind.
Peter Drucker once wrote that profit to a firm was what oxygen is to a man. (And recovering from my wretched cold, I've come to appreciate anew the importance of oxygen.) Vital but by no means the purpose. The purpose of business is something grander than just profit. These guys understood that. They weren't focused on pushing the limits of profits - they were focused on pushing the limits of architecture, imagination, and the human experience.
Could you even imagine - in today's world of technology and information exchange and population what we could do with that kind of an approach? It boggles the mind.
12 August 2009
The "Five Books You Have to Read" Store
On our recent trip, I slipped into a few bookstores. One in particular left me feeling like I could have purchased another 15 books if only I wasn't already behind in my reading by about 15 books. I love the mad diversity in a modern bookstore and - from experience - have come to believe that there are an abundance of amazing books waiting for my attention. And these wonderfully full, bursting at the seams bookstores have begun to make me weary for the very reason that they once made me so happy: they simply have too many enticing titles.
Which brings me to my idea for bookstore. Rather than have thousands and thousands of titles, just have a bookstore titled, "The 5 Books You Have to Read." And then carry only five titles. If people come in asking for a different title, you simply say, "Have you read all five of our books?" If not (and that's usually the case), just redirect them to the short list. If they have, tell them to be patient - the list changes. Eventually. "Live. Don't just read," the clerk would tell them. "There will be a new book you simply have to read soon enough. Get caught up on your chores. Visit your old aunt. Hike through a copse of trees. Volunteer. And then come back in about a month. We'll have at least one new book on the list by then."
Oh, and how do we choose the five books? Don't even get me started on that. Because as soon as you make this part explicit, you get dragged into the whole business of whose list and why not another list and what about people who need large print or children or business majors or beach reading or .... And that's just the kind of confusion that leads to bookstores that - on a single day - stock more titles than you could hope to read in a lifetime. And my bookstore would put an end to that.
Which brings me to my idea for bookstore. Rather than have thousands and thousands of titles, just have a bookstore titled, "The 5 Books You Have to Read." And then carry only five titles. If people come in asking for a different title, you simply say, "Have you read all five of our books?" If not (and that's usually the case), just redirect them to the short list. If they have, tell them to be patient - the list changes. Eventually. "Live. Don't just read," the clerk would tell them. "There will be a new book you simply have to read soon enough. Get caught up on your chores. Visit your old aunt. Hike through a copse of trees. Volunteer. And then come back in about a month. We'll have at least one new book on the list by then."
Oh, and how do we choose the five books? Don't even get me started on that. Because as soon as you make this part explicit, you get dragged into the whole business of whose list and why not another list and what about people who need large print or children or business majors or beach reading or .... And that's just the kind of confusion that leads to bookstores that - on a single day - stock more titles than you could hope to read in a lifetime. And my bookstore would put an end to that.
11 July 2009
Betting on Google (or Why Chrome OS Is a Lottery Ticket Worth Scratching Off)
The guys at Google came up with a secret sauce in the form of algorithms that efficiently and quickly search the Internet. They understand probabilities. And that might be as good a reason as any to bet on their continued success.
Google has a fascinating policy of letting programmers work one day a week – 20% of their time – on their own projects. This has already translated into popular products like gmail and google news. Some projects come from central management and some come from the cubicles. This is not much different from successful economies where some projects (e.g., NASA or the early Internet) come from centrally-planned government programs and some come from unexpected sources like the garage or the back of a cocktail napkin.
One of the insights to come from the world of probabilities and into the world of finance in the last century is the notion of the high probability of low probability events. The lottery is the simplest example. The odds of any ONE person winning are incredibly low. Buying a lottery ticket to win money is almost like buying an airplane ticket to commit suicide. The odds are terribly low for any one person to win and yet the odds that SOMEONE will win are incredibly high.
Venture capitalists differ greatly from bankers in this regard: they take an equity position in success and know that only a small percentage of their investments have to become the next Yahoo or … well, Google in order to offset the many investments that don’t pay off. They don’t embrace failure but they know it is inevitable.
Google has seemed to realize that a corporation has a huge advantage over a venture capitalist in this game. A corporation can provide a risk free environment in which individuals can start projects that might become market successes or merely technical successes or might never become successful. The corporation can provide the infrastructure (e.g., HR, marketing, etc.) that can absorb so much time from the entrepreneur. And if one of these projects like gmail or google news should become successful, they offset the many projects that don't come to fruition.
Further, even the failures are never clearly failures. If an employee learns a new skill or gains a new market insight from trying something new, that can be applied to the next venture. And with everyone taking on their own project, the entire organization has a vastly different mindset in regards to projects. Thinking about how to create and deliver products to market becomes pervasive. This sort of culture can be more valuable than any one project.
All that to say that the many critics who are already pointing out why Google Chrome OS – Google’s attempt to capture Operating System market from Microsoft – will fail could be right. The odds of this ONE product becoming a success are pretty low. (But it is still a good bet. Microsoft gets about $15 billion a year in revenue from Windows.) But each time they try another venture like this, the odds of generating profit to match what's generated by their search engine go up.
Oh, and one other thing. I remember when Microsoft’s Excel and Word were obvious failures. It took some time before they seemed like something other than cute substitutes for the seemingly invincible Lotus 1-2-3 and Multimate Word Processor. The fact that gmail does not have as much market share as Outlook does not mean it will not eventually have more. It is rarely the released product that conquers the market – it is usually the evolved product that owns a market.
It is true that lottery tickets are unlikely to pay off. It is also true that only people who buy them ever win the lottery.
Google has a fascinating policy of letting programmers work one day a week – 20% of their time – on their own projects. This has already translated into popular products like gmail and google news. Some projects come from central management and some come from the cubicles. This is not much different from successful economies where some projects (e.g., NASA or the early Internet) come from centrally-planned government programs and some come from unexpected sources like the garage or the back of a cocktail napkin.
One of the insights to come from the world of probabilities and into the world of finance in the last century is the notion of the high probability of low probability events. The lottery is the simplest example. The odds of any ONE person winning are incredibly low. Buying a lottery ticket to win money is almost like buying an airplane ticket to commit suicide. The odds are terribly low for any one person to win and yet the odds that SOMEONE will win are incredibly high.
Venture capitalists differ greatly from bankers in this regard: they take an equity position in success and know that only a small percentage of their investments have to become the next Yahoo or … well, Google in order to offset the many investments that don’t pay off. They don’t embrace failure but they know it is inevitable.
Google has seemed to realize that a corporation has a huge advantage over a venture capitalist in this game. A corporation can provide a risk free environment in which individuals can start projects that might become market successes or merely technical successes or might never become successful. The corporation can provide the infrastructure (e.g., HR, marketing, etc.) that can absorb so much time from the entrepreneur. And if one of these projects like gmail or google news should become successful, they offset the many projects that don't come to fruition.
Further, even the failures are never clearly failures. If an employee learns a new skill or gains a new market insight from trying something new, that can be applied to the next venture. And with everyone taking on their own project, the entire organization has a vastly different mindset in regards to projects. Thinking about how to create and deliver products to market becomes pervasive. This sort of culture can be more valuable than any one project.
All that to say that the many critics who are already pointing out why Google Chrome OS – Google’s attempt to capture Operating System market from Microsoft – will fail could be right. The odds of this ONE product becoming a success are pretty low. (But it is still a good bet. Microsoft gets about $15 billion a year in revenue from Windows.) But each time they try another venture like this, the odds of generating profit to match what's generated by their search engine go up.
Oh, and one other thing. I remember when Microsoft’s Excel and Word were obvious failures. It took some time before they seemed like something other than cute substitutes for the seemingly invincible Lotus 1-2-3 and Multimate Word Processor. The fact that gmail does not have as much market share as Outlook does not mean it will not eventually have more. It is rarely the released product that conquers the market – it is usually the evolved product that owns a market.
It is true that lottery tickets are unlikely to pay off. It is also true that only people who buy them ever win the lottery.
Subscribe to:
Posts (Atom)