Inside out

There’s a lot to like in Pixar’s new movie. It is a lovely course in how the brain works – not a 100% scientific but enough to paint the picture. It also speaks to the tension between the various emotions in our minds as we make our way through this journey.

My favorite lesson was the central lesson in the movie – joy and sadness work best when they move together. One wouldn’t exist without the other.

We all go through bumps in the road. It feels easier to avoid the difficult, suppress emotions and move on. It takes courage to put ourselves out there, let ourselves feel the sadness and then move onto recovery.

What we learn from that movie is that that courage is essential. Making sure we let ourselves feel that sadness/disappointment/anger when things don’t go our way is an important step in the recovery and “bounce forward” process.

Or, in fewer words, don’t avoid pain. It is part of this rich life experience. Besides, joy wouldn’t be good if it wasn’t for pain.

Assertive communication and passive teams – The 200 words project

Volunteers were brought into a study and separated into teams to fold shirts. Half the team leaders were instructed to speak assertively/powerfully (“Do this!”) and the other half to speak tentatively/powerlessly (“Do you think doing this would be a good idea?”).

It was found that teams with proactive team members had 22% higher output under leaders who spoke tentatively. Proactive team members viewed them as open and receptive while they viewed leaders who made an effort to be assertive to be afraid of new ideas. The same study showed to be true in pizza delivery teams.

This behavior was found to be reversed in passive teams with less interested and less proactive team members. The more proactive the team, the less the need for an assertive leader and vice versa.

So, an Adam Grant leadership tenet – identify how proactive your team is and adjust your assertiveness accordingly.

When people think you’re trying to influence them, they put their guard up. But when they feel you’re trying to help them, or to muse your way to the right answer, or to be honest about your own imperfections, they open up to you. – Susan Cain (she was clearly talking about proactive people :-))

Source and thanks to Give and Take by Adam Grant.

George Ezra

Young musician George Ezra grew up in a family of avid singers. His siblings, however, had better voices growing up. One day, he stumbled onto a label by American folk singer William Ledbetter “Lead Belly.” On the back of the CD, it said – “his voice was so big that you had to turn the record down.”

So, George, in a moment of inspiration, decided to try out a big voice.

It worked. And he never looked back. One small leap and his life changed for ever.

There’s no guarantee that we’ll have our George Ezra moment when we leap next. But, leap enough, and it’ll likely show up.

I, for one, am glad he took that leap and gave it a go. We wouldn’t have had “Budapest” if he didn’t.. :-)

Surviving Pune

I love swimming when I have the opportunity. But, every time I walk to the pool to swim and first touch the water, the resistance shows up and exaggerates the feeling of discomfort. Even though I’ve learnt that I’ll get comfortable within 10 seconds of actually swimming, I’m amazed as to how my mind does such a poor job of predicting my eventual happiness. This is especially hard if the pool isn’t deep – it works much easier if I can just jump in.

But, a tactic that works incredibly well is to remember my experience jumping into much colder water in much cooler weather when I was on a 3 month project in Pune, India. Having survived Pune (and learnt a few lessons in the process), it becomes much easier to sign up for the ride. After all, if I’ve survived worse, how bad can this be?

The lesson I’ve learnt from this is the sheer value of hard knocks, failures and bad experiences. When you put yourself out there and attempt to do/change things, you inevitably go through difficult experiences. And, these experiences, especially the really difficult ones, greatly improve your ability to persist and persevere through other experiences. They also make it easier to keep perspective when things go wrong – you survived “Pune” after all.

We aren’t born with grit and happiness written on our birth certificate. The good stuff is always hard earned.

Chevron Pump – Product Review 2

Chevron Gas Pump

I had a product moment when I was refueling over the weekend. As is often the case with refueling, my mind was on auto-pilot. The fuel system was very good – no hitches until I had to pick the grade of fuel I wanted. My hand naturally moved towards clicking the button on the left. But, just as I was about to press it, I stopped.

“91” was written on the button. And, there seemed to be lower numbers next to it. By now, my brain was getting out of auto-pilot mode. Ah – so, Chevron had the most expensive product on the left while my natural instinct was to expect the cheapest variant on the left. I chose regular and smiled at the smart product design.

3 questions emerged –
1. Is there a real difference between the 3 variants of fuel? I tend to be skeptical of such variants and view them largely as pricing gimmicks.
2. How much more had Chevron earned due to other users who’d clicked the “Supreme” variant out of instinct?
3. Assuming users generally realized they picked the most expensive variant by mistake (and assuming people don’t normally do that), does this happen more than once? I’d imagine people are on their guard the next time they refuel.

Small changes in products can make a big difference. Companies like Facebook have run millions of experiments on which locations optimize clicks, for example. And, a big part of smart product design is understanding “auto-pilot” behavior – both to make the product intuitive as well as, in cases like this, to monetize.

 

Selling 22,200 girl scout cookies

13 year old Katie Francis sold 21,477 girl scout cookies this year and broke the world record. The New York Times has captured a few hard earned lessons that Katie’s learned over these years – this wasn’t her first time selling girl scout cookies, of course. She’s accumulated considerable skill attempting to break the record every year and is probably in the top 0.1% of hard working 13 year olds.

With stories like this, I’m always curious as to how much of the motivation came from factors like parents and the environment and how much came from her own self. I suspect it must have been ignited by external factors when she started and then taken on a life of its own thanks to intrinsic energy and drive.

Katie’s become a superstar and is now doing speaking gigs at sales conferences. Good for her. I’m hopeful she’ll retain the spark as she grows up.

And, just for today, I wanted to draw attention to one lesson she shared – ‘Don’t waste time convincing the naysayers. Move on and find the yesses.’

Great advice.

Conflicting incentives – MBA Learnings

In my last post about the tension between debt, shareholders, management and taxes, I ended with a line that leads straight into today’s post – “But, if there’s one thing I’ve learnt about markets, they’re rife with conflicts of interest.”

Let’s now take a look at the life of John Doe. John is an executive at a leading Fortune 500 company headquartered in the US. He gets paid $1 million in cash, 4 million in stock, and 20 million in various incentive related bonuses that are tied to “EPS” or earnings per share.

Now, let’s think about the many decisions he needs to make as a CEO that impact other constituents –
– How much debt should the company take on?
– How much tax will the company pay? (vs. how much of income will it recognize in low tax jurisdictions?)
– Should we pay dividends or repurchase shares?
– Should I take riskier investment bets or less risky bets?

Every one of these has an implication on the company’s profitability. And, a company’s profitability directly affects it share price. However, they do so in different place.

Let’s take dividends vs. share repurchases. When John’s company has a $100 in extra cash, they can either choose to pay the money in dividends to shareholders or choose to buy back their own shares from shareholders. Technically, they are both ways of returning money to shareholders. However, dividends inevitably reduce the share price (a company’s share price reflects the value of future cash flows – less cash available = less share price) while share repurchases generally have a positive effect on EPS.

While there are other impacts of making a dividends vs. repurchase decision, this difference alone highlights a conflict of incentives. John Doe and his executive team are often compensated on EPS. And, the markets often price stocks as a multiple of EPS. So, when the firm increases of EPS, it inevitable leads to an increase in share price. Now, it is great when that happens because of excellent management and/or smart investment bets. But, financial re-engineering, e.g. taking on excess debt, avoiding taxes, and/or repurchasing shares vs. paying dividends can also increase executive compensation significantly. John knows that he’s, at best, got a few good years as the CEO of this firm before he inevitably gets fired. So, why not make the most of it and swing these decisions in his favor?

There’s been a lot of discussion in the news about executive compensation as such decisions frequently come under scrutiny. In some ways, these conflicts make the markets fascinating. In other ways, they can make us cynical about decisions made by companies. My take has been to examine decisions more carefully to really understand what is going on and to understand the incentives in place. More often than not, the behavior we reward is the behavior we get.

One final plug on executive compensation – there are huge implications on the importance of ethics in these conversations. There has probably been an uptick in these conversations post the Enron debacle. I don’t think these conversations happen nearly as often as they should.

Happiness is not a station we arrive at

It is a manner of traveling.

And, every once a while, we need to drown out all the noise to understand our manner of choice. Our manner of traveling won’t work with every person in every environment.

But, that’s why happiness is described as either a “journey,” “pursuit” or “search” – it is all of that. And, it is up to us.

Howard Moskowitz and Spaghetti Sauce – The 200 words project

Here’s this week’s 200 word idea thanks to Malcolm Gladwell’s TED talk with a hat tip to Prof Jen Brown @ the Kellogg school for sharing.

Campbell soup went to psychophysicist Howard Moskowitz to help fix their Prego brand of spaghetti sauce in the 1980s. Prego was struggling and Campbell wanted Moskowitz to find the perfect Prego recipe.

So, Howard looked through mountains of data about how American people felt about spaghetti sauce. But, instead of looking for a perfect variety (a hypothesis that completely neglected diversity), he tried to see if there were clusters. And, sure enough, he found people who liked 3 kinds of sauces – plain, spicy and extra chunky.

Prego were shocked at his findings because there was no extra-chunky spaghetti sauce in the market. So, Prego completely reformulated their spaghetti sauce, and came out with a line of extra chunky that immediately and completely took off, making 600 million dollars in 10 years. It was a powerful insight – there is no “one” spaghetti sauce – one that economists call horizontal differentiation.

We often find ourselves looking for one perfect solution to solve a problem (or find happiness). But, Gladwell shares what he thinks is the most beautiful lesson from Moskowitz’s work – in embracing the diversity of human beings, we find a surer way to true happiness.

Howard Moskowitz spaghetti sauceSource and thanks to: The Daily Eater

That’s when everyone else in the industry looked at what Howard had done, and they said, “Oh my god! We’ve been thinking all wrong!” And that’s when you started to get seven different kinds of vinegar, and 14 different kinds of mustard, and 71 different kinds of olive oil. – Malcolm Gladwell

Distinctly un-cool

A butterfly’s lifecycle is a great example of the lifecycle of something cool.

Source: Milkweed for Monarchs

You go through many stages that look distinctly un-cool until something beautiful appears.

Behind any kind of greatness lies years spent in activities that are distinctly un-cool at the time – days spent in self doubt, weekends spent working on that dream, and years spent in lonely practice. There is no guarantee that these efforts will lead to the desired rewards. Sometimes it all works out. And, sometimes it doesn’t.

And, even when it doesn’t, it is just the desired reward that doesn’t work out. What follows whole-hearted effort are character, happiness, and a persistent spirit that moves onto working on the next thing.

The best thing about those riches is that they’re eternal..