SOPHISTICATED FINANCE

Make Fewer Excuses

Daniel Kahneman (Photo credit: Wikipedia)

Forbes had an interesting article on how to be successful. Citing the research of Nobel Laureate psychologist Daniel Kahneman, the article states that emotional intelligence (EQ), moral intelligence and body intelligence are more important than IQ in predicting individual success. To improve moral intelligence, how one manages "integrity, responsibility, sympathy, and forgiveness", Forbes recommended to make fewer excuses.

I am very fond of lessons from the military (several links here) in teaching individual behavior and management. New soldiers are taught three ways to answer a question:

1. Yes sir
2. No sir
3. I do not know sir

From the beginning soldiers are taught not to make excuses. You will also save a lot of time by eliminating excuses :)

 

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Thoughts on Humility

Gaston Acurio at Madrid Fusion 2006 (Photo credit: Wikipedia)

On a recent flight all my electronic devices needed a charge so I read the American Way magazine in Spanish. One story featured renown Peruvian chef Gaston Acurio. When asked to what he attributed his success, he said humility. Humility enabled him to objectively evaluate the results of his cooking and spot the errors.

This point struck a cord because the night before I heard Mohammed Yunus speak at the Hult Global Case Challenge in New York. As a Nobel Prize winner and probably the inventor of social entrepreneurship, the man has some accomplishments to tout. However, the most noticeable quality about Professor Unus is his humility. In a thirty minute speech he never used the word "I" to describe his accomplishments in Bangladesh.

Unus sounded very much like Albert Einstein. I have been reading the arts and letters (not the physics) of this very accomplished thinker. The book is titled Ideas and Opinions. One consistent theme in Einstein's writings and speeches is the fun he poked at organizations (and himself) that gave him awards. Again, humility comes through as one of the strongest messages.

In the matter of 24 hours I have three great examples of world class practioners, all in very different disciplines, but all demonstrating the value of humility. I suspect that you do not become humble after you become world class, but rather humility facilitates world class work. By not being so self-centered you have an easier time to spot your errors (Acurio) and you probably devote more time to your work and less to self-promotion. 

Another benefit of humility is you worry less. All of the students presenting at the Hult Case Challenge were jazzed up and very nervous. Not uncommon at a big event with many people presenting. In a perfect world maybe they were so excited because they did not want to fail their team members, but I suspect that there is another reason. They were all worried about looking bad in front of the audience. Humble people do not worry about such matters and just do the best they can.

Want to worry less. Be more humble.

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5 More Productivity Tips

Inc. Magazine had a very good article on how to improve productivity, based on the characteristics of successful people. The characteristics of these productive people were:

• They have a life. Taking breaks to do non-work things gives one a chance to refresh and exposes you to new problems and solutions that can be used in the work environment.
• They take breaks. Constant work depletes ones mental capabilities. Periodic breaks in long projects gives you a chance to refresh the mind and body.
• They have worked in different industries.  Variety in work experience may allow one to bring proven techniques from one industry to problems in another industry.
• They have great outside collaborators.  Once again, networking is critically important. These friends bring fresh ideas to problems and may lead to quicker solutions.

 All of this is good advice, but I thought I would share a few of my own tips:

1.  One-hour meetings. I rarely have meetings for more than one hour. Most adults cannot maintain focus for more than an hour. If properly prepared with documents circulated in advance, 95 percent of matters can be well discussed and solutions arrived at in an hour.
2. Do important things at your best time of the day. Most of us have a biorhythm that makes us an early morning person or a night owl. Learn which you are and do the most demanding tasks during the best period of the day for you.
3. Understand if you should be listening or talking. In most interactions I try to initially set up the purpose of the call/meeting so the time is effectively used and then I basically listen. Give people a chance to talk after setting the objectives and things move more quickly. 
4. State the solution first.  Most people give way too much background in person before they present the solution. Present the solution and then two or three bullet points to support the conclusion. Most people have a lot of background on the matter discussed and can quickly determine if the proposed solution is correct. If the matter is very complex send a short memo or email in advance that outlines the complexity but remember to state your conclusion. You may be able to skip the meeting if the conclusion is accepted based on the writing.
5. Learn to write. Many people are afraid of writing and consequently lose a lot of time preparing to write. Remember this simple rule:

 

•  
  •  
    • Tell them what you are going to say
    • Say it
    • Tell them what you said

Put the energy and time into outlining what you are going to say (the first part of the rule). It's easy to write after you outline the topics.

 

I do not pretend to be a productivity expert, but I have a fairly full schedule between OLPC, consulting, teaching, blogging, book writing, 3-4 workshops and speeches per month and the 4-5 startups and students I typically mentor. In the fall it will be a bit busier when I start teaching a second course at FIU. Always be working on techniques to be more productive. That may be the best tip I can offer.

Image credit: followsteph.com

A Simple Rule for Entrepreneurs

My good friend @Yaquesita, also known as @OLPC_Mexico in another life we share, sent me this article "A Good Mentor Will Tell It Like It Is". The required features in a mentor really highlighted the typical weaknesses in entrepreneurs that need to be addressed:

• "Most entrepreneurs have lots of ideas. Some can be put into practice easily, but others will be off-the-wall and need refinement to implement"
• "Entrepreneurs tend to be driven by the crisis of the moment. As such, it is easy to neglect the real priorities of growing the business"
• Entrepreneurs have a constant stream of ideas, but the resources available set the agenda
• Entrepreneurs need to expand their networks in order to efficiently access the best resources to address an issue
• Entrepreneurs tend to become so immersed in their business that they tend not to take the time to reflect and plan

Constant crisis and no time to reflect on the customer, business and revenue growth are two sides of the same problem. Good entrepreneurs always find time to think and plan. If you are unable to tell the difference between a real crisis and the problem of the moment, you should consider this simple rule:

If it does not affect the customer or cash flow, ignore it. 

Leaders who focus on the correct issues and set proper priorities have many fewer employee issues, which is why I have omitted employees from the rule. However, employee morale and development should be the third priority.

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Slowdown

Tony Schwartz had a good post on HBR Blog Network, "Slow Down, You Move Too Fast". Two excerpts are worth noting:

"Speed is the enemy of depth, nuance, subtlety, attention to detail, reflection, learning, and rich relationships — the enemy of much, in short, that makes life worth living. "

"Speed is a source of stimulation and fleeting pleasure. Slowing down is a route to depth, more enduring satisfaction, and to excellence."

The complete article is here.

Killer Apps May be Confusing US

IP Carrier is an excellent blog that focuses on new business models in telecom and related areas such as data. A recent story, "Is there a Tablet Killer App?", raised an interesting point not just about tablets but all computing devices.

From the early days of computing, a new device succeeded if there was a "killer app". A killer app was a software application that had such high utility that people bought the device to get the app. The classic killer app was the spreadsheet running on the PC. The conventional wisdom is that VisiCalc, Lotus 1,2,3 and Quattro Pro, the early spreadsheet apps, made the PC market. However, we all know that Microsoft Office, which integrated several useful apps, is the most profitable Microsoft product. What Microsoft realized is that the suite of productivity apps, and not a single product (app) was the way to satisfy the customer need. Effectively, Microsoft looked beyond the product and looked at what was the customer need. (Perhaps Microsoft's last great insight until they became a game company.)

This issue of looking at product and not the real customer need may explain the decline of BlackBerry. The "killer app" for Blackberry is generally considered to be email. However, email was available on PCs and the real benefit to the customer was reliable, remote access... to email. Reliable, remote access explains the popularity of BB Messenger in many developing countries where network quality is not good. Many people in such countries buy their Blackberry just for BB Messenger as a chat device. If Blackberry had realized that the way the device was used and not the app was important they might have dominated chat worldwide and not have their current problems.

If we now turn to the tablet, we should not be considering killer apps but rather why do people use the device. Fortunately there is no "killer app" on the tablet to confuse the analysis. In talking to hundreds of people about their tablet, nobody singles out a particular app consistently to explain their tablet purchase. The manufacturers all highlight their app stores but nobody ever says they bought an iPad because they can easily add new apps. Maybe early adopters mention such "geek nonsense" but typical users never mention it. What people typically cite is the interface and how everybody in the family can use the device--even two year olds. Maybe tablets are "family" entertainment devices or maybe they will become "childrens' connectivity devices". 

When the tablet first emerged, Frog Design, the world renown design firm, said that the tablet was a new interface and not a new product (SF story, Frog Design article, both from March 2010). Frog focused on the customer and why they would use the device and not the device or its apps. This is the same point IP Carrier made in their story. It is a point that cannot be over emphasized. Understand the use case of the customer and not the product.

Functional Fixedness and Problem Solving

I have written about a technique called "relax the assumption" here and here. Several people find this technique a powerful model to solve problems and innovate. When I do workshops on this technique, I always start by asking the question "why can't we timeshare dogs?" This question makes clear that you only relax the assumption about ownership and we have dog timeshares. 

In a typical workshop I then ask how many new businesses can you create by relaxing one assumption about the original Model T Ford. Everybody thinks of customizing the car color and rental cars. I end the examples by pointing out that fast food restaurants is another example. Do not change just assumptions about the car but rather about people's lifestyles.

I have always considered "relax the assumption" to be a technique that I developed. This article from Big Think shows that my technique addresses what psychologists call "functional fixedness" or ingrained limitations in your thought about the function of something, such as a Model T. Now I have a scientific basis for my technique. 

Social Venture Checklist

Yesterday I spoke at the Miami Philanthropy Forum. Very nice event with about 100 attendees. Thanks to Colleen Post for inviting me.

I spoke about what I call the "social venture checklist". Many socially oriented founders default to non-profit status, but I cautioned them to understand the tradeoffs before accepting this choice. When I asked the audience of non-profit managers why they chose non-profit nobody had an answer except to reference tax free contributions. See the Powerpoint below for better reasons.  When I explained that non-profits are like stock brokers I had everyone's attention. Both organizations provide trustee services for low margin income.

Then I took them through a discussion of the for-profit choices:

1. Social entrepreneurship
2. "Capitalist Dog" entrepreneurship

The difference between the two types of entrepreneurship is that in social entrepreneurship one maximizes value creation and in traditional entrepreneurship one maximizes value capture (just the way Milton Friedman taught us). I also stressed that many social ventures assume that they have some higher normative status compared with for-profits. The lines that define "social" are actually quite unclear and any organization is better off to focus on economic consequences. 

Social Venture checklist

View more presentations from rhhfla.

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Delegate in Complex Situations

Image via Wikipedia

In a recent post, "Complexity and Speed in Decisionmaking", I talked about the need to delegate responsibility to greater levels to respond to rapidly developing situations. One group that understands rapidly developing situations is the U.S. military's Special Operations Command, the group responsible to manage the Navy Seals. This article from the NYT, "Admiral Seeks Freer Hand in Deployment of Elite Forces", discusses the efforts of the commanding officer of Special Operations Command to get authority to pre-positions his assets based on intelligence and other data. The biggest issue in such a change is that regional military commanders resist having forces not under their command in their geograpghic area of responsibility.

The lesson to be derived is that when one delegates authority downward, one needs to explain it to the whole organization to prevent interference from other authorities. Focus on mission and not authority is the important theme.

Lessons from Red Hat

Image via CrunchBase

I have been thinking about collaboration more and more. There is no doubt that all the different new IT technologies are changing the way we collaborate. However, I was trained in the traditional command and control hierarchy which drove the economic growth of the U.S. after WWII and I do not give up proven systems easily. Also, I was raised in the Lone Ranger mode and did not even accept teamwork until I was about 40. Teamwork and collaboration are different concepts, but the point is that I was slow to see the value of groups and the value of combined output.

This story from Business Insider about Red Hat, one of the great companies built on open source Linux, illustrates some interesting points about collaboration:

1. Companies with open source-based products live in a world of constant collaboration, as volunteers work to constantly improve the product
2. Open source companies naturally adopt collaboration as a part of their culture
3. Collaborative cultures change the role of senior management from decisionmakers to "guides"
4. Despite the reduced "power" of the senior management team, customer focused, technology driven strategies can still be achieved.

From talking to people in open source cultures, there is also a higher requirement to hire A and A+ employees. Lesser types have trouble keeping up in a more free form management structure based on collaboration.

Related articles

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Complexity and Speed in Decisionmaking

Chris Zook, a Partner at Bain, had an interesting post on the HBR Blog Network. In part he discussed themes from the recent Davos Forum. One of the themes was:

"that while events are unfolding in the world at an accelerating pace, increasingly complex institutions are less and less able to deal with them."

This is a theme that I have written about frequently, including here and here. Events are unfolding at an accelerated pace because information about the events is being disseminated at a much faster pace over the Internet. Secondly, information about an event is being covered by more and more sources, both offical and recognized and informal. For example, Twitter probably breaks more top news stories than any news agency or television network. Large complex organizations such as governments and Fortune 500 companies are not currently designed for immediate reaction and response but rather prefer a deliberate, consensus oriented approach.

The question, of course, is why large organizations cannot respond more quickly. Zook proposes that companies need simpler strategies and more transparency. Simpler strategies presumably reduce the number of variables to consider in making a decision and transparency provides more people with the necessary and correct information. This is good advice but I would add one more concept.

If the strategy is clear (through simplicity) and people have good information, then authority can be delegated down to a much lower level. Lower level staff may not execute their authority but they have the option to do so. I always remember the story of the sniper in Afghanistan who had Bin Laden in his sights during the Clinton administration, but by the time Washington approved the shot Bin Laden had left the scene. Delegation of authority permits faster reaction times by the people on scene dealing directly with the problem.

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The Convergence of Human Behavior, Design and Branding

DESIRE!

 

UX Magazine had an interesting post today,"Desire is a Universal Language". Take a ways from the article:

• "Half of our waking cognition is purely unorganized, emotional thought". Desires play a much greater role than rationale in all activities including decision making. 
• "Dr. Steven Reiss, an Emeritus Professor of Psychology at The Ohio State University studying intrinsic motivation, has identified 16 basic desires that guide almost all of our meaningful behavior." 
• Brands that engage one of these basic desires make more powerful connections with customers, e.g. desire for knowledge explains the popularity of the Discovery Channel.
• "We make decisions based on predictions of pleasure", the satisfaction of desire.
• "Once we establish the pleasure–desire relationship ... create the symbolic language that helps people predict the pleasure of using a product or service".
• "We can design in desire, forming powerful and often intangible connections between a brand and the people it serves.

The intrinsic motivation of desire(s) for the customer serves as the universal theme that may enable design, engineering and sales and marketing to share a universal product vision. Every business decision would revert back to whether it enhanced the motivation or desire of the customer. Such an approach would perhaps simplify the use of value creation-value capture framework.

 

Problem Solving in Crisis

Over the year's I have been involved in solving a lot of business problems. My experience is not particularly unique and I reach conclusions following a three step process:

1. Reconfirm the objective
2. Confirm that you are treating the customer, employee, supplier.....fairly
3. Demonstrate that marginal benefits equal or exceed marginal cost...or know the negative cash flow consequences are acceptable

Shake twice and out comes a good solution.

This method works well with routine business problems, say 99.9 percent of management issues. However, every 5 to 10 years along comes that gut wrenching, killer problem that threatens to put your company out of business. When faced with such a problem the first thing to remember is Hacker's first rule: if they are not shooting at you, it's not a serious problem. Problems are rarely as bad as they first look.

After you calm down, assemble a small team of no more than five. Include one subject matter expert, one street smart guy/gal, one really good problem solver, one really smart person and the leader. (Really smart person could be any of the other four but not necessarily.) Very important to pick people from different disciplines. People from the same discipline tend to have the same problem solving approaches because of similar training. Only invite A+ players and avoid B and C types (who should not work for you anyway) even if political correctness requires it. In a crisis politics should not be important.

Now comes the key part for the leader in finding a good plan forward or solution. Do not state the problem and absolutely do not propose a solution. When the building is on fire the leader may need to give orders immediately, but most business problems do not require such an immediate solution. Confident leaders do not have to appear to always have the solution.

Next have the subject matter expert state the problem. This serves to provide everybody with basic facts and more details and let's everybody vent their emotions over why the idiot did not (fill in the blank). Next confirm whether the real problem has been identified. The smart guy will identify the real problem(s) if necessary. That's why he is part of the team.

Next discuss thoroughly why the problem occurred. Again, the leader should facilitate but not lead the discussion. Solutions to prevent the reoccurrence of the problem are then discussed. Lastly, starting with the most junior person ask for solutions to the critical problem that may put you out of business. This gradual approach to solving the "life threatening" problem serves three purposes:

1. By the time you get to the final solution discussion, all the emotional energy has been vented
2. Everybody has complete information because you have really discussed the problem from three perspectives
3. Consensus for the solution has been established without the leader forcing a solution.

This approach produces magical results. Exactly what you need when your business is on the line.

This article from Fast Company presents a similar view but advocates such an approach for all management situations. Well worth a read.

 

 

 

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Aaron Hurst's View on Running a Non-profit

Two friends sent me a link to this article from Huffington Post, "It's Harder to run a Non-profit than a Company". The article is written by Aaron Hurst, the founder of the Taproot Foundation and a two-time startup entrepreneur. Mr. Hurst's bio describes him as "a globally recognized social innovator and leading architect of the growing pro bono services movement". The article has an interesting theme but I disagree with several points. Hurst's points are below in bold, followed by my commentary.

1. You can't afford to pay the top price to attract top talent. The age old mantra is that non-profits have to have low salaries in order to maximize the money invested in social services. Essentially the non-profit takes advantage of people's desire to do good and therefore is able to secure staff at lower salaries. What is overlooked in this logic is the best people, presumably higher priced, are more efficient, require less staff and are able to develop more effective operating models. Net, net, the best people are cheaper because of the better results produced. Board members should be able to understand this logic, and if they cannot, you have the wrong Board. One other point, a lot of very good people are now looking for jobs. Many positions in non-profits can be staffed by high quality part-time workers who should be priced at attractive rates. 
2. There is just as much competition but you are expected to not talk about it or openly engage in competitive behavior. I agree with Hurst here. Competition is fierce in social services not just from other non-profits competing for donations and targeting the same folks in need, but also increasingly from for-profit companies that find the same "markets" attractive. Again, refusing to recognize the competition is a legacy from the old days where many "do gooders" think of "business" as a dirty word. At a foundation I know well, the competition is Intel, Microsoft, HP, Dell and ten other for-profit companies. The foundation faces these competitors every day in government bids. These governments frequently discuss competitor offerings and the foundation positions themselves to focus on their non-profit status, superior product and history in child learning. The reality is that every product/service has competition and discussions of competition may foster greater clarity of mission with stakeholders.
3. Your board requires a lot more investment of your time and energy. Hurst is probably correct here, but I suggest that you separate board seats and donors. One way to achieve this separation may be to focus more on corporate donors and less on high net worth individuals. In my experience corporates are less likely to link donations to board seats.
4. There is no market for growth capital. I think Hurst has underestimated the growing number of investors and venture capitalists interested in social-based investing. Perhaps the business model he uses needs to change to a social entrepreneurship model rather than a donation model. Social entrepreneurship is not the perfect capital raising model but it provides a lot more flexibility in financing than relying only on donations.
5. You have more customers (stakeholders). I disagree here. As Hurst knows well, one should focus on the market served. Everybody else is secondary, although it may take some time for donors and staff to fully realize the benefits of such an approach.
6. Failure can lead to real impact on the lives of real people. If your company fails, you lose money. When you fail in a social sector endeavor, you've failed to improve our society and improve the lives of your fellow citizens. You've failed in realizing your vision of creating a better world. I would point out that when for-profit companies fail employee lives are disrupted and products and services that benefit society are also lost. The point here is that organizations should focus on their mission and not be confused by the notion of "doing good". Key performance indicators and the reported or realized results are what improve lives and "doing good" is just a part of the marketing message. It may be a powerful message but it is just a message.

Mr. Hurst's article appears to assume that non-profits rely almost exclusively on donations. I would point out that many social entrepreneurship ventures are also non-profits. A social entrepreneurship model may avoid many of the legacy issues of non-profits, such as board seats linked to donations, "business" as a dirty word and "doing good" as opposed to a results orientation. Perhaps Mr. Hurst just needs to bring more of his entrepreneurial experience to his management philosophy in social services. More on social entrepreneurship here and here.

The views expressed here are my personal views and do not represent the views of any organization with whom I am affiliated.

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Articles on Entrepreneurship Updated

Image by Wolfram Burner via Flickr

Just a reminder that this archive of articles on entrepreneurship is updated frequently. The original post and the link to the archive are below. Recently the articles have been on strategy and the customer value proposition.

"I have shared the articles here that I send to my entrepreneurship students during the semester. Will add articles during the remainder of the semester and in future semesters. The mix is mostly blog posts and videos. Naturally it is a bit eclectic and reflects my interest in design as a model for innovation, social entrepreneurship and venture capital amongst other topics.

I used Evernote to make the articles available. Evernote is excellent for organizing large amounts of information."

 

The Startup Genome Report

Researchers supported by Stanford University are trying to model successful startups in the web space. Their report is here. Findings show four types of web startups, each of which develop in a different manner that is documented based on interviews with over 600 startups. Will probably incorporate the study in the curriculum for my masters level course in entrepreneurship this fall.

A sample finding with respect to capital raising and mentors is shown below. Mentors have an appreciable effect on capital raising if they participate or advise on funding.

Another interesting graphic (below) shows how the type of revenue changes as the company passes through the first four phases of development.

The report is chuck full of other interesting findings and should be a must read for any aspiring entrepreneur interested in the web space.

I found the report on Steve Blank's blog, which is an excellent source of info on entrepreneurship, the "lean startup" methodology and the Stanford entrepreneurship community. Steve's post also provides a more detailed summary of the report.

 

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Another View of Collaboration

Many people would define collaboration as the bringing together of resources through formal or informal networks. Many thinkers believe that in the 21st century collaboration will be critical to solve the increasingly more complex social, environmental and economic problems ahead. Fortunately technology is helping to facilitate collaboration, but there is another trend that may also help.

Living space is becoming more densely populated as a result of population growth and increased urbanization. Colombia and Bangladesh are the same size in square kilometers, but Bangladesh has a population of 180 million and Colombia has 44 million. In which country is greater collaboration required. Of course, the answer is Bangladesh just because of the very high population density. Collaboration is a natural force in areas of high population density. Today the collaboration may just be focused on survival but with education these natural collaborators become a real force for change.

Many of the highest population densities in the world are in Asia, such as the city of Shanghai, the island of Java in Indonesia and of course Bangladesh. As we consider the future of the U.S. we need to recognize that certain places in the world foster natural collaborators. We in the U.S. need to embrace collaboration more aggressively, and especially in our schools, because many of the competitors are natural collaborators.

What’s The Most Difficult CEO Skill?

Ben Horowitz is perhaps the most thoughtful and insightful VC blogger anywhere. His post What’s The Most Difficult CEO Skill? Managing Your Own Psychology was highlighted in a separate post by Fred Wilson. Fred may be the second best VC blogger around. My problem is I do not agree with what they say.

Horowitz states:

If you manage a team of 10 people, it’s quite possible to do so with very few mistakes or bad behaviors. If you manage an organization of 1,000 people it is quite impossible. At a certain size, your company will do things that are so bad that you never imagined that you’d be associated with that kind of incompetence. Seeing people fritter away money, waste each other’s time, and do sloppy work can make you feel bad. If you are the CEO, it may well make you sick.

And to rub salt into the wound and make matters worse, it’s your fault.

My problem with this statement is that it is a very self-centered view of the CEO. Yes, the CEO is ultimately responsible but where were the COO or CFO or CIO. A key to building large companies is to delegate responsibility. If you go crazy over money being wasted, for example, maybe you hired the wrong C-level executive. If you could not afford for some money to be wasted, you should have approved every contract or check. 

Horowitz said:

If someone was promoted for all the wrong reasons, that was my fault. If we missed the quarterly earnings target, that was my fault. If a great engineer quit, that was my fault. If the sales team made unreasonable demands on the product organization, then that was my fault. If the product had too many bugs, that was my fault. It kind of sucked to be me.

Being responsible for everything and getting a 22 on the test starts to weigh on your consciousness.

Getting a 22 on the test is not really important, as Ben knows. Staying in business and growing it are the important goals. I think back on the problems I went through managing a company in Asia:

1. The 1997 Asian Financial Crisis, when the currency devalued by 80 percent
2. Having all my bank lines cancelled
3. Having my lead bank twice cancel my bank lines
4. Having 7 store fires in three years, one of which occurred the day before a road show
5. Collecting a $30 million insurance claim from rioting in Jakarta
6. Wal-Mart entered the market

Wal-Mart really scared me and the store fires really concerned me until Kroll could find no evidence of a conspiracy to burn us out of business. After one or two total disasters you learn to roll with the punches and each subsequent disaster gets much easier to handle both psychologically and as a business problem. What we should probably teach CEOs is not to be really concerned until there are riots in the streets and/or they hear gunfire. Up until that point, just carry on, which was a point Horowitz made in closing his post.

Horowitz also made some good points about how to handle the stress of being alone at the top as CEO:

1. Make some friends with emotional maturity
2. Write about the problem; it may help you to separate the decision from your psychological demons
3. Focus on the road (stay focused on what is important)

I agree with the focus point. Absolutely critical and more critical as things get worse. I would add two recommendations:

1. Exercise more, it always helps to reduce psychological problems
2. It's therapeutic to look after the staff who may have bigger issues than you are experiencing; putting problems in perspective relieves stress

 

 

 

 

Interesting Posts Today

The blogging muse went on vacation and did not tell me. So today's post is a summary of some very interesting articles from this morning's reading.

Fred Wilson, legendary NYC VC, started a huge debate on the internet here on the role of marketing in early stage companies. Basically all the VCs lined up with Fred  and the marketing mavens all took the opposite view. Fred basically argued for a focus on sales with support from internally generated PR and social media. What the marketing mavens said was largely wrong or confusing. Bottom line do not think about "marketing" in the classic sense and focus on very capital efficient approaches to get customers. One of the more interesting articles in the debate came from the Equity Kicker.

Another interesting article came from an old Tech Crunch post on the pitch deck for a VC or angel. Tim Young reveals the secrets that he used successfully to raise $10 million for two startups in the same year. He uses a 5 slide deck. I love the simplicity, clarity and elegance of his sample deck. I think I found this article through an answer on Quora.

I cannot believe I am going to mention a story about Microsoft technology. Please do not tell anybody. This story describes how Microsoft is developing technology where the human body is the interface to the computer. No mouse, no keyboard. Just hit your arm with your hand in different places and the computer correctly does what you want. And you thought the iPad was cool. Interface to the computer is a big new frontier. 

Suggested ideas for future blog posts welcome.

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Self-Interest and Negotiation

I have been thinking a lot recently about self-interest. In a workshop I give on leadership I begin by describing life as a conflict between self-interest and morality. When you take responsibility for other people that dichotomy expands to include a third part " mission", which leads to the concept of leadership.

In an HBS research paper "Naivete and Cynicism in Negotiations and Other Competitive Contexts" the authors discuss the role of self-interest in negotiation in terms of naivete and cynicism. Their concepts are captured in the summary below.

 

"Naïveté is more than a glut of trust. More broadly, naïve behavior refers to a failure to make the best decision, due to a lack of consideration of other people's strategic and behavioral perspectives. We are likely to make naïve decisions when we don't think through the likely future decisions of other parties. A cynic, on the other hand, may avoid a business transaction due to an assumption that the seller's self-interested motives will be harmful to him or her-even if logic shows that the deal would likely benefit both parties. When people withhold from trusting others, they usually lack opportunities to learn whether their trust would have reaped rewards. But when they offer their trust and are subsequently burned, they learn hard lessons about trust. This unbalanced feedback breeds cynicism."

I have seen many times in negotiation where an excessive concern about the other party's self-interest has clouded judgement and stalled negotiation. What needs to be remembered is the economic definition of an exchange, an exchange being the transfer of  a good or service in return for consideration (e.g. cash). As defined, an exchange only takes place when both parties believe that they are receiving appropriate value--the better deal. Therefore, every exchange (or negotiation) is based on self-interest.

Negotiation is simplified by just looking after your own self-interest and letting the other side worry about their self-interest. The skill, of course, is in achieving "value", where the self-interest of the two parties are mutually compatible and the transaction closes.

Image: Diogenes of Sinope, founder of the philosophical school of cynicism. Credit.