Month: August 2015

Sunk costs and bitter pills

As a consultant, I worked on a fascinating project back in 2012 to prepare a client for a potential Greek exit from the Eurozone. This was July 2012 and things looked bleak.

Fast forward 3 years later and we’re still in the same situation. There have been a couple of false dawns along the way but, largely, the problem hasn’t gone away. Every time I see a headline in the news about the situation (i.e. every day), I am reminded of sunk costs and bitter pills.

The sunk cost fallacy is when we weigh up all our past investment to make an investment in the future. The phrase “throwing good money after bad” sums it up. Billions of Euros have been sunk into this “relationship.” And, it feels like both sides are consistently looking back at all past investment instead of making decisions based on what lies ahead.

When you fall sick, the recovery path is rarely sweet. Yet, leaders on both sides are refusing to swallow bitter pills. Greek President Tsipras won the previous election by declaring he would be anti-austerity. There was no shred of sense in that campaign. He resigned yesterday. Glad that worked out. There’s a nice saying that says something like – “When 50,000 people believe in something wrong, they are still wrong.” The trouble with politics is that it often involves hundreds of thousands of people screaming populist bullsh*t. Someone is going to have to take the bitter pill in this situation.

Time doesn’t make difficult problems go away. The last 3 years in the Eurozone saga have demonstrated that.

3 productivity principles – MBA Learnings

Some of my highest impact learnings as a graduate student have been around productivity. One of my professors in the first couple of weeks described it as a 2 year course in decision making and trade-offs. I couldn’t agree more. I’ve written about what my process has looked like. And, today, I thought I’d attempt to pull out 3 productivity principles that have become apparent to me in the past year.

1. There is no productivity without a goal. We are either active or productive. The difference is whether we’re making progress towards a goal. This goal has to be necessarily overarching. For example, if your goal is to become CEO and CEO alone, talking to family becomes unimportant activity.

So, the first principle of productivity is to decide what matters.

2. Strategic decisions cannot be taken in isolation / You can’t optimize sub systems. If you’re trying to figure out how to live a good life, you can’t work toward optimizing a “sub system” or part of your life. This means you can’t make a good decision on your career if you don’t consider the impact on the other parts of your life. For example, what is the impact of you accepting a new role? Does that compromise on your desire to be healthy?

The latin root of decision comes from ‘cis’ or ‘cid’ which literally means “to kill.” Good strategy involves good decisions which, in turn, involve killing options. And, such decisions need to be taken with a view of the whole picture.

A quick additional plug – making decisions keeping the whole picture in mind helps us be consistent and “walk our talk.” The one word that describes that well is integrity. Integrity is derived from integer which, as you probably know from 3rd grade math, means whole. It all ties together.

3. The key goal – to keep the main thing the main thing. There’s a story that a productivity coach in the 1920s once gave millionaire Charles Schwab a simple piece of advice – write down the 3 most important things at the start of the day and don’t move to item 2 till you finish item 1. He received a check for $25,000 (a big amount in those days) a few weeks later.

Once you understand what you are optimizing for and make decisions that ensure you’re optimizing for the right thing, the next step is getting things done. And, the first step to getting things done is to constantly keep the main thing the main thing. This isn’t easy to do. But, I’ve found that the Charles Schwab technique of being consistently mindful is one of those that works very well. To each their own though.

I find it unfortunate that discussions around productivity often revolve around tactics – how to keep inbox zero, write things down as you think of them, etc. There is a lot of merit to tactics and maybe I’ll attempt to pull together what I’ve learnt on them, someday. But, they are secondary to strategy.

It is also telling that 2 out of the 3 principles I’ve pulled out were thanks to that fantastic book on Operations Strategy – The Goal by Eliyahu M Goldratt. As we learnt on day 1 of our course on Operations, good operations supports strategy. After all, if it isn’t contributing towards the goal, it is just activity, not productivity.

Adapt and reinvent

I’ve been following football (/soccer) for 13 years now. Many of the young stars I started out admiring have now retired. Football has taught me a lot about life and careers. I’ve seen careers torn apart due to bad life decisions, personal lives messed up due to hubris and seen innumerable cases of “the next big thing” never turning out to be the next big thing.

There are, however, a handful of legends who did manage to stay true to their status as the “next big thing,”  And, every single time, they did so not just because of their incredible technical abilities but because they were willing to adapt and reinvent themselves. They understood their physical make up and changed their game to suit them as they grew older. Many changed positions and styles. And, what is telling is that they found new strengths as they grew older. If they were pacy in their youth, they impressed with their reading of the game a decade later.

Careers in sport at the highest level are rarely longer than 15 years and, yet, top players probably reinvent themselves 2-3 times in that period.

Careers in the professional world are 30-40 years long generally. How many people reinvent themselves by adding new skills and abilities 6-8 times in that period?

Inviting pain

Have you ever had a good work out without feeling a bit of pain, soreness or discomfort? Have you ever achieved anything that you felt was meaningful without challenges? (And, if you did, would you feel it was meaningful?)

Life is a series of ups and downs. And, the way I see it, you can either experience a down or invite a down yourself. This sounds somewhat masochistic – so, let me explain myself.

Take a simple example – you can choose to enjoy a period of eating lots of delicious food combined with no exercise and feel certain that there’s a “down” coming. The down will either be gaining a few extra pounds or just feeling lethargic and unhealthy. Similarly, you can choose to skip studying before an examination or slack off before an important deadline and be certain that there’s pain coming on the other side.

The impulsive and emotional part of our brain is wired to make short term choices. It comes from a few thousand years foraging in forests. Who knows if you’re going to be alive to enjoy the next meal? Might as well make the most of it while it lasts.

The wiring clearly doesn’t apply anymore. So, we’re better off adapting to the times and re-wiring ourselves to be suspicious if there’s too much ease. Instead of coasting towards our critical deadline next week, expect challenges and push to finish earlier and faster by waking up earlier and working longer for a couple of days. A little bit of pain now can ease the path later.

Re-wire yourself to invite pain. That way, you’ll expect problems and eat them for breakfast.

Muhammad Ali once said – I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’

He buried the lead and made it sound like training is a short-term thing. It isn’t. We never really stop training.

So, we might as well get on with it and embrace it.

The point of safety stock

For every post that shows up here, there’s at least 3 that are thrown away. Many of the ones that don’t make it are discarded in the mind. Some make it all the way to my “safety stock.” This is a page on my OneNote where I document post ideas. Most of those will never make it here. I still go through that list on days I don’t feel inspired to write about anything in particular. But, I don’t throw the ideas on my OneNote page away.

I’ve realized that the most important role of safety is precisely that – safety. Once you have safety locked in, it is possible to explore different avenues and dream. Without it, you’re just fighting for survival.

The best illustration of this idea is money. The first step in Dave Ramsey’s financial management program is to build an emergency fund and this is followed by building up savings to last you 6 months without pay.

It works great with time as well. If you’re always over capacity, you’ll never have time to be creative.

We all need safety stock. It enables us to do more than we realize.

Escalation of commitment – The 200 words project

When General Motors launched Saturn, in 1985, the small car was GM’s response to surging demand for Japanese brands. However, after a brief sales peak in 1994, sales drifted steadily downward. While GM did go on to make a few changes to the division, it still went on to invest $3 billion to in 2004 to rejuvenate the brand despite continuous losses. Why?

This is a classic study in escalation of commitment – when we sink more resources into a prior decision despite new information telling us otherwise. How do we avoid this?

Well-run private equity firms may have an answer for us. One leading US firm assigns independent partners to conduct periodic reviews of businesses in its portfolio. If Mr. Jones buys and initially oversees a company, Ms. Smith is charged with reviewing it and is made accountable for the unit’s final performance. Although the process can’t eliminate the possibility that the partners’ collective judgment will be biased, the reviews not only make biases less likely but also make it more likely that under-performing companies will be sold before they drain the firm’s equity.

Here’s to more independent audits of our own decisions – especially when we find ourselves doubling down on losing investments.

The key to success, it seems, lies not in never quitting, but in knowing when to quit. That can be a tall order for people who like a concrete set of rules to follow, including “Never quit.” The data on quitting may just be further evidence of that so hard to swallow truth, that the only hard and fast rule of adulthood is to make your own rules, and even then be open to changing them. – Jessica Rotondi on the sunk cost fallacy, Huffington Post

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Source and thanks to: The McKinsey Quarterly

The small moments

What good is life if we always need that big milestone to feel good?

What if all it took were the small things?

A fun song

The wind in our ears

A drive in a nice neighborhood

Hanging out with a loved one doing nothing of note

Working really hard on something you care about

A Friday

Day dreaming about something cool coming up

A delicious meal

A functioning heart :-)

There’s more things going right at any moment in our lives than we know or realize.

Every once a while, when we find ourselves weighed down by this or that, it is worth reminding ourselves about a few of the small things that are going great.

If we’re unable to enjoy the small things, it is unlikely we’ll enjoy the big things.

And, besides, in the final analysis, the small things are the big things…

An alternative to traditional tier based evaluation systems – MBA Learnings

Incentives drive behavior. This is so much the case that our “Leadership in Organizations” Professor repeatedly stated that incentives are among the strongest levers to changing culture. And, as we discussed incentive systems, we discussed the issues with the traditional tier based evaluation systems.

Most companies have some variant of a system that grades people above or below target/expectations relative to their peers. We discussed a couple of issues with this –
1. Peer based evaluation systems often lead to unhealthy competition
2. Telling someone they were really close to the next tier actually causes a lot of unhappiness. Our Professor had done research on Olympic medal winners and found that Silver medalists were more unhappy than Bronze medalists. While the Bronze folks were just happy to be on stage, the silver folks were generally unhappy at missing the elusive Gold.

So, what’s an alternative solution? We discussed a 100 point scale with 20 questions scored for 5 points each. These 20 questions could be divided into 4 areas – e.g. task performance, leadership, culture, and teamwork. And, each question would drive to specific questions about how a team member performed. Of course, the manager(s) would need to substantiate each question with clear examples.

Why would this be better? First, it eliminates tier regret. Your yearly evaluation is a score out of a 100. Second, it focuses competition on yourself. The relevant question here is – how did I do versus my performance last year? Third, it encourages self reflection and alignment. Each employee should do a self evaluation and compare notes and points of difference with their managers. And, finally, it provides more granular feedback on performance versus a couple of letters and bullet points.

We discussed almost a year ago now and it is clearly one of those discussions that has stuck with me. I’ve been looking for counter points nearly every time I’ve thought about it. And, I’m yet to find too many. So, here’s to giving it a try.. someday.

Energy and willpower

There are a few learnings that get repeated here. One of my all-time favorites/most repeated is the one where I remind myself to end low energy days early. This works very well – so much so that I do this nowadays on auto pilot.

I was wondering about the “why” behind this learning (beyond knowing it works great). And, I think the reason is that the amount of energy we feel is proportional to the amount of willpower we have. So, if we’re feeling very low on energy, it is likely our willpower is depleted. The way to recharge our willpower is to either do something that helps in the short term (eat or drink stuff that gives us energy) or go to the best long term solution – sleep.

The temptation, in a low energy period, is to either indulge in eating, watching TV or, in the worst case, attempting to be productive. Willpower depletion begins a negative cycle that leads to tiredness, bad decisions, irritation and more bad decisions.

Learning to manage energy is critical. And, being able to muster enough willpower to switch off all internet access, get an early dinner and sleep during low energy days is still among the most important things I’ve learnt.

PhraseExpress – Product Review 6

Attribute #1. Delivers on a singular value proposition in a world-class way (purpose): Grade – A+
PhraseExpress exists to make it easy for you to replace oft-used phrases with a couple of keystrokes. I use it to replace phrases that I use a lot – e.g. “please find attached,” “hope you are doing well,” “looking forward to,” “alearningaday,” my email address, etc.

It saves me a ton of time and has never caused problems. Definite A+

Attribute #2. Simple, intuitive, and anticipates needs (design): Grade – B
I don’t find PhraseExpress’ design to be simple or intuitive. 3 areas where it just over complicates things –
1. Clicking the icon on my taskbar doesn’t open the application. It opens a bunch of sub menus. I need to right click -> Edit phrases to open up the application.
2. Right clicking the left hand side of the image above (i.e. where the phrases are stored) gives rise to 5 options – to create a new folder/phrase/bitmap/counter variable/separator. Maybe PhraseExpress’ users are largely power users who understand what all of this means. But, I somehow doubt it. It feels a lot like feature creep.
3. The right hand side is, again, anything but simple. I would scrap this and start all over again to make things simpler.

The only place where PhraseExpress scores high is that it notices spelling errors wherever I type and helps auto correct. But, thanks to bad design, this is only a B.

Attribute #3. Exceeds expectations (customer love): Grade – B
It does what it is supposed to. Solid B here.

Attribute #4. Emotionally resonates (feel): Grade – C
No emotional resonance. I don’t find that to be disappointing as I don’t expect any better.

However, the product keeps popping up with these massive alerts asking me to upgrade to their latest version. Now, I’m really glad their product team is shipping all these upgrades. But, it is text expansion software for god’s sake. I wish there was an easy way to turn the updates off. Sadly, I haven’t found any. And, as a result, the annoying updates cause negative emotional resonance.

Attribute #5. Changes the user’s life for the better (impact): Grade – A
Definitely positive impact.

Overall Rating: B
PhraseExpress is an example of a product that delivers on its purpose well but fails on the user interface. It feels like a classic case of feature creep with way more options than necessary.

But, that said, I still use it and I’d still recommend it. And, I think that speaks to the power of a product delivering on a single value proposition in a world class way.