Month: December 2014

Being entrepreneurial vs. being an entrepreneur

The media loves the entrepreneur’s story. Just search for Elon Musk, Jeff Bezos, or Larry Page and you will find no shortage of press articles and books that detail their obsessive habits, their exercise routines and anecdotes from their childhood. Why blame the media? We love the entrepreneur story too – the story of the one person who came about and changed everything. Many dream to be that person. It is definitely a worthy dream if the goal is to make a positive difference during your time on the planet.  And, it is definitely one way to approach the many problems our planet and the human race faces.

The other way is to just be entrepreneurial – wherever you might be. The entrepreneurship concept is built around three phases – idea/problem -> initiative -> action. Those who go about registering a new company to solve the problem/execute the idea are called entrepreneurs. As you might have guessed, this post is about all those who don’t, all those we will call entrepreneurial.

Let us consider the story of Brent James at Intermountain Healthcare who has been at the forefront of a movement to make health care better by making it easier for doctors to access data and make better decisions. Or perhaps the many change-makers at hospital networks and medical device manufacturers around the world who have helped save an enormous number of lives through changes they lead. Perhaps we could think about those in companies that have led agricultural innovations or maybe the early team at Twitter including folks like Jason Goldman who have helped make Twitter an agent of change around the world. Brent James and folks like him may not have started companies but, as change agents in large organizations, have probably driven more tangible change than most could hope for.

The way I see it – there is a small group of people who will have the combination of smarts, resources, and luck that Musk, Bezos and Page have had in shaping the world tomorrow. And, while they will undoubtedly make huge dents to life on this planet, the change they will make will be dwarfed by the change made by the many entrepreneurial folk who are driving change in their neighborhoods, tribes, communities and companies. These people may not have articles dedicated to their childhood on Fortune magazine and may just be lauded in an internal company-wide memo. But, it would be foolish to underestimate the impact that they have on our lives. We’ve been innovating at an unprecedented rate of late. That’s not because we have more superstar entrepreneurs. In fact, the number of superstar entrepreneurs has stayed constant over time. For every Bill Gates, there always was a Rockfeller. However, with more availability of information and resources, we do have more people who’ve been taking initiative and attempting to make a difference wherever they are.

So, you might have many reasons to not be an entrepreneur. That’s completely okay. There is, however, no excuse to not be entrepreneurial. You have more access to tools that can drive change than ever before. You can also spot people who’re out there attempting to make the world a bit better. If you don’t feel strongly enough about pushing an idea forward, be good at spotting those who are and join them. Just ask Tim Cook and Jonathan Ive – that works too.

We make the world better.. together.

Being suspicious of synergy – MBA Learnings

If you ask for 5 words that form part of traditional business jargon that people hate, the word “synergy” would be right up there. Given its horrible reputation, I was curious to learn more and we discussed the idea at length at our intro strategy class. Here are a few notes –

1. The economic view on synergy is – (how big are the gains) x (how achievable are they) – (costs involved). So, in essence, synergy is just a calculation that multiplies potential gains by the probability of achieving them and subtracts the costs involved.

2. The core idea is that two organizations can combine to create more value as a group than they did individually. Value can be created by either increasing benefit to customers or reducing cost. But, this is where things get a bit nuanced and tricky.

3. Combining two organizations just because they have something in common does absolutely nothing. Good strategy is when the acquisition enables the acquirer to fundamentally change something about how they do what they do. This works well when they have strengths that complement each other. A great example of this is Disney acquiring Pixar. Pixar gave Disney strength in computer generated cartoons and a creative engine that churned out a great movie every 2 years. Disney, on the other hand, could use all of Pixar’s characters in its theme parks and merchandise. In order to avoid too many organizational costs like a clash of cultures, Disney allowed Pixar to operate separately and this acquisition has worked incredibly well for them.

4. It does gets tricky at this point, however, because acquisitions we read about in the press largely talk about potential gains and completely neglect the potential costs. That’s the part of the synergy equation that is normally forgotten or omitted. Researchers have dug into this question over many years – why are acquisitions regularly over valued when they fail so often? There have been many explanations with CEO hubris, poor decision making processes being suggested as possible explanations. But, the fact remains that the costs of a potential acquisition are generally glossed over. And, every time you see an acquisition announced, it is definitely worth looking for whether the acquirer discusses potential costs and challenges. It is quite amazing how regularly this isn’t discussed just given the base rate of failure.

5. Warren Buffet once said – “Synergy is a term widely used in business to explain an acquisition that otherwise makes no sense.” And he’s absolutely right. Synergy has been used to describe business decisions that can best be describes as illogical or fuzzy. And, the take-home message is definitely to continue to be wary when you hear “synergy” because very few actually understand it and use it consistent with its economic definition.

6. Finally, a quick personal application. Every gain we foresee comes at a cost. It is regularly tempting to only think about and discuss the gain. When we do that, it pays to remember that we’re guilty of the exact mistake that costs many companies billions of dollars and many smart executives their job. Make sure we look at both sides of the decisions make. As economists like to say, there is no “free” lunch.

So, yes, we are back a full circle to where we started in terms of our suspicion of the word. But, hopefully, the journey has been useful.

Wired to compete

Homo sapiens have been on earth for about 200,000 years. For 199,950 (99.9%) of those years, most of the human population wasn’t assured easy access to food. We’ve been hard-wired to compete for survival. That instinct to compete translates into everything else we do.

But, you know what? We don’t need to compete any more. A large proportion of us don’t need to fight everyone else for food and survival. We don’t really need to compete for any of the basic needs on Maslow’s hierarchy. Instead, the questions we have in front of us are –
– How can we make sure the rest of the human population have the basics in place – food, shelter, access to clean water, education, etc.?
– How can we be happy?

The second question is the tough one. Our instinct to compete combined with the many opportunities out there directs our focus to “the chase.” “The chase” is a metaphor for whatever is sought after in societal terms. It is easy to spend our time in “the chase” because it is extrinsic. As long as our struggles are extrinsic, we can focus on appeasing our insecurities and circumvent any questions around happiness.

But, that question is going to keep coming back. If it isn’t clear yet, there’s enough out there for us. We just have to be willing to get to know ourselves, understand what we really want, and keep our eyes open for opportunities. This isn’t about what’s out there. It is about what’s in here. We need less competition, less insecurities, and less frantic activity. Instead, we need more calm, more confidence, and more wisdom.

The challenge is that all of this goes against our wiring. Perhaps that is the biggest challenge that awaits our generation.

The first step to surgical precision

The first step to surgical precision is a plan. The plan might change depending on what the surgeon sees when he operates. But, he’s going to have a defined plan nevertheless.

It is like a general going to war. As they say, no battle plans survive first contact with the enemy. That doesn’t mean great generals didn’t make them. They just adapted their plans depending on the situation.

I just read a nice quote that said –

‘Nobody ever wrote down a plan to be fat, lazy, broke, or stupid. Those things are what happen when you don’t have a plan. ‘| Larry Winger

Having a plan doesn’t guarantee that it’ll all work out. But, not having one really messes your chances.

So, improve your chances. Start with a plan. When things change, adapt your plan. Get everything that is in your control sorted – that’s how we get to surgical precision. So, take a few seconds today and.. plan. There is power in just being intentional.

(And, yes, “plan” was intentionally repeated. :-))

Toyota experiments and Intuit – The 200 words project

Here’s this week’s 200 word idea thanks to Fastcompany.com.

How can a loom maker located in the Kansas of Japan decide to go into the car business after everyone else and become better than GM and Mercedes in the core business of making cars? Why is it that when Nissan sells a hybrid, it’s got Toyota parts in it?

Even as a student, Intuit founder Scott Cook was fascinated by Toyota. Along with his professors at Harvard, he went to the Toyota factories and observed Toyota’s approach to manufacturing. And, one of his professors pointed out that Toyota ran itself as a massive series of experiments from the production line worker to the CEO. They had the line supervisor teach 70 or 80 people how to run experiments with their team – little scientific single variable experiments to try out their ideas on how to improve production. He later saw the same dynamic repeat itself at Google.

Scott Cook concluded that the reason big companies with insanely smart people made bad decisions was because they relied on the 3 P’s of politics, persuasion and PowerPoint instead of experimentation. He was so inspired by Toyota that “leadership by experimentation” became at the center of his leadership style at Intuit

Leadership by experimentationSource and thanks to: www.EBSketchin.com

‘We got beat because Google runs itself as a series of experiments run by its engineers. They are constantly trying new things at a ferocious rate. A Google chief scientist says they run 3,000 to 5,000 experiments a year. If you use Google in a week, you’re likely to be in three experiments. You don’t know you are, because they are experiments.’ | A Yahoo engineer on Google

Absolute time vs. effective time

Most folks who have an interest in personal productivity have probably experimented with tracking time. This is challenging because this can cause large amounts of overhead – e.g., if you’re spending a minute every fifteen minutes noting down what you did. It can also be very distracting. After a few attempts with minimal success over the years, I think I have finally developed a system that works for me. More on this coming soon at a blog post near you (yes, this is just a teaser :-)).

A key part of the success has been learning to focus on effective time vs. absolute time. People call “effective time” by different names – focus time, flow, deep work, etc. I think of it as “effective time” as it is the time that was really spent in getting stuff that matters done. So, a few tweaks that have helped me focus on “effective time” are –

1. Not measuring time spend on email or admin. That’s not to say admin doesn’t get done. It is just that I know I will end up doing it. Admin and email also tend to be my favorite tools for procrastination. So, not measuring them means I keep focused on the things I ought to be working on.

2. Being strict about measuring “effective time.” After a 2 hour burst, for example, I record it in the form of a calendar event on my Outlook. I’ve generally erred on the side of being strict around exactly how much I put in. If I feel like I spent only 1 hr 40 mins, I generally put in an hour and a half (generally measured in 15′ intervals as it is easy to count at the end of the week).

3. Not sweating the small stuff. I’ve been measuring how I spend my time for 14 weeks now and have learnt that I shouldn’t worry about small slippages. It is completely okay to sleep an extra hour, spend an extra 15 minutes enjoying your lunch or to just stare into space. What really matters is what you do when you get to work. In fact, the less stressed you feel, the more you will probably get done. If you can squeeze in effective time when you are at your work desk, the small stuff doesn’t matter.

It comes down to understanding and then measuring the effectiveness of the time you spend working. Meetings, for example, are an example of time you might measure as “work” but it is typically low effectiveness work. So, you definitely need to think about what you really need to do to get work that matters done. Once that is done, then it is all about creating a clear list that spells it out, not worrying about absolute time you’ve spent on your desk and just maximizing the effectiveness of time you spend working.

Once again, don’t worry about time spent at the office. Worry about what you do when you are actually there.

(This is the sort of post that feels so obvious and simple once you write it. Somehow, the execution tends to never be close to obvious or simple..)

System Optimizers vs. System Creators

Think about life a 150 years ago. People on earth wouldn’t have been able to imagine the things we take for granted now – mobile devices, the internet, professional services, massive healthcare systems, expensive degrees, etc. In fact, the sight of so many of us running around like ferrets working through “deadlines” on computers would have been right out of the weirdest science fiction movie.

Oh, wait. Science fiction movies didn’t exist 150 years ago.

It is so important to keep perspective that everything we take for granted today was invented by people like us – often within the last 100 years. And, since it is all invented, it matters that we think less like system optimizers and more like system creators. It is all well to game the system and succeed. But, what happens when the system itself is changing really quickly?

This idea is going to be even more important going forward because we might soon find ourselves at a point when most “traditional” jobs are obsolete. We’ll soon need to stop to think about what makes us as humans tick. What does the world look like when most of us don’t need to work to put food on the table? Will we be measuring unemployment the way we do today? Why do we measure unemployment in the first place? What would being employed even look like?

Some thinking is definitely in order.

Lobsters in the Titanic

Actions and reactions drive our happiness. If our actions are aligned to our purpose and values (i.e. if the what, why and how are in place), we give ourselves a good shot at happiness through what we do. However, our actions make up a smaller part (10%?) of our life experiences when compared with our reactions. A big part of life is just dealing with stuff that happens to us. Some of this is driven by our actions and some of it is just random.

To deal with all this “stuff,” the single best happiness increasing skill is the ability to keep perspective. So, if things didn’t work out this week, this is just a reminder that the setback for you was, perhaps, a miracle for someone else.

What goes around does come around and your turn will come, too. And now, for the best part of today’s post – a quote I came across –

“The sinking of the titanic was a miracle to the lobsters in the kitchen.”

Indeed it was. What a great lesson in perspective.

Compound interest and loan sharks – MBA Learnings

We discussed a a segment on CBS regarding Pay Day loans in our accounting class. CBS discussed a Pay Day Loan organizations that charged a bi-weekly interest rate of 15%. They spoke about how outrageous this was as, in their estimation, this meant the lender was charging customers an interest rate of 400%. Now, let’s get into the numbers –

The first step is to spend a minute understanding compound interest. Every great personal finance book starts with requesting the reader to appreciate the beauty and power of compound interest. So, here goes – let’s imagine you have a principle amount of $10 growing at 10% compound interest per year. That means –

At the end of year 1, you have interest of – ($10 x 10%) = $1 
At the end of year 2, you have interest of – $1 + ($10 x 10%) + ($1 x 10%) = $2.1

That little snippet describes what makes compound interest special. In the first year, you earn $1 on the initial $10. But, in the second year, you not only earn the $1 on the $10, you also earn an additional $0.1 on the $1 you earned last year.

At the end of year 3, you have interest of – $2.1 + ($10 x 10%) + ($2.1 x 10%)  = $3.31
At the end of year 4, you have interest of – $3.31 + ($10 x 10%) + ($3.31 x 10%) = $4.64

So, over time, it keeps giving you returns on the interest you already have. Substitute these with much larger numbers and a long time period, and you’ll see how quickly compound interest can increase wealth. The formula for compound interest is P (1 + r)^n where P is the principal, r is the rate of interest and n is the number of time periods.

Let’s go back to the loan sharks now. The rate of interest is 15% and the time period is bi-weekly. There are 52 weeks in a year => 26 “bi-weekly” time periods. CBS’ calculation was 15*26 = 390% or around 400%. This equates to $400 of interest for every $100 in 1 year.

However, they’ve forgotten that the 15% interest is compounded. That means the lenders also charge the 15% on the interest to be repaid over time. This means we have to think of it in terms of compound interest. The real rate, therefore is (1 + r)^n or (1+0.15)^26 (assuming principal to be 1) = 37.86 or 3,786% 

If you’ve ever wondered how loan sharks make money, that is how. For every $100 loaned by a loan shark, they get around $3,786 back in a year for a “15%” bi-weekly interest rate.

One final note – bankers have come under lots of criticism since the financial crisis. While the industry definitely deserves the sort of scrutiny it has been getting, there was commentary about whether life was better without banks. I think this example illustrates how critical banks are towards progress in society. If we’re complaining about a 20% interest on our credit cards, well, maybe we ought to speak to a loan shark..

A case for selfishness

I began writing on this blog at a time when I felt my insecurities were taking over my ability to be happy. I was an unhappy 19 year old. I had just seen an initiative of mine criticized and had taken the criticism a touch too personally. In many ways, this blog is my version of “Dealing with insecurities for dummies.”

Insecurities cause envy and self-doubt – two emotions that rouse the worst in us. These emotions make dealing with insecurities complicated because these emotions often complement each other. And, there is no easy way of dealing with envy or self doubt. The other challenge is finding a way to avoid the instinct that causes both these emotions to surface. This instinct is drawing unnecessary comparisons with people around you. The more you compare, the more envy you feel and the more you question your own self-worth. This is a vicious cycle.

The only solution I’ve found to get past this is a certain degree of selfishness and self absorption. This degree of self absorption enables us to relentlessly focus on ourselves and our own process. It fills our thinking-time with interesting challenges around issues we face rather than around what everyone around us is doing.

I am of the view that you don’t ever get rid of your demons. But, you do learn to keep them at bay. So, I don’t think you ever truly get rid of insecurities. You just learn to accept their presence, work with them, and consistently let your best self shine through. On some days, this is pretty hard to do. On those days, I just need more reminders that I am doing what I am doing for a reason and I have got to be patient to see it through.

Is there ever any guarantee that what we do will work? Absolutely not. That’s why we’ve got to work hard on our own process. If it doesn’t work this time, we’ll need to figure it out by next time. At the end of the day, our approach needs to be customized to our personality. And, that can only come with self awareness. Radical self awareness is easier said than done, of course. And, it is bloody hard to get to radical self-awareness when you are dealing with bouts of self-doubt. That’s why I recommend trying a bit of selfishness and focus on our selves first.

I’ve found that detour to help.