Category Archives: Books

Crossing the Chasm by Geoffrey Moore

Summary
  1. Navigating in such the uncharted waters of the chasm requires beacons that can be seen above the waves, and that is what models in general, and the chasm models in particular, are for. Models are like constellations—they are not intended to change in themselves, but their value is in giving perspective on a highly changing world. The chasm model represents a pattern in market development that is based on the tendency of pragmatic people to adopt new technology when they see other people like them doing the same. This causes them to hang together as a group, and the group’s initial reaction, like teenagers at a junior high dance, is to hesitate and watch. This is the chasm effect. The tendency is very deep-rooted, and so the pattern is very persistent. As a result, marketers can predict its appearance and build strategies to cope with it, and it is the purpose of this book to help in that process. To be specific, the point of greatest peril in the development of a high-tech market lies in making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation. The gap between these two markets, heretofore ignored, is in fact so significant as to warrant being called a chasm, and crossing this chasm must be the primary focus of any long-term high-tech marketing plan. A successful crossing is how high-tech fortunes are made; failure in the attempt is how they are lost.
Key Takeaways
  1. Background & Fundamentals of Crossing the Chasm
    1. It is only natural to cling to the past when the past represents so much of what we have strived to achieve. This is the key to Crossing the Chasm. The chasm represents the gulf between two distinct marketplaces for technology products—the first, an early market dominated by early adopters and insiders who are quick to appreciate the nature and benefits of the new development, and the second a mainstream market representing “the rest of us,” people who want the benefits of new technology but who do not want to “experience” it in all its gory details. The transition between these two markets is anything but smooth. Indeed, what Geoff Moore has brought into focus is that, at the time when one has just achieved great initial success in launching a new technology product, creating what he calls early market wins, one must undertake an immense effort and radical transformation to make the transition into serving the mainstream market. This transition involves sloughing off familiar entrepreneurial marketing habits and taking up new ones that at first feel strangely counterintuitive.
    2. The basic forces don’t change, but the tactics have become more complicated. Moreover, we are seeing a new effect which was just barely visible in the prior decade, the piggybacking of one company’s offer on another to skip the chasm entirely and jump straight into hypergrowth. In the 1980s Lotus piggybacked on VisiCalc to accomplish this feat in the spreadsheet category. In the 1990s Microsoft has done the same thing to Netscape in browsers. The key insight here is that we should always be tracking the evolution of a technology rather than a given company’s product line—it’s the Technology Adoption Life Cycle, after all. Thus it is spreadsheets, not VisiCalc, Lotus, or Excel, that is the adoption category, just as it is browsers, not Navigator or Explorer. In the early days products and categories were synonymous because technologies were on their first cycles. But today we have multiple decades of invention to build on, and a new offer is no longer quite as new or unprecedented as it used to be.
    3. If we step back from this chasm problem, we can see it as an instance of the larger problem of how the marketplace can cope with change in general. For both the customer and the vendor, continually changing products and services challenge their institution’s ability to absorb and make use of the new elements. What can marketing do to buffer these shocks? Fundamentally, marketing must refocus away from selling product and toward creating relationships. Relationship buffers the shock of change. Marketing’s first deliverable is that partnership. This is what we mean when we talk about “owning a market.” Customers do not like to be “owned,” if that implies lack of choice or freedom. The open systems movement in high tech is a clear example of that. But they do like to be “owned” if what that means is a vendor taking ongoing responsibility for the success of their joint ventures. Ownership in this sense means abiding commitment and a strong sense of mutuality in the development of the marketplace. When customers encounter this kind of ownership, they tend to become fanatically loyal to their supplier, which in turn builds a stable economic base for profitability and growth.
    4. The fundamental requirement for the ongoing, interoperability needed to sustain high tech is accurate and honest exchange of information. Your partners need it, your distribution channel needs it and must support it, and your customers demand it.
    5. The fundamental basis of market relations is to build and manage relationships with all the members that make up a high-tech marketplace, not just the most visible ones. In particular, it means setting up formal and informal communications not only with customers, press, and analysts but also with hardware and software partners, distributors, dealers, VARs, systems and integrators, user groups, vertically oriented industry organizations, universities, standards bodies, and international partners. It means improving not only your external communications but also your internal exchange of information among the sales force, the product managers, strategic planners, customer service and support, engineering, manufacturing, and finance.
      1. Must see through every stakeholder’s eyes and create win-win relationships. This becomes even more complicated with public, high-tech companies given the number of constituents
    6. The problem, since these techniques are antithetical to each other, is that you need to decide which one – fad or trend – you are dealing with before you start. It would be much better if you could start with a fad, exploit it for all it was worth, and then turn it into a trend. That may seem like a miracle, but that is in essence what high-tech marketing is all about. Every truly innovative high-tech product starts out as a fad—something with no known market value or purpose but with “great properties” that generate a lot of enthusiasm within an “in crowd.” That’s the early market. Then comes a period during which the rest of the world watches to see if anything can be made of this; that is the chasm. If in fact something does come out of it—if a value proposition is discovered that can predictably be delivered to a targetable set of customers at a reasonable price-then a new mainstream market forms, typically with a rapidity that allows its initial leaders to become very, very successful. The key in all this is crossing the chasm—making that mainstream market emerge. This is a do-or-die proposition for high-tech enterprises; hence, it is logical that they be the crucible in which “chasm theory” is formed.
    7. The rule of thumb in crossing the chasm is simple: Pick on somebody your own size.
    8. These are the two “natural” marketing rhythms in high tech— developing the early market and developing the mainstream market. You develop an early market by demonstrating a strong technology advantage and converting it to product credibility, and you develop a mainstream market by demonstrating a market leadership advantage and converting it to company credibility. By contrast, the “chasm transition” represents an unnatural rhythm. Crossing the chasm requires moving from an environment of support among the visionaries back into one of skepticism among the pragmatists. It means moving from the familiar ground of product-oriented issues to the unfamiliar ground of market-oriented ones, and from the familiar audience of like-minded specialists to the unfamiliar audience of essentially uninterested generalists.
    9. Market Development Strategy Checklist. This list consists of a set of issues around which go-to-market plans are built, each of which incorporates a chasm-crossing factor, as follows:
      1. Target customer
      2. Compelling reason to buy
      3. Whole product
      4. Partners and allies
      5. Distribution
      6. Pricing
      7. Competition
      8. Positioning
      9. Next target customer
  2. Technology Adoption Life Cycle – The Cause for the Chasm
    1. To recap the logic of the Technology Adoption Life Cycle, its underlying thesis is that technology is absorbed into any given community in stages corresponding to the psychological and social profiles of various segments within that community. This profile, is in turn, the very foundation of the High-Tech Marketing Model. That model says that the way to develop a high-tech market is to work the curve left to right, focusing first on the innovators, growing that market, then moving on to the early adopters, growing that market, and so on, to the early majority, late majority, and even to the laggards. In this effort, companies must use each “captured” group as a reference base for going on to market to the next group. Thus, the endorsement of innovators becomes an important tool for developing a credible pitch to the early adopters, that of the early adopters to the early majority, and so on. The idea is to keep this process moving smoothly, proceeding something like passing the baton in a relay race or imitating Tarzan swinging from vine to well-placed vine. It is important to maintain momentum in order to create a bandwagon effect that makes it natural for the next group to want to buy in. Too much of a delay and the effect would be something like hanging from a motionless vine—nowhere to go but down. As you can see, the components of the life cycle are unchanged, but between any two psychographic groups has been introduced a gap. This symbolizes the dissociation between the two groups—that is, the difficulty any group will have in accepting a new product if it is presented in the same way as it was to the group to its immediate left. Each of these gaps represents an opportunity for marketing to lose momentum, to miss the transition to the next segment, thereby never to gain the promised land of profit-margin leadership in the middle of the bell curve. The key to winning over this segment is to show that the new technology enables some strategic leap forward, something never before possible, which has an intrinsic value and appeal to the nontechnologist. This benefit is typically symbolized by a single, compelling application, the one thing that best captures the power and value of the new product. If the marketing effort is unable to find that compelling application, then market development stalls with the innovators, and the future of the product falls through the crack.
    2. It turns out our attitude toward technology adoption becomes significant—at least in a marketing sense—any time we are introduced to products that require us to change our current mode of behavior or to modify other products and services we rely on. In academic terms, such change-sensitive products are called discontinuous innovations. The contrasting term, continuous innovations, refers to the normal upgrading of products that does not require us to change behavior.
    3. Of course, talking this way about marketing merely throws the burden of definition onto market, which we will define, for the purposes of high tech, as:
      1. A set of actual or potential customers
      2. For a given set of products or services
      3. Who have a common set of needs or wants
      4. Who reference each other when making a buying decision.
    4. The goal should be to package each of the phases such that each phase
      1. Is accomplishable by mere mortals working in earth time
      2. Provides the vendor with a marketable product
      3. Provides the customer with a concrete return on investment that can be celebrated as a major step forward.                                                                                                                                                    
    1. Innovators
      1. Visionaries are not looking for an improvement; they are looking for a fundamental breakthrough.
      2. In sum, visionaries represent an opportunity early in a product’s life cycle to generate a burst of revenue and gain exceptional visibility.
    2. Early Adopters
      1. What the early adopter is buying is some kind of change agent. By being the first to implement this change in their industry, the early adopters expect to get a jump on the competition, whether from lower product costs, faster time to market, more complete customer service, or some other comparable business advantage. They expect a radical discontinuity between the old ways and the new, and they are prepared to champion this cause against entrenched resistance. Being the first, they also are prepared to bear with the inevitable bugs and glitches that accompany any innovation just coming to market.
    3. Early Majority (Pragmatists)
      1. The real news, however, is not the two cracks in the bell curve, the one between the innovators and the early adopters, the other between the early and late majority. No, the real news is the deep and dividing chasm that separates the early adopters from the early majority. This is by far the most formidable and unforgiving transition in the Technology Adoption Life Cycle, and it is all the more dangerous because it typically goes unrecognized. The reason the transition can go unnoticed is that with both groups the customer list and the size of the order can look the same.
      2. The early majority want to buy a productivity improvement for existing operations. They are looking to minimize the discontinuity with the old ways. They want evolution, not revolution. They want technology to enhance, not overthrow, the established ways of doing business. And above all, they do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base. This contrast just scratches the surface relative to the differences and incompatibilities among early adopters and the early majority. Let me just make two key points for now: Because of these incompatibilities, early adopters do not make good references for the early majority. And because of the early majority’s concern not to disrupt their organizations, good references are critical to their buying decisions. So what we have here is a catch-22. The only suitable reference for an early majority customer, it turns out, is another member of the early majority, but no upstanding member of the early majority will buy without first having consulted with several suitable references.
      3. Of course, to market successfully to pragmatists, one does not have to be one—just understand their values and work to serve them. To look more closely into these values, if the goal of visionaries is to take a quantum leap forward, the goal of pragmatists is to make a percentage improvement—incremental, measurable, predictable progress. If they are installing a new product, they want to know how other people have fared with it. The word risk is a negative word in their vocabulary—it does not connote opportunity or excitement but rather the chance to waste money and time.
      4. If pragmatists are hard to win over, they are loyal once won, often enforcing a company standard that requires the purchase of your product, and only your product, for a given requirement. This focus on standardization is, well, pragmatic, in that it simplifies internal service demands. But the secondary effects of this standardization—increasing sales volumes and lowering the cost of sales—is dramatic. Hence the importance of pragmatists as a market segment.
      5. When pragmatists buy, they care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get. In other words, they are planning on living with this decision personally for a long time to come.
      6. Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you. Obviously, this works to the disadvantage of start-ups and, conversely, to the great advantage of companies with established track records. On the other hand, once a start-up has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed. When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That’s one of the reasons pragmatists make such a great market.
      7. Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in the magazines they read. You need to be installed in other companies in their industry. You need to have developed applications for your product that are specific to the industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service. In short, you need to make yourself over into the obvious supplier of choice. This is a long-term agenda, requiring careful pacing, recurrent investment, and a mature management team
      8. Conservatives like to buy preassembled packages, with everything bundled, at a heavily discounted price. The last thing they want to hear is that the software they just bought doesn’t support the printer they have installed. They want high-tech products to be like refrigerators—you open the door, the light comes on automatically, your food stays cold, and you don’t have to think about it. The products they understand best are those dedicated to a single function—word processors, calculators, copiers, and fax machines. The notion that a single computer could do all four of these functions does not excite them—instead, it is something they find vaguely nauseating. The conservative marketplace provides a great opportunity, in this regard, to take low-cost, trailing-edge technology components and repackage them into single-function systems for specific business needs. The quality of the package should be quite high because there is nothing in it that has not already been thoroughly debugged. The price should be quite low because all the R&D has long since been amortized, and every bit of the manufacturing learning curve has been taken advantage of. It is, in short, not just a pure marketing ploy but a true solution for a new class of customer. There are two keys to success here. The first is to have thoroughly thought through the “whole solution” to a particular target end user market’s needs, and to have provided for every element of that solution within the package. This is critical because there is no profit margin to support an afterpurchase support system. The other key is to have lined up a low-overhead distribution channel that can get this package to the target market effectively.
      9. Just as the visionaries drive the development of the early market, so do the pragmatists drive the development of the mainstream market. Winning their support is not only the point of entry but the key to long-term dominance. But having done so, you cannot take the market for granted. To maintain leadership in a mainstream market, you must at least keep pace with the competition. It is no longer necessary to be the technology leader, nor is it necessary to have the very best product. But the product must be good enough, and should a competitor make a major breakthrough, you have to make at least a catch-up response.
      10. The key to making a smooth transition from the pragmatist to the conservative market segments is to maintain a strong relationship with the former, always giving them an open door to go to the new paradigm, while still keeping the latter happy by adding value to the old infrastructure. It is a balancing act to say the least, but properly managed the earnings potential in loyal mature market segments is very high indeed.
      11. So the corollary lesson is, we must use our experience with the pragmatist customer segment to identify all the issues that require service and then design solutions to these problems directly into the product.
      12. In sum, the pragmatists are loath to buy until they can compare. Competition, therefore, becomes a fundamental condition for purchase. So, coming from the early market, where there are typically no perceived competing products, with the goal of penetrating the mainstream, you often have to go out and create your competition. Creating the competition is the single most important marketing decision made in the battle to enter the mainstream. It begins with locating your product within a buying category that already has some established credibility with the pragmatist buyers. That category should be populated with other reasonable buying choices, ideally ones with which the pragmatists are already familiar. Within this universe, your goal is to position your product as the indisputably correct buying choice.
      13. In sum, to the pragmatist buyer, the most powerful evidence of leadership and likelihood of competitive victory is market share. In the absence of definitive numbers here, pragmatists will look to the quality and number of partners and allies you have assembled in your camp, and their degree of demonstrable commitment to your cause.
    4. Late Majority
      1. Simply put, the early majority is willing and able to become technologically competent, where necessary; the late majority, much less so. When a product reaches this point in the market development, it must be made increasingly easier to adopt in order to continue being successful. If this does not occur, the transition to the late majority may well stall or never happen.
    5. Laggards
      1. Skeptics—the group that makes up the last one-sixth of the Technology Adoption Life Cycle—do not participate in the high-tech marketplace, except to block purchases. Thus, the primary function of high-tech marketing in relation to skeptics is to neutralize their influence. In a sense, this is a pity because skeptics can teach us a lot about what we are doing wrong
  3. The D-Day Strategy – Choose a Target Niche
    1. Entering the mainstream market is an act of aggression. The companies who have already established relationships with your target customer will resent your intrusion and do everything they can to shut you out. The customers themselves will be suspicious of you as a new and untried player in their marketplace. No one wants your presence. You are an invader. This is not a time to focus on being nice. As we have already said, the perils of the chasm make this a life-or-death situation for you. You must win entry to the mainstream, despite whatever resistance is posed. That’s it. That’s the strategy. Replicate D Day, and win entry to the mainstream. Cross the chasm by targeting a very specific niche market where you can dominate from the outset, force your competitors out of that market niche, and then use it as a base for broader operations. Concentrate an overwhelmingly superior force on a highly focused target. It worked in 1944 for the Allies, and it has worked since for any number of high-tech companies.
    2. The D-Day strategy prevents this mistake. It has the ability to galvanize an entire enterprise by focusing it on a highly specific goal that is (1) readily achievable and (2) capable of being directly leveraged into long-term success. Most companies fail to cross the chasm because, confronted with the immensity of opportunity represented by a mainstream market, they lose their focus, chasing every opportunity that presents itself, but finding themselves unable to deliver a salable proposition to any true pragmatist buyer. The D-Day strategy keeps everyone on point—if we don’t take Normandy, we don’t have to worry about how we’re going to take Paris. And by focusing our entire might on such a small territory, we greatly increase our odds of immediate success.
      1. This isn’t rocket science, but it does represent a kind of discipline. And it is here that high-tech management shows itself most lacking. Most high-tech leaders, when it comes down to making marketing choices, will continue to shy away from making niche commitments, regardless. Like marriage-averse bachelors, they may nod in all the right places and say all the right things, but they will not show up when the wedding bells chime.
      2. “Never attack a fortified hill.” Same with beachheads. If some other company got there before you, all the market dynamics that you are seeking to make work in your favor are already working in its favor. Don’t go there.
    3. One of the most important lessons about crossing the chasm is that the task ultimately requires achieving an unusual degree of company unity during the crossing period. This is a time when one should forgo the quest for eccentric marketing genius, in favor of achieving an informed consensus among mere mortals. It is a time not for dashing and expensive gestures but rather for careful plans and cautiously rationed resources—a time not to gamble all on some brilliant coup but rather to focus everyone on making as few mistakes as possible. One of the functions of this book, therefore-and perhaps its most important one-is to open up the logic of marketing decision making during this period so that everyone on the management team can participate in the marketing process. If prudence rather than brilliance is to be our guiding principle, then many heads are better than one. If marketing is going to be the driving force-and most organizations insist this is their goal—then its principles must be accessible to all the players, and not, as is sometimes the case, be reserved to an elect few who have managed to penetrate its mysteries.
    4. The consequences of being sales-driven during the chasm period are, to put it simply, fatal.
    5. Segment. Segment. Segment. One of the other benefits of this approach is that it leads directly to you “owning” a market. That is, you get installed by the pragmatists as the leader, and from then on, they conspire to help keep you there. This means that there are significant barriers to entry for any competitors, regardless of their size or the added features they have in their product. Mainstream customers will, to be sure, complain about your lack of features and insist you upgrade to meet the competition. But, in truth, mainstream customers like to be “owned”—it simplifies their buying decisions, improves the quality and lowers the cost of whole product ownership, and provides security that the vendor is here to stay. They demand attention, but they are on your side. As a result, an owned market can take on some of the characteristics of an annuity—a building block in good times, and a place of refuge in bad—with far more predictable revenues and far lower cost of sales than can otherwise be achieved.
    6. For all these reasons—for whole product leverage, for word-of-mouth effectiveness, and for perceived market leadership—it is critical that, when crossing the chasm, you focus exclusively on achieving a dominant position in one or two narrowly bounded market segments. If you do not commit fully to this goal, the odds are overwhelmingly against your ever arriving in the mainstream market.
    7. The key to moving beyond one’s initial target niche is to select strategic target market segments to begin with. That is, target a segment that, by virtue of its other connections, creates an entry point into a larger segment. For example, when the Macintosh crossed the chasm, the target niche was the graphics arts department in Fortune 500 companies. This was not a particularly large target market, but it was one that was responsible for a broken, mission-critical process—providing presentations for executives and marketing professionals.
    8. The niche wins—presuming the beachhead strategy is conducted correctly—by getting a fix for its specialized problem. And the vendor wins because it gets certified by at least one group of pragmatists that its offering is mainstream. So, because of the dynamics of technology adoption, and not because of any niche properties in the product itself, platforms must take a vertical market approach to crossing the chasm even though it seems unnatural.
    9. The answer is that when you are picking a chasm-crossing target it is not about the number of people involved, it is about the amount of pain they are causing. In the case of the pharmaeutical industry’s regulatory affairs function, the pain was excruciating.
    10. This is a standard pattern in crossing the chasm. It is normally the departmental function who leads (they have the problem), the executive function who prioritizes (the problem is causing enterprise-wide grief), and the technical function that follows (they have to make the new stuff work while still maintaining all the old stuff).
    11. The more serious the problem, the faster the target niche will pull you out of the chasm. Once out, your opportunities to expand into other niches are immensely increased because now, having one set of customers solidly behind you, you are much less risky to back as a new vendor.
  4. Next Target Segment
    1. The second key is to have lined up other market segments into which you can leverage your initial niche solution. This allows you to reinterpret the financial gain in crossing the chasm. It is not about the money you make from the first niche: It is the sum of that money plus the gains from all subsequent niches. It is a bowling alley estimate, not just a head pin estimate, that should drive the calculation of gain.
    2. First you divide up the universe of possible customers into market segments. Then you evaluate each segment for its attractiveness. After the targets get narrowed down to a very small number, the “finalists,” then you develop estimates of such factors as the market niches’ size, their accessibility to distribution, and the degree to which they are well defended by competitors.
    3. Now, the biggest mistake one can make in this state is to turn to numeric information as a source of refuge or reassurance. You need to understand that informed intuition, rather than analytical reason, is the most trustworthy decision-making tool to use. The key is to understand how intuition—specifically, informed intuition—actually works. Unlike numerical analysis, it does not rely on processing a statistically significant sample of data in order to achieve a given level of confidence. Rather, it involves conclusions based on isolating a few high-quality images—really, data fragments—that it takes to be archetypes of a broader and more complex reality. These images simply stand out from the swarm of mental material that rattles around in our heads. They are the ones that are memorable. So the first rule of working with an image is: If you can’t remember it, don’t try, because it’s not worth it. Or, to put this in the positive form: Only work with memorable images.
    4. Target-customer characterization is a formal process for making up these images, getting them out of individual heads and in front of a marketing decision-making group. The idea is to create as many characterizations as possible, one for each different type of customer and application for the product. (It turns out that, as these start to accumulate, they begin to resemble one another so that, somewhere between 20 and 50, you realize you are just repeating the same formulas with minor tweaks, and that in fact you have outlined 8 to 10 distinct alternatives.)
    5. It is extremely difficult to cross the chasm in consumer market. Almost all successful crossings happen in business markets, where the economic and technical resources can absorb the challenges of an immature product and service offering.
    6. The elements you need to capture are five:
      1. Scene or situation: Focus on the moment of frustration. What is going on? What is the user about to attempt?
      2. Desired outcome: What is the user trying to accomplish? Why is this important?
      3. Attempted approach: Without the new product, how does the user go about the task?
      4. Interfering factors: What goes wrong? How and why does it go wrong?
      5. Economic consequences: So what? What is the impact of the user failing to accomplish the task productively?
  5. Whole Product Package
    1. Systems integrators could just as easily be called whole product providers—that is their commitment to the customer.
    2. The whole product model provides a key insight into the chasm phenomenon. The single most important difference between early markets and mainstream markets is that the former are willing to take responsibility for piecing together the whole product (in return for getting a jump on their competition), whereas the latter are not.
    3. Tactical alliances have one and only one purpose: to accelerate the formation of whole product infrastructure within a specific target market segment. The basic commitment is to codevelop a whole product and market it jointly. This benefits the product manager by ensuring customer satisfaction. It benefits the partner by providing expanded distribution into a hitherto untapped source of sales opportunities.
    4. To sum up, whole product definition followed by a strong program of tactical alliances to speed the development of the whole product infrastructure is the essence of assembling an invasion force for crossing the chasm. The force itself is a function of actually delivering on the customer’s compelling reason to buy in its entirety. That force is still rare in the high-tech marketplace, so rare that, despite the overall high-risk nature of the chasm period, any company that executes a whole product strategy competently has a high probability of mainstream market success.
    5. Review the whole product from each participant’s point of view. Make sure each vendor wins, and that no vendor gets an unfair share of the pie. Inequities here, particularly when they favor you, will instantly defeat the whole product effort—companies are naturally suspicious of each other anyway, and given any encouragement, will interpret your entire scheme as a rip-off.
    6. The fundamental rule of engagement is that any force can defeat any other force—if it can define the battle. If we get to set the turf, if we get to set the competitive criteria for winning, why would we ever lose? The answer, depressingly enough, is because we don’t do it right. Sometimes it is because we misunderstand either our own strengths and weaknesses, or those of our competitors. More often, however, it is because we misinterpret what our target customers really want, or we are afraid to step up to the responsibility of making sure they get it.
  6. Distribution
    1. The number-one corporate objective, when crossing the chasm, is to secure a channel into the mainstream market with which the pragmatist customer will be comfortable.
    2. In other words, during the chasm period, the number-one concern of pricing is not to satisfy the customer or to satisfy the investors, but to motivate the channel.
    3. To sum up, when crossing the chasm, we are looking to attract customer-oriented distribution, and one of our primary lures will be distribution-oriented pricing.
    4. When functioning at its best, within the limits just laid out, direct sales is the optimal channel for high tech. It is also the best channel for crossing the chasm.
    5. All other things being equal, however, direct sales is the preferred alternative because it gives us maximum control over our own destiny.
    6. First and foremost, the retail system works optimally when its job is to fulfill demand rather than to create it.
  7. Positioning
    1. To sum up, your market alternative helps people identify your target customer (what you have in common) and your compelling reason to buy (where you differentiate). Similarly, your product alternative helps people appreciate your technology leverage (what you have in common) and your niche commitment (where you differentiate). Thus you create the two beacons that triangulate to teach the market your positioning.
    2. You can keep yourself from making most positioning gaffes if you will simply remember the following principles:
      1. Positioning, first and foremost, is a noun, not a verb. That is, it is best understood as an attribute associated with a company or a product, and not as the marketing contortions that people go through to set up that association.
      2. Positioning is the single largest influence on the buying decision. It serves as a kind of buyers’ shorthand, shaping not only their final choice but even the way they evaluate alternatives leading up to that choice. In other words, evaluations are often simply rationalizations of preestablished positioning.
      3. Positioning exists in people’s heads, not in your words. If you want to talk intelligently about positioning, you must frame a position in words that are likely to actually exist in other people’s heads, and not in words that come straight out of hot advertising copy.
      4. People are highly conservative about entertaining changes in positioning. This is just another way of saying that people do not like you messing with the stuff that is inside their heads. In general, the most effective positioning strategies are the ones that demand the least amount of change.
    3. Given all of the above, it is then possible to talk about positioning as a verb—a set of activities designed to bring about positioning as a noun. Here there is one fundamental key to success: When most people think of positioning in this way, they are thinking about how to make their products easier to sell. But the correct goal is to make them easier to buy. Think about it, most people resist selling but enjoy buying. By focusing on making a product easy to buy, you are focusing on what the customers really want. In turn, they will sense this and reward you with their purchases. Thus, easy to buy becomes easy to sell. The goal of positioning, therefore, is to create a space inside the target customer’s head called “best buy for this type of situation” and to attain sole, undisputed occupancy of that space. Only then, when the green light is on, and there is no remaining competing alternative, is a product easy to buy.
  8. Pricing
    1. Set pricing at the market leader price point, thereby reinforcing your claims to market leadership (or at least not undercutting them), and build a disproportionately high reward for the channel into the price margin, a reward that will be phased out as the product becomes truly established in the mainstream, and competition for the right to distribute it increases.
  9. Other
    1. So how can we guarantee passing the elevator pitch test? The key is to define your position based on the target segment you intend to dominate and the value proposition you intend to dominate it with. Within this context, you then set forth your competition and the unique differentiation that belongs to you and that you expect to drive the buying decision your way. Here is a proven formula for getting all this down into two short sentences. Try it out on your own company and one of its key products. Just fill in the blanks:
      1. For (target customers—beachhead segment only) who are dissatisfied with (the current market alternative), our product is a (new product category) that provides (key problem-solving capability). unlike (the product alternative), we have assembled (key whole product features for your specific application).
    2. So building relationships with business press editors, initially around a whole product story, is a key tactic in crossing the chasm.
    3. The purpose of the postchasm enterprise is to make money. This is a much more radical statement than it appears. To begin with, we need to recognize that this is not the purpose of the prechasm organization. In the case of building an early market, the fundamental return on investment is the conversion of an amalgam of technology, services, and ideas into a replicable, manufacturable product and the proving out that there is some customer demand for this product. Early market revenues are the first measure of this demand, but they are typically not—nor are they expected to be-a source of profit.
    4. How wide is the chasm? Or, to put this in investment terms, how long will it take before I can achieve a reasonably predictable ROI from an acceptably large mainstream market? The simple answer to this question is, as long as it takes to create and install a sustainable whole product. The chasm model asserts that no mainstream market can occur until the whole product is in place.
    5. The key is to initiate the transition by introducing two new roles during the crossing-the-chasm effort. The first of these might be called the target market segment manager, and the second, the whole product manager. Both are temporary, transitional positions, with each being a stepping stone to a more traditional role. Specifically, the former leads to being an industry marketing manager, and the latter to a product marketing manager. These are their “real titles,” the ones under which they are hired, the ones that are most appropriate for their business cards. But during the chasm transition they should be assigned unique, one-time-only responsibilities, and while they are in that mode, we will use their “interim” titles. The target market segment manager has one goal in his or her short job life—to transform a visionary customer relationship into a potential beachhead for entry into the mainstream vertical market that particular customer participates
What I got out of it
  1. Awesome playbook for building out a high-tech company and framework for how to invest in them (see The Gorilla Game for further notes on the investing portion). The innovators gladly take on new technology but it is the pragmatists or the early majority who need proof of concept, who need evidence that you will be around for a while and that other respected players are using your product or service before they buy in, and they are where the real profits lie. The chasm is formed between these innovators and pragmatists and your strategy, focus, and mindset has to shift when attempting to tap into the mainstream.

And Then They Fired Me by Jannie Mouton, Carie Maas

Summary
  1. My business philosophy is really quite simple: I believe in strategic planning, and then follow an entrepreneurial approach. I empower the right people completely, enable them to secure a percentage of the shareholding, and then believe in their ability to, with help and proper corporate control, establish good businesses. Perhaps this definition is not all that easy to digest, but as I explain it, it will be clear how simple the principle is. What it eventually boils down to is that my contribution almost shrinks to that of a possible idea or the creation of a culture of ideas. Other guys do all the hard work. The smaller one’s role as so-called chief executive or chairman, the better for any company and its growth.
Key Takeaways
  1. Early Days & SMK
    1. We had a sense of duty from an early age, because my father, Jan, made us work in his shop, even for a large part of the holidays. Initially I thought it unfair, having to work while everyone else could gallivant on their wide-rimmed bicycles, but later I realised how valuable it was, compared with the nonsense of the so-called gap year that pupils and students insist upon nowadays.
    2. We were young and had lots of plans. Added to that, or maybe because we were that young, we were very enthusiastic and hardly anything scared us. Now, in hindsight, I pale with fright because we had responsibilities, wives, children, cars and houses.
    3. I had grown too big for my boots. I remember phoning Kango Beachbuggies to ask in which colours they had the vehicle available, and then saying I would take one in each available colour – five altogether. Now I can only marvel at the memory. To be that self-confident, and with gearing to the point of bursting, was asking for trouble. Like all bubbles, this one also burst, on October 22, 1987, and a lot of us were cut down to size and got quite a kick in the teeth financially. Let me tell you, there was blood on the walls. It was the mother of all market carnages – the decline of about 30% was the most significant in a single day in living memory. I was almost done for. One day we were the kings of the development capital market, the next day humble servants. As in many other times in my life, I should have listened to Dana, because she used to say when I started pretending to be a sage and it was only “me, me, me”, then the end was in sight. Those were prophetic words. From him I learnt that one’s people and one’s clients are the most important assets. He was a humble leader, armed with vision, courage and cool-headedness.
    4. We had gigantic successes and made excellent profits. The listings of Rand Merchant Bank and Richemont were climaxes, and my children still remember my picture on the front page of Beeld with the listing of Naspers.
    5. Because we were partners and not shareholders, the profits had to be divided every year. In other partnerships the managing director would decide what the share of each partner would be, and the mistake we made was trying to do it democratically. Everyone had to give himself and every other partner a mark out of 100 for the value each had added, in his opinion. Nobody ever scored himself lower than any of the other 19. It was my unpleasant duty to convey the auditors’ calculation of the total to everyone. If the group then gave someone an average of 5% and he thought he really deserved 8% of the total of 100%, it raised suspicion. Instead of motivating someone, I had to call him in and tell him he wasn’t as good as he thought he was. Among the changes I wanted to make was to convert the partnership into a company.
    1. A negative person has never started or established anything positive. The people at PSG also know they shouldn’t come and tell me something doesn’t work – they have to come up with an alternative.
    2. After reading for a while, I decided to do a SWOT analysis on myself and, according to the acronym, started jotting down strong points, weak points, opportunities and threats. I realised my and Chris Otto’s frequent (and long) lunches at Late Night Al’s in Auckland Park were no long-term solution and at age 50 I was not ready for retirement yet. I had to persuade myself that I was doing something useful, that I was devising plans and ferreting out opportunities. I knew I had to fight against the threat of stagnation. The personal space in the office forced me to contemplate my future and that of my family. Thinking would be my new project, and it wasn’t at all the child’s play it appeared to be. I wanted to start a new business and I had to find the key for it. With dedication I started reading and focused on books in the investment world, from Warren Buffett and his philosophies to the management approaches of successful business people. What I read made me think, and to arrange my thoughts I summarised many of the books in Afrikaans. Not every book changes one’s life, in a manner of speaking, but there is always an idea or two that one can use. Apart from the work and academic advantages, this study made me reorient myself. Collecting specialised knowledge demands sacrifice, but it stimulated me and broadened my mind in my planning for the future. Now I realise there were quite a few points that prepared the ground for PAG, the precursor to PSG. I can summarise it as a sounding board, a self-analysis, a dream, a plan of action, a positive attitude, decision making and communication. And I can recommend it to someone who has got into a rut like the one threatening me back then. One has to work through a setback realistically. You need someone to help you if your enthusiasm exceeds your realism, but that person can’t be a yes-man. It needs to be someone with good judgement and enough respect for you to answer the difficult questions honestly.
    3. Honest introspection is not always pleasant, but without it one would struggle to work towards one’s better points and eliminating one’s weaker traits. Yet, clever as it might sound after the fact, my old diary is testimony of how I toiled and bothered and reworked my SWOT analysis until later I knew exactly what I wanted to and could do. The simple question is: What’s your personal mission statement, your goal, your dream? If you know the answer, it unleashes a power that draws you towards the destination. My plan that I wrote down in November 1995 and had typed was: I want to be free and not to work for others. I want to make a difference to the lives of others and have empathy with my fellow human beings. I want to write a book (there you have it). I want to tackle something with my children. I want to take on a new game farm after Nokonya. By doing great things I’m happy. I want to develop a new company successfully. Many things have changed over the years, but the framework is still valid. My plans of action had to direct my dreams: I want to be in control of a listed company. I want to focus on the financial services sector. I want to procure capital for a strong capital base. I want to manage in a decentralised and delegated way. I want to draw in good people. I want to move from Johannesburg to Stellenbosch. I want to have a small, creative head office with a relaxed vibe. I want to think more and do less. To know I had figured out what my dream and final destination were, made me positive. Aiming high requires as much strain as aiming low, as is expressed in this little rhyme by Jessie B Rittenhouse I’ve read so often: I worked for a menial hire, Only to learn, dismayed, That any wage I asked of Life, Life would have willingly paid. Without a decision, one is never wrong, therefore people hesitate to take decisions. Taking a responsible risk brings me freedom and joy. Even now a successful business decision like an SMK or PSG or Capitec that works gives me far more pleasure than the money I gain from it. And if something doesn’t work, close that business and move on. From all the business books I read then and still read, it’s apparent: the most important element of success is to speak out. By conveying one’s dreams and plans to friends, you place yourself under pressure to fulfil them. And that truth applies right through the investment world – your shareholders are interested in where you’re going, your successes and your failures. But even more important than speaking is to listen to them in turn.
    4. Success is not the key to happiness, happiness is the key to success
    5. What has remained with me though is that I never want to be in a position again where I don’t have control over a company. Even in subsidiary companies where we have a stake warranting it, I want to have a say at board level, at least.
  2. PSG
    1. PSG Group is an investment company that acquires strategic stakes in established businesses with strong management, good corporate governance, a history of earnings growth and positive cash-flows, and creates innovative ideas at existing businesses.
    2. Maybe I should start by clearing up a misconception some people have: PSG is not a financial services company; we are an investment company. That means PSG is not an operating company. We don’t manage a business like Plascon or Edgars. We invest in and also start other businesses like manufacturers or retailers or service companies. The group comprises of more or less three main parts. Under PSG there are the financial giants like PSG Konsult and Capitec, but under the tradename Zeder we have unified all our agricultural companies like Pioneer Foods. Some of the smaller private equity investments like Thembeka that don’t belong elsewhere reside under Paladin.
    3. Maybe that’s also one of the reasons why I’m such an avid buyer of PSG shares and have never sold a single share. Advisors of readers of financial pages would be horrified, but I often borrow money to get hold of more PSG shares.
    4. My business philosophy is really quite simple: I believe in strategic planning, and then follow an entrepreneurial approach. I empower the right people completely, enable them to secure a percentage of the shareholding, and then believe in their ability to, with help and proper corporate control, establish good businesses. Perhaps this definition is not all that easy to digest, but as I explain it, it will be clear how simple the principle is. What it eventually boils down to is that my contribution almost shrinks to that of a possible idea or the creation of a culture of ideas. Other guys do all the hard work. The smaller one’s role as so-called chief executive or chairman, the better for any company and its growth. For me, strategic planning is the alpha and the omega. In the book The Art of War the principles of the Oriental military strategist Sun Tzu are expounded: “Strategy is the great work of the organization.” According to the book, that determines survival or extinction in situations of life or death. It inspires people to share the same ideals and expectations. Because they’re in the struggle together, they don’t fear perils. The military strategist said that was why leaders who understood strategy could lead people and determine how stable the venture was. Regarding successful warfare, Sun Tzu strongly emphasised that an understanding of one’s own capabilities and limitations, one’s opponent and the circumstances in which the fight would take place, should be thoroughly contemplated and then integrated into a strategy that was applied in a disciplined way by a leader that inspired his subordinates with trust. I love his wisdom: If you have your strategy, you hit fast and hard, then you win. Colleague Chris Otto says I’m the only person he knows who would go to the seaside for four weeks and use ten of those days to draw up a business plan. That’s true, I can’t simply lounge around. I get bored and then I devise schemes. It was also after a holiday that I returned with my Keerom plan for Naspers, a controversial but quite exciting deal I’ll tell you more about in the next section. Chris has also quipped that I should not get time to think, but let him rather do the talking, because I don’t want to say this about myself: I always tell Jannie one day I’ll write on his tomb stone: “Here lies an unreasonable man.” He has a great ability to think and work out strategies. He always has a plan, and then he can’t imagine that something can’t happen. He challenges us and eventually everyone starts thinking like that – how one makes something happen. He’s not interested in technical details about why something can’t work. I think that’s why PSG often manages to do things others thought impossible. If then, according to Sun Tzu’s searching one’s own heart, one of my abilities is to think, or to want to think, one of my limitations surely remains not always working gently with the people helping with those thoughts and applying them – I still struggle with that even now.
    5. By this time our size makes us look at smaller investments more realistically: corporate management, attending meetings and managerial time are expensive. At Paladin and Zeder we have the framework that we invest in businesses that are easy to understand, and have a cash flow and good management. Our share of the profit after tax has to exceed R10 million. That means if we have a 25% stake in a company it has to make at least R40 million before we would look at it. However, many mice can turn into men and PSG never wants to neglect its entrepreneurial approach. That’s what brought us to where we are.
    6. Shareholders are the owners of a company and an owner should always be in control of his own assets. The board is appointed by the owners – and that’s why I like a company with a strong owner. In PSG’s case, 77% of the shares are in the hands of confidants – relatives, friends and directors. While many similar companies are susceptible to takeovers because a large number of their shares are with the big institutions, we are covered against that in this way
    7. At present my children and I own more than 30% of PSG’s shares and, along with the shareholders mentioned above, Thys du Toit (former KWV chairman) and Christo Wiese have huge stakes.
    8. Let me be honest: one can continue ad infinitum about PSG’s ingenuity, but the role luck sometimes plays can’t be ignored. PAG’s sale price was plain darn luck; don’t let anyone tell you a different story. Sheer luck. That’s how PSG started. We started small and slowly achieved success. Success gives one self-confidence and that’s quite contagious on the market. It makes it a little easier to run risks when one is stronger. If you have capital you can grow, and you can even afford to make mistakes.
    9. Whatever investment you do, you should know in what kind of underlying business you invest and understand that some companies won’t yield the kind of investments you hope for overnight. You can start something new, like a Capitec, develop it while you can take pride in a high price/earnings ratio (PE) of 25, or how much you’re willing to pay for the expected earnings in rand. On the other hand you can be extremely patient and make and keep an investment in agricultural companies with a PE of 4. You would buy at a good price, but then you should not be obsessed with a running clock. Few people understand both kinds of investments.
    10. I knew Keerom was a much cheaper way of securing a stake in Naspers. Some unlisted shares can be bought at a rebate. Therefore one could get a big chunk of Naspers through Keerom or Naspers Investments, as well as control with high voting rights. It’s a principle I’ve applied time and again since then.
    11. The trick is to try to buy where limitations are still in place and when the old board is still in charge. Then one buys cheaply – one might even buy only the buildings at 60% of the real value. That’s something we understand very well at PSG. Yet one needs patience, because at these businesses the change towards being more commercially-minded happens rather slowly. The management are not lying yuppies, but down-to-earth people, honest and upright, whose business has been in existence for years. The opportunity is in the fact that for many years co-operatives have been attuned to delivering a service, rather than seeking profits. The best is that one can take this kind of wisdom even a little further, which is what we are doing through our agricultural arm, Zeder.
    12. The biggest value is unlocked where management is poorest.
    13. With decisions one should not hesitate, and rather apply straight away whatever is agreed upon. A major lesson PSG has learnt often is to immediately admit if a purchase had been a pig in a poke.
    14. At Paladin we refer to the “refinement” of a portfolio over time, perhaps because we do business in the winelands. One should try selling the bad companies systematically and rather invest in the winners. You always want to keep your company streamlined.
    15. It took me several years to figure out what the most important objective of a company is. I struggled with “increasing shareholders’ wealth”, for many years the main goal of PSG. Gradually I started thinking it sounded too arrogant and cheeky, with an overbearing focus on the collection of wordly assets or wealth. It was if one only cares about one’s pocket, and I started developing a different philosophy. There are more people involved than shareholders, like staff and clients. One’s staff members are happy when they feel fulfilled, when they have freedom and a goal – in my opinion that’s the main motivation. I wouldn’t be happy if everyone else around me was unhappy. One’s clients need to believe in one too. A company is a success if the client, shareholder and employee are all happy. If you manage that, the company can grow and you’re doing something right. Growth in client numbers indicates profitability, and that’s why for growth in the share price one has to focus on clients. Moreover, over time people don’t really remember all that much about dividends, special dividends, unbundlings and other windfalls. What they do remember is by how much the share price has risen. It’s a simple criterion and it measures everything – risk, past performance, future prospects, management and the integrity of the figures – yes, everything.
    16. Pure pleasure is what PSG Konsult signifies to me. If you’ve ever seen a business that’s running like a well-oiled machine, that would be Konsult. The only reason I’m still on the board of directors is because every time I want to step down, chief executive Willem Theron persuades me otherwise. The management team is so strong that they don’t need even a little support. Konsult’s business plan is so simple that one can’t believe it hasn’t always existed.
    17. The mistake I then made is a classic one. Instead of appointing a single managing director for the bank, I put a committee of four at the helm of the new entity: Botha Schabort, André la Grange, Charles Turner and Hugh Oosthuizen, all of them strong personalities. I thought the four divisions could work together well and with time the best guy would emerge. How stupid that idea was I did not realise at the time. It was a breeding ground for conflict. Because the guys were fighting amongst one another, that was what they focused on, instead of their divisions.
    18. Many of our branch employees are later lured away by other banks with offers of bigger salaries, but it’s great to see how many of them want to return three or four months later – at their old salary. Capitec is an employer of high calibre, and then people enjoy working there too. Capitec is a dream come true. It’s a reality that shows how many opportunities there really are in South Africa, and what fantastic potential its people have. With access to capital, poverty can be eradicated over time.
    19. I reiterate: it’s a gigantic risk to put all your eggs in one basket, but woven grass or not, PSG as an investment company has many divisions. Apart from the properties and art I own, my own money is only in PSG, the furniture group Steinhoff, on whose board I serve, and the PSG Flexible Fund, the unit trust managed by my son Jan. Do I have the right to talk other people into it? I can honestly believe it’s good counsel, but I would neglect my fiduciary duty by only picking one share for someone.
    20. An irrefutable truth is that you have to have time on your side. A young person might not have money to invest, but he has to learn to save right from the start. It’s amazing how much money can grow if one saves. There’s a reason why it’s called the eighth wonder of the world.
    21. The cornerstones are transparency, honesty and sincerity. And every company does have an issue.
  3. Entrepreneurial mindset
    1. The soul of a company – the culture determines the performance
    2. The role of the entrepreneur is the collection and use of knowledge, his ability and readiness to see and use profitable opportunities and to use scarce resources effectively.
    3. The point is: entrepreneurs create value. They create jobs and they make money. But that’s not easy. A unique talent, coupled with hard toil, is what’s needed. Successful entrepreneurs are attuned to what they’re busy with. They have self-confidence and flair. Their need for success makes them restless and they don’t cower in the face of big risks. Such a person doesn’t lie awake because of spelling errors in minutes of a meeting, but quickly masters his field. This guy spots opportunities and can bring theory and practice together.
    4. PSG Capital chief executive, calls PSG a family of entrepreneurs: A family that gives one the security of being together, but doesn’t shy away from asking straight questions or hauling you over the coals. It’s a bunch of individuals who can and want to function independently. It’s a company that provides one with the great opportunity to convert this freedom and independent thoughts into palpable profits in which you can share.
    5. I have a list of what I regard as the characteristics of successful people, probably an obvious bunch of traits. People who are well read, have well-considered opinions, are honest, can communicate and stick it out, are self-confident and care for people and on top of that can think, are the best. Clear goals direct all these characteristics.
    6. So many people who come to present an opportunity uhm and ah so incoherently that I now ask beforehand whether someone would just like a cup of tea or sell or buy something so I can focus. My patience runs out with a wishy-washy presentation – does one really need more than ten minutes to explain how a business works and maybe ten minutes for a possible deal? And then there are those who just come to fish for advice. Those who don’t shy away from setbacks and are prepared to take hold of the future are the people you want at your side.
    7. The assistance to entrepreneurs or management firstly consists of striving to help someone focus on their goals. Directors have to see to it that a business plan is carried out.
    8. We can, however, help them with the negotiations and contracts and they have to stay alert, then opportunities will appear. One just has to be attuned to them constantly.
    9. It’s amazing what one can come across, and then one has to sit and think. One has to think outside the parameters. That way you will come up with an interesting business opportunity. The same alert attitude can also prevail in your daily dealings. One has to keep wondering all the time. When you have your hair cut . . . where does your hairdresser buy, and why? If you have a cup of coffee . . . what would happen if Famous Brands cut off one of its trademark entities like Mugg & Bean? If you’re driving around  . . . why is somebody erecting such a huge building in a new property development? Who owns the mall where you do your shopping when you furnish your holiday home?
    10. What have I learnt? Don’t generate business from technology, but let technology support and drive the business. I believed the clients of PSG Online had wanted to stay anonymous and preferred no human interaction. That was a big mistake. Online clients prefer a computerised service mechanism, but welcome personal contact from Online’s side.
    11. With e-insurance the trick is that the money you save in brokers’ fees because the client buys directly from you, you spend on advertising.
    12. At a dinner hosted by William H Gates, father of the same Microsoft founder Bill Gates, for a number of hand-picked business people, he asked those present to write down on a piece of paper a single word that they deemed of utmost importance in the business world. Coincidentally two of the guests chose the same word: the host’s son and one Warren Buffett. And the word? Focus. When I read that story I realised how important focus was for discipline and success. I always admire Whitey Basson, chief executive of the Shoprite Group, for the same thing. He is incredibly attuned to trends in the retail industry.
  4. Ultimate Empowerment
    1. After many lessons I only invest in companies I understand, whose management I know and whose character and culture I like. Three questions kept me busy for a long time: How does one make a company grow, when are people happy and what’s the key to making a success of a company? The answer is ultimate empowerment.
    2. The former American president Theodore Roosevelt’s encapsulation is the best, in my opinion: “The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.”
    3. In PSG people are allowed to think and do themselves, and everyone knows that. A company grows when all of the employees perform to the best of their abilities. People perform well when they are happy and people are happy when their talents are recognised and when they are given the space to act and make decisions independently. To me, ultimately empowering someone therefore means delegating authority and responsibility. Empowerment in that sense means everybody is involved and knows how the company is performing. The decision-making process is shortened and the spirit and status are created that no one has terrific titles, but people get a lot of recognition. That creates a company with responsible managers who feel free and proud. People who are encouraged to think strategically themselves take their own future in hand. That freedom means not looking over people’s shoulders, but trusting them. On a more practical level it means that everyone can draft their own business plan, that every unit decides on its own remuneration packages and incentives, and that some services can be contracted out to an entity shared by a few companies in the group.
    4. The group makes significant investments in successful businesses and stands by its entrepreneurs without exception. Jannie’s policy of ultimate empowerment enables entrepreneurs to realise their vision. Ultimate empowerment also means there is no place to hide. It gives you just enough opportunity to engineer your own downfall if you don’t tread carefully. In PSG the prevailing culture entails low overheads, strict financial reporting, a high return on share-holders’ capital and the premise that the shareholder is always king.
    5. That, supposedly, begs the question when a board of directors does step in. A board has to have a relaxed leash on everyday matters and only get involved when overarching problems emanate in or outside the group. One has to concentrate on what’s important.
    6. Jannie builds around the jockey when he sees a business opportunity, provided of course that it’s a special opportunity in PSG’s field of play. Then the business model is almost the jockey’s prerogative, within bounds of course. Often the model is not the point. Jannie would pick the guy and respect his opinion and say: “You tackle it for us.”
    7. Willem Theron, chief executive, got rid of all the stress by devolving all decisions about remuneration to branch level. Each branch may keep 70% of its income and do with it as it likes, including paying bonuses to deserving people. In that way everyone is responsible for their own welfare concerning profits and all is fair in the garden again. Once the thorny issues and the remuneration differences have been sorted out, the satisfaction of the right person in the right job is huge. A testimonial to the calibre of people we draw is how many have remained loyal to the company over the years and how many have even been with us from the time of SMK and the very start in 1995. Another reason for great joy is the number of friends’ children and their spouses working for PSG
    8. Thus I naturally am my own boss, because I believe directors should have big share investments in the companies they represent. They are custodians of the shareholders’ assets and will definitely do a better job if they are big shareholders themselves.
    9. People laugh when I say this, but it’s true. I’ve overdone delegation to the extent that I do almost nothing. I don’t really work at the office. It’s a singular privilege. I want time to think. I want to philosophise and I want to come up with opportunities. There are people who like being involved everywhere, as if that would make them seem important. One should rather become unimportant. It consumes an endless amount of time if you as manager don’t trust people. Chris Otto will also tell you I’m the best delegator he’s ever met. He also knows that in fact I do nothing: Jannie doesn’t want to be on boards. He’s not a control freak, but he expects something to be done, and then it gets done. There’s something else to the art of empowerment. If you trust others to take good decisions, you also have to respect your employees and give credit where it’s due. Labour can never be rewarded with money alone.
  5. On Investing
    1. In a nutshell: start with about four or five good shares in the long term, diversify your investments across more shares for less risk and forget about short-term speculation. Five or six shares are optimal for diversification, as long as you invest in fairly diverse sectors. If you invest over a lifetime, you can afford to keep a cool head. And don’t put all your money in one share. Timing is also an issue to keep an eye on. Look at the profit potential and the net asset value. Long-term investments are like having a happy family – it requires love over a lifetime and not speculative moments. Just as one outburst wouldn’t alarm you, neither would a single share with the hiccups. Just as your good friends carry you through emotional crises, good investments carry you through economic storms.
    2. One gets to know the market over time. If everyone is optimistic and even people who don’t work with the stock exchange every day start chatting about it, it’s selling time, as sure as nails. By that time you have to have the cash in your hand, else you’re going to be very sorry. And if nobody is interested in the stock exchange anymore, it’s buying time. In the long term one has to sit back from the noise, but timing can’t be ignored completely.
    3. In every person’s life there are about four or five investment cycles. One needs to use them and be patient; then you’ll make a lot of money. These five principles are as plain as the nose on one’s face: Even if you’re a layman, you need to understand the company for personal investment, as I’ve written in part three about companies.
      1. If you can’t tell someone else what the company is doing, don’t invest there. I’ve never made money from mining shares, especially gold, because I don’t understand it. Yet one can understand that Sasol produces petrol from gas.
      2. Investigate the people in control of the company. Are they honest and hardworking or flashes in the pan? Through the years PSG has benefited a lot from learning as much as possible about the management before investing in a company.
      3. I’ve tried to explain above that you have to go against the current and buy at a low price-earnings ratio in a bear market, determine a realistic price to the net asset value and be on the lookout for a strong balance sheet and good cash flow. This strategy is as difficult as the opposite, to sell in a bull market, but the pain and insecurity when everybody else keeps swimming with the current will bear fruit.
      4. Do research. Read a lot and develop a feeling for investments. Listen, think and learn from your mistakes and successes. Good investment experts can always help you, but don’t underestimate your own role. The long term is imperative if your focus is on year-on-year growth in the share price.
      5. A share will only grow if the underlying profits of the company grow, which is the challenge of management.
    4. Only once you’ve mastered the management of a first franchise should you dare to borrow money for a second.
    5. Speculation and investment are two different matters. Speculation is short-term positions for which you don’t use your brain and investment is long-term. Speculation is the worst thing there is and you have to stay away from it as far as possible or you’ll get into trouble.
    6. Forget about investment clubs with friends. It only leads to indecision and bad blood. Don’t ever talk about the market as if it’s your pal – nobody ever understands the market. The pain of a loss is worse than the pleasure of a profit. Don’t ever take a loss lightly. If you get worried and sleep badly, you’re in trouble already. Forget about the trendy shares of the day. Don’t invest further in a losing situation. Liquidate your position.
    7. There are many clever investors who only look at listed shares. For those with a lot of perseverance and who want to trust my judgement there might be another option – to watch what PSG is doing and buy the same unlisted ones we buy. As I’ve said in part 3, a share register is public knowledge. With a little effort one can get hold of it. PSG is wide awake and constantly on the lookout for unlisted businesses we can acquire at a discount and where we can help add value. As buyers we want the price to remain low initially, and for that many investors don’t have the patience. But if you have it . . .
    8. Hierarchy paralyses . Colleague Chris Otto will tell you I’ll open a closed door in the office, for closed doors create a vibe we don’t want in PSG. It surprises newcomers that anyone can walk into my office without an appointment. The days of levels have long been numbered and titles are undesirable too.
    9. Drowning in the e-mail ocean of a bureaucracy – formality is stupidity. I detest senseless communication that wastes time and attention. As useful as e-mail can be, there are people who measure “indispensability” by how many e-mails there are in their inboxes when they return from two days out of the office. I simply get worried about my business if I get too many “in case” e-mails. I plainly call it cover your arse, for why do you send me e-mail so you can have the excuse of “I’ve told you about it” if something goes wrong? If something is important enough, someone has to phone me; else I don’t want to know about it. A problem is not solved because you’ve sent e-mail about it.
    10. Directions, rules and regulations stifle a company. We encourage an open, informal and creative environment where decisions can be made quickly. Yes, the more haste the less speed and because of that culture we sometimes make mistakes, but only someone who never takes a decision will go through life without mistakes.
  6. Other
    1. The Scottish-American entrepreneur and philanthropist Andrew Carnegie, the wealthiest American ever apart from John D Rockefeller, used to say one has to use a third of one’s life to get an education, a third for the creation of wealth and the last third for giving it away. Indeed that little yellow note found in his desk drawer after his death indicated that he had got rid of every last cent when he laid his head down.
    2. On a certain income level, giving money naturally gets relatively easy. Time is scarcer. Generosity can also entail giving time and therefore the transfer of wisdom or assistance.
    3. Oh Lord, it’s hard to be humble – humility is admirable
    4. The American columnist and radio presenter Herman Cain rightfully said success was not the key to happiness, but happiness was the key to success – if you’re crazy about what you’re doing, you will achieve success.
    5. “If you can give your son or daughter only one gift, let it be enthusiasm,” said Bruce Baron, American member of congress and author of books on personal success. That same cornerstone I desire for my offspring, PSG. That we don’t break or brake, but build. It took me many years to realise that enthusiastic and positive people inspire me, but the “it won’t work” of negative grumblers make me see red
    6. Next to honesty and work ethics, caring for your company and colleagues and good manners are paramount. I’m passionate about the adages of CJ Langenhoven, one of the fathers of the Afrikaans language, like this one: “Treat your superiors with courtesy because it is your duty; your inferiors because it is your privilege.”
    7. Yet who would one choose: a Warren Buffett who has built up so much; or a Jack Welch who might have managed the largest company in the world, General Electric, but by means of cracking whips and a culture of fear about who would be fired next? PSG subsidiaries have been compelled to retrench people, but I hope I’m leading from the front rather than from behind.
    8. For me, creativity borders on enthusiasm, for the energy levels and success of a business are boosted when people challenge one another with innovative ideas. A sexy plan grabs people and motivates them to take calculated chances. It gives me no end of pleasure to establish something out of nothing.
    9. What has a director contributed by spotting a spelling error in the annual report? If you can generate two or three fresh ideas when the executive committee gets together, it’s a successful meeting, not when you’ve worked through an agenda item by item. I put in some effort to, an hour or two before a meeting like that, come up with a few things that could get the guys to think a little. The possibility of alternatives is what gets the grey matter going. If you think outside of the existing parameters, the result is a Curro; or the investment possibilities of alternative energy; or the financing possibilities of non-redeemable preference shares, where you never have to pay back the loan capital until the business ceases to exist, and which can never land you in hot water during a financial crisis. Curiosity is a winning characteristic. An interesting proposal and a fresh idea or new angle from which to look at an old problem is an approach that needs to be cultivated and encouraged. It has to become a mindset in a company. Creativity is much harder work than the useless buzz-words visions and missions.
    10. One of the major challenges and most exciting aspects of the business world remain identifying opportunities.
    11. Yet I’m convinced that businesses that are started in one’s own interest are more successful and that the impact of successful businesses trickles down into and benefits society as a whole.
    12. The business magazine Finweek published a story in its Piker column on July 30, 2009 about a local economics professor who gave everyone in his class a single average mark in order to illustrate socialism. Before the next test the clever students wondered why they should work hard and the underachievers also thought they didn’t have to do anything, so the second average mark was about 30% lower. And for the third test all of them got close to zero.
    13. The best thing about contributing to a country or a community is that it’s something you do because you want to, and not due to compulsion or for monetary remuneration. It’s great to plough back something of your knowledge and experience or ability because you are so privileged. You often get more out of it than what you put in.
    14. But being generous and wasting are light years apart. And like stinginess is a bad thing and ugly, frugality is a virtue. People who waste money will indeed lose everything, for if you waste something you don’t have respect for it.
    15. We tease him, calling him Radio JFM – and that’s not a station where listeners may phone in and say something of their own! My dad doesn’t believe in complaining and moping in self-pity at all. For him it doesn’t exist.
    16. Apart from PSG I hope what I leave behind for my children are above all a mindset of enthusiasm in everything they tackle, the tireless search for solutions, and the ethos to work hard in order to make a success of whatever they try to achieve.
    17. A negative person sees insurmountable hurdles and the proactive person looks for alternatives
    18. There is a very thin line between being assertive and aggressive, as I probably know better than anyone else. Yet I know even better that stumbling about is an unproductive waste of time. One has to take a decision and that’s it. If you’re wrong, you simply have to take the rap afterwards.
    19. The services of the best lawyer or accountant are for sale, but with a guy with general knowledge you can take anything on, because he can think further than his textbooks. On a board it’s also the guy with the integrated knowledge and well-considered opinion who makes a contribution. The rest only waste your time with superficial questions. Closely connected to that is the will to think. In The fall of the human intellect Swami Parthasarathy writes that people have lost the ability to think and reason. Knowledge is absorbed passively, but it doesn’t develop independent thoughts: “You need to wake up from this slumber. Start thinking, questioning, enquiring as to the cause of all this strife and struggle. Examine the truths of life. Do not accept anything without reason and logic.”
    20. A leader is someone with an interesting vision who knows the environment. He has the power of drawing people to follow him instead of pushing them, and therefore people have respect for him. Eventually leadership is about the ability to get the best from people and to combine their input effectively to reach a common goal.
  7. The PSG Stable
    1. PSG Group is an investment company that acquires strategic stakes in established businesses with strong management, good corporate governance, a history of earnings growth and positive cash-flows, and creates innovative ideas at existing businesses.
    2. Propell is a niche financing company specialising in financial products for the property industry, especially bridging finance, and also…
    3. Capitec Bank is a retail bank that provides accessible and affordable banking facilities to clients via the innovative use of technology, in a manner that is convenient and personalised. Its client base has historically been the… Some highlights have been hidden or truncated due to export limits.
    4. PSG Capital is PSG’s boutique corporate finance division, with teams based in Stellenbosch and Johannesburg. It provides a complete suite of corporate finance and advisory services to a broad spectrum of clients, both nationally and internationally. Its services include capital… Some highlights have been hidden or truncated due to export limits.
    5. PSG Fund Management’s business consists of local and offshore collective investments, asset management, hedge funds and prime broking. The funds include PSG Flexible Fund, PSG Alphen’s bouquet of funds, PSG Preferred Dividend Fund, PSG Money… Some highlights have been hidden or truncated due to export limits.
    6. PSG Futurewealth is an investment facilitator that offers investment solutions to the retail and institutional market. Apart from linked investment products it also offers guaranteed investment… Some highlights have been hidden or truncated due to export limits.
    7. PSG Konsult is an independent financial services company that offers a value-oriented approach to clients’ financial planning requirements. Services encompass investments, short-term insurance, life… Some highlights have been hidden or truncated due to export limits.
    8. Zeder Investments is an investment company that focuses on the agricultural, food, beverages, food-processing and related sectors. It offers investors exposure to the current inherent… Some highlights have been hidden or truncated due to export limits.
    9. Agricol is a seed company with an extended network of branches and agents all over South Africa. Their products include most well-known crops, alternative crops like forage seed and agronomy crops like cereals, canola and hybrid sunflower. It has a strong emphasis on research… Some highlights have been hidden or truncated due to export limits.
    10. BKB’s business entails the handling and marketing of agricultural products; wool, mohair and livestock, the provision of farming requisites and the rendering of related… Some highlights have been hidden or truncated due to export limits.
    11. Capespan is an international integrated logistical supplier of fruit. The company is the major role player in South Africa and sources fruit from 44 countries worldwide and distributes to 55 countries around the world. It is… Some highlights have been hidden or truncated due to export limits.
    12. Capevin is the ultimate investment holding company of Distell, Africa’s leading producer and marketer of fine wines, spirits, ciders and ready-to-drinks. Zeder owns 37% of Capevin Holdings, which… Some highlights have been hidden or truncated due to export limits.
    13. Kaap Agri came into being as a result of the merger between WPK and Boland Agri in 2005. The company’s footprint stretches through the Western and Northern Cape up into southern Namibia where it has recently acquired a number of trading branches. The focus of its retail branches (the Agrimark stores) has… Some highlights have been hidden or truncated due to export limits.
    14. Pioneer Foods is South Africa’s second largest food company and is structured into four divisions that manufacture household food and beverage products: Sasko, Bokomo Foods, Agri Business and The Ceres Beverage Company. Pioneer also has… Some highlights have been hidden or truncated due to export limits.
    15. KLK Landbou is a small but diversified agriculture-focused company headquartered in Upington. The company primarily serves the sheep farmers in the Kalahari and Northern Cape areas through 21 retail branches. The bulk of its profit comes from the distribution and retail sales of BP… Some highlights have been hidden or truncated due to export limits.
    16. MGK Business Investments operates through three divisions: Obaro, Prodsure en All-Gro. Obaro offers agricultural, gardening and pet products and services to the public from 17 commercial retail outlets. Its main clientele requires products and services mainly relating to irrigation agriculture. Its BEE programme has received widespread praise. NWK is a provider of agricultural services and inputs, primarily in the North West province. The company is involved in a wide spectrum of activities in the following fields: grain industry, agricultural management services, trade, financial services and industries. It owns 19% of the country’s grain storage capacity. OVK Operations is a diversified agricultural business. Its primary activities involve general trade, fuel distribution, the sales, servicing and repairs of agricultural machinery, motor dealerships, short-term insurance broking, grain handling, storage and marketing, livestock slaughtering and marketing of carcasses, and client financing. Its service area includes the Free State, Eastern Cape and Northern Cape. Suidwes Investments operates in the maize-producing area of North West, with its head office in Leeudoringstad. It is involved in all aspects of meeting the needs of grain and other farmers, from supplying inputs and requisites to grain handling, storage… Some highlights have been hidden or truncated due to export limits.
    17. Paladin Capital is an investment company with a private equity bias and PSG’s preferred investment vehicle in areas other than financial services and agriculture. Paladin Capital’s investment principles are based on the following: not industry-specific, encompassing listed and unlisted companies; strong sustainable… Some highlights have been hidden or truncated due to export limits.
    18. African Unity Insurance provides illness benefit management, a range of life insurance and funeral schemes for groups and individuals. Algoa Insurance merged with African Unity in 2009 and it has 29% BEE ownership. Curro Holdings is the parent company of all Curro private schools. Their role is to establish new private schools and to back each school with a solid management team experienced in the field of education. The schools offer parallel medium education in Afrikaans and English, have a Christian ethos, positive discipline and balanced academic, sport and cultural activities. Erbacon is a construction company predominantly in infrastructure (roads and bridges) and general construction (through Armstrong). It also has a tool hire division. Civicon operates on contract sites throughout Southern Africa. Its services include general civil engineering construction, industrial and process plants, mining infrastructure and support both surface and underground, and design and construction of turnkey industrial projects. GRW is a manufacturer of steel and aluminium tankers and specialised liquid containers. Apart from South Africa it also has clients in the UK and Middle East. It has a highly advanced robotic plant. Iquad Group is a specialised outsourcing company, focusing on treasury management, investment incentives and BEE verification services. Petmin is a minerals, mining and processing company that services the metallurgical and industrial sectors. It is listed on the JSE and the aim in London, and has two operations mining in silica and anthracite. Precrete specialises in the production and distribution of pre-mixed concrete for the construction, support and other related mining applications. Its wholly owned subsidiary, GFC Construction, focuses on guniting or shotcreting, which involves applying concrete pre-mixes to walls of mine shafts. Protea Foundry is a non-ferrous casting operation based in Gauteng, the largest in South Africa. Top Fix Holdings’ business comprises the following: the supply and leasing of scaffolding and scaffolding personnel to industrial plants and construction sectors; the supply of personnel to the chemical, petro-chemical, power generation, construction and coal mining industries; and supply of safety surveillance and access control equipment on chemical and petro-chemical plants. Thembeka Capital is a broad-based… Some highlights have been hidden or truncated due to export limits.
    19. Think & Grow Rich, Napoleon Hill. The single book that has changed my life and positively inspired me to start PSG. It’s not only about money and wealth, but rather about the philosophy of believing in oneself
What I got out of it
  1. Ultimate empowerment, alignment, people above everything, long-term, speak your mind, be authentic to yourself, speak out for what you believe in and make sure you have a voice/control, delegate fully and the best companies allow the head to be least involved on a day to day level, absolute enthusiasm / curiosity / looking for opportunities and scheming

John H. Patterson: Pioneer in Industrial Welfare by John H. Patterson, Samuel Crowther

Like my write-up on Henry Ford and some of my other “teacher’s reference guides“, I got so much out of Pioneer in Industrial Welfare that I wanted to create a more formal write-up. As always, I have attempted to put together something which is (hopefully) a manageable, actionable and digestible introduction to Patterson’s thinking and business philosophy.

On John H. Patterson

 

 

*The vast majority of the content is from the books and not my own words. I’ve simply distilled, compiled, and added a few notes.

12 Rules for Life: An Antidote to Chaos by Jordan Peterson

Summary

  1. 12 rules for how to balance chaos and order, how to live a meaningful life that benefits self and others. If we each live properly, we will collectively flourish

 

Key Takeaways

  1. Stand up straight with your shoulders back.
    1. Most animals and every human is part of a dominance hierarchy and being higher has more positive effects than we care to verbalize. It is an external part of our environment, an unchanging aspect of evolution. Where we stand powerfully affects every aspect of our being – conscious and unconscious alike. Our system actively monitors exactly where we stand in society and there are physical changes that occur in victory and defeat (a loss by a dominant lobster leads to a virtual dissolution of his brain into a subordinate brain).
    2. Many human games are winner take all or winner take most so being a winner often has exponentially positive effects – virtuous and vicious cycles. You feel safe and secure so can take more risks, change is typically seen as good and you can be more confident, courageous, and generous, can be on less alert and plan long term, you can delay gratification. All characteristics, traits, behaviors that enhance chances of success. Those at the bottom are generally less healthy and don’t live as long. Being at the bottom necessitates a lot of emergencies and a strong will to survive but this burns our energy.
    3. Having predictable daily routines offsets much chaos, unpredictability and ultimately fear that many people experience – go to sleep and wake up at similar times, have a high protein and fat breakfast. Many difficulties stem from biological imbalance and if we can get our sleep, diet, health in order, we can better manage anything that comes at us
    4. If you start to straighten up, people might just start looking at you and treating you differently. Your nervous system responds totally differently when you take on a challenge directly as opposed to being forced into it. Being higher up in the food chain, in the social hierarchy, has obvious social, physical, psychological, physiological effects which ripple into everything we do or undertake
  2. Treat yourself like you are someone you are responsible for helping.
    1. Peterson argues that because you know your own faults better than anyone else, how meaningless and flawed you are, you have trouble taking care of ourselves like we would others. We don’t respect ourselves and see ourselves as falling creatures. We don’t stand for and walk with the truth so can’t take care of ourselves in the way that someone who did would. Most people simply do not believe they deserve the best care. However, although we are not a God, we are something, we matter. You have a moral obligation to take care of yourself as best as you can because it not only benefits you but ripples and benefits others as well. You deserve to be taken care of and to be healthy and happy
  3. Make friends with those who want the best for you
    1. Good influences will encourage you and not put up with your flaws. They will push you to be a better person and to strive for more, for better.
    2. Those who are bad influences will try to drag you down for every improvement you make in your life only makes them more aware of their own inadequacies
  4. Compare self to who you were yesterday and not who someone else is today
    1. Aim high but make the goal(s) reachable
    2. Be careful who you compare yourself to. The comparison is generally too narrow, without taking the full context into account. Is that famous person you are jealous of truly happy. Are they close with their families? Do they feel fulfilled?
    3. You have to see yourself as a stranger and ask who you are, what you want, where are you and where you want to go. Imagine that you’re dealing with your moodiest, most sensitive, laziest friend and communicate to yourself as you would to them. Nobody wants to work for a tyrant so ask nicely, humbly. Begin with small, simple asks and actions – what small thing could you do today that would help you accomplish that? That would get you just an inch closer to better, to being happier. Just like you pay an inspector to tell you the flaws in a house, you need an inspector to tell you your flaws. This can be an internal critic, if he/she is on the right track and has your best interests in mind.
    4. The past and the future are similar except that the past is fixed. You can do something about the future and happiness is found in uphill progress.
    5. 3 simple questions to get started on this path:
      1. What bothers me?
      2. Is this something I can fix?
      3. Would I actually be willing to fix it?
      4. What could you do, what would you do, to make life just a little bit better
    6. When you feel strongly about something, you must speak up. When this failure happens at a societal level, tyranny ensues. It is on the individual to speak up for what is right, to stop evil, to do good.
    7. What you aim at is what you see. That’s worth repeating. What you aim at is what you see. Overtime this accumulates and progresses. This is magic. This is compound interest. Seeing is difficult and very cognitively expensive so you must shepherd your resources carefully. You must ignore the unmanageable complexity found in the world and march towards your goal. You see obstacles as they arise and find a way around them. However, you must balance this with knowing when to back off for marching blindly towards your goal will make you unaware of other, potentially better, opportunities. If we accept that we are blind to most of the world, we also must accept that most of the opportunities are outside of our awareness. This is incredibly uplifting because it means that finding different paths, more opportunities is always available
    8. You cannot fool your psyche. You must wholeheartedly want to improve, to become better. You have to know what this means for you from bottom to top. Becoming better and improving takes more resilience and responsibility than living stupidly and without a purpose. It takes perseverance and effort. Don’t let that stop you. Align yourself to your highest good, bring peace and beauty into this world.
    9. You are too complex to ever fully understand. The closest proxy we have is to observe how we act. Don’t overestimate your self-knowledge. On one hand you are the most complex thing in the universe and on the other, you can’t even set the time on your microwave.
  5. Don’t let kids do anything that would make you dislike them
    1. Successful parents make kids eminently sociable (know how to play which allows them to develop and learn and be accepted by a wide variety of groups).
    2. Many parents are willing to give up respect in order to gain friendship. This is wrong. Your children will have many friends but only two parents. Proper discipline is difficult and takes much effort but the long-term payoffs are priceless. It will give you a well-adjusted, socially desirable child. Boundaries and limits, although not generally welcome in the moment, are needed by all children. They push in order to see what is permissible, where the boundaries lie. Consistent correction is necessary and better sooner than later, and a better alternative to what the child is looking for must be shown.
    3. No grudge after victory – you always reward good behavior. Children do not solely cry when they are scared, hungry or sad, but more often they cry because they are angry. Anger crying is often an act of dominance and should be dealt with as such.
    4. Violence, destruction, anxiety are not hard to understand. They are the default. Peace, progress, calm are hard to understand because they are difficult, they take restraint.
    5. Discipline and punishment evoke bad images but their use in raising children cannot be avoided. Rewards are of course needed too and they can’t be so small they are inconsequential nor so large that they devalue future rewards. People move towards what they find agreeable and away from what they don’t. So know what you are looking for and what you want more of and reward that and punish what you don’t. You can discipline your children or you can wait for the harsh and uncaring world to do it for you. Poorly socialized children have terrible lives so it is best, and most loving, to socialize them yourself when they are young. The question is not if to punish/discipline/reward your children, but how to best do it based on the temperament of your children
    6. Rules should not be multiplied beyond necessity. Bad laws drive out the good. Limit the rules and then figure out what is done when one is broken but use the least force necessary to enforce those rules – this must be figured out experimentally (note the rules he mentions in this section for why children should behave well). You are not doing your child any favors by holding back on punishment and discipline and ignoring their bad behaviors. Timeouts are useful to show the child that they can rejoin once the anger or poor behavior has resided.
    7. Parents should come in pairs. Parenting is difficult and everyone has bad days so it is necessary to have someone else around to observe and step in when needed
    8. Parents should understand their own capacity to be mean, vengeful, spiteful. No adult human being can withstand being dominated by a child forever and this will eventually lead to a need for revenge, to ignoring the child and the real punishment will then begin – resentment, holding back love, ignoring them. Planning and knowing the proper punishment and how you will act will stem toxicity and save the family
    9. Parents have a duty to act as proxies of the real world. Caring proxies, loving proxies, but proxies nonetheless. This responsibility supersedes any responsibility to make the child happy, boost their self-esteem, it is the primary job of parents to make the children very socially desirable, bringing opportunities, deep relationships, meaning and fulfillment. Clear rules make for sociable and calm children and rational parents
  6. Set your house in perfect order before you criticize the world
    1. Understanding resentment, revenge, and the dark side of humanity is very helpful but you must come to know these in yourself before you can judge others. It is only through the difficult self-work needed to make your life better, the little things that you know you can do or stop doing in order to make yourself happier, to make your life simpler, to make the lives of those around you better. Only once you have acted on all these and have gained this self-knowledge, can you begin to look outward and expect more of others. Once you see how hard it is to expect these things of yourself, you will better understand others and not have sky high expectations
  7. Do what is meaningful and not what is expedient
    1. Doing anything meaningful requires sacrifice and sometimes the bigger the sacrifice the more meaning you can gain
    2. Delayed gratification, planning, and sacrifice are essentially bargains with the future – you give up something today in order to have more or better tomorrow
    3. What is the biggest most impactful sacrifice you can make today and what is the most ideal future that would create? Define this for yourself and align your life to give yourself the best chance of making that happen
    4. Sharing done properly is giving something today to someone with the hope that they will give you something else in the future. It is the beginning of trade. What is even better than sharing is sharing generously, without expecting anything in return, for this has many positive unintended effects and everyone loves and helps those who are generous
    5. The most successful sacrifice: any sacrifice which is difficult to make, and is personal. Do this until it becomes easy, until it’s routine.  This is foregoing what is expedient and what is easy for what is meaningful
    6. If you learn to listen to your conscious, get to know your values and ideals, and follow them, you’ll be given more than you could ever need or require. The payoffs are greater than you know
    7. Enlightenment is so rare because it takes a move down to move up which means that the enlightened know the darkest, deepest, worst spots and stains and behaviors of man and is therefore never surprised by human nature. However, the flip side is that they also know the highest, the ideal form of man and knows that we are all capable of that as well
    8. Evil is when you make others needlessly suffer for no reason other than to see them suffer and good is anything which stops it. That is the meaning for that we should guide our lives towards. Never lie for this is the road to hell. Make this your moral pinnacle do everything in your power to alleviate unnecessary pain and suffering – that is the meaning of the good life
  8. Tell the truth, or at least don’t lie
    1. Never lie for it is the road to hell. If you lie, you can’t present your true self to others and you will never get to know your true self either. You will never truly know who you are or maximize your potential. You are hiding from the reality and not willing to confront it head on
    2. Lies warp the structure of being and lead to repression, pathologies, and the moral issues and horrific events that we saw in the 20th century
    3. You have to know where you are and where you are going so that you can chart a course, so that you know what you need to do to get from where you are to where you need to be. You have to know what your principles are, what you stand up for, so that you can argue against those who do not believe in what you do, so you can protect yourself, and you can more easily tell what is worth striving for. You have to keep your word and reward yourself when you succeed. It takes work to make heaven on earth, it won’t just be handed to you
    4. True thinking is really hard and really rare. Thinking can be thought of as a conversation between two or more avatars in your head and you have to be able to take each one of their sides, listen to each one, see how they would play out in your reality and then act on it. What most consider thinking is simply self-criticism disguised as thinking
    5. Memory is not meant to be perfect recall of the past for that does not exist. Memory exists in order to help you not make the same mistakes over and over again
    6. Truly listening to someone is one of the rarest skills and gifts there are. People organize their thoughts through conversation and if they have no one to share them with, they lose their minds. If you can truly listen, people tell you more than you could ever ask for and they will generally be very interesting and help you grow as a person
  9. Assume person you’re listening to knows something you don’t
    1. What you don’t know is more important than what you know. If you truly listen to people they’ll tell you what’s wrong, what they want, and how to fix it. Repeat people’s arguments to them and ask if you understood it correctly – don’t want to “win”, want to fix the problem. You and me against the problem, not me against you
  10. Be precise in your speech
    1. We don’t perceive objects like we think we do. We perceive meaning directly and then assign them to objects. We see tools and obstacles, not things and objects. And it depends on our needs and goals. This is why knowing where we are, where we are going, what we want, what we don’t want, our values, etc. is so important. It literally affects how we perceive the world around us
    2. We often see by instinct what things mean even before what they are which means that objectivity is very hard to reach
    3. Emergency = emergence of “c”, emergence of chaos
    4. Never underestimate the power of omissions. When things get swept under the rug and are not discussed and flushed out, they grow and manifest and become worse than you could ever imagine. If only they were brought up early and transparently and discussed openly, they could be called out, named, and dealt with. Everything discussed becomes clarified and gives you the potential to at least remedy them. If you avoid rather than address, what you least want will eventually come to happen, at the worst possible time. To specify the problem is to admit it exists, to admit what it is that you want. This may hurt but it is far better than the alternative and in the other way you cannot fail as you have not admitted what it is you want but this path leads you quickly astray. Be brave. Risk conflict in the present for longer term peace and happiness
    5. If we are imprecise with our speech, things remain vague, we are in the fog, our destination is unknown. Courageous clarity of thought is needed to call forth the problem
    6. Say what you mean, act out what you say so you can find out what happens and then course correct. Tell those around you who you are and what you want
  11. Don’t bother children when they’re skateboarding
    1. Kids need some danger, some consequences, in order to gain competence and later mastery. If things are too safe or predictable, they’ll behave in unintended ways because they need to live on the edge in some sense. They enjoy risk because it helps them improve future performance
    2. If you can’t understand why somebody did something, look at the consequences and then infer their motivations
    3. Conscientiousness and honesty more common and natural in western culture than people give it credit for.
    4. Take responsibility for your life and make the most of it. Don’t restrict children’s play
    5. Competence and not power is what gets you to the top of the hierarchy. In the west, the traits most associated with success are intelligence and conscientiousness and for entrepreneurs and artist, it is intelligence and openness to new experiences
  12. Pet a cat when you encounter one in the street
    1. In order to cope with a crisis, people shorten their time frame just to make it through the day. Be alert to the unexpected beauty in life during difficult times
    2. What you love about someone is inseparable from their weaknesses, from their flaws
    3. In the depths of difficult situations it is not thinking that gets you out but noticing. Notice that you love someone not despite their limitations but because of them.
  1. Other
    1. Consciousness is the thin veil the process that turns order into chaos. It has been proposed that the two hemispheres of the brain exist in order to deal one with order and the other with chaos. Meaning progress and for filament is found when you have 1 foot in order and 1 foot in chaos providing some stability and routine while still being able to learn and grow this is the straight and narrow path to flow and all progress. A good question for parents regarding chaos and order is do you want to meet them safe or strong
    2. An idea is more creditable when the results from the investigation come from various different realms
    3. Two lessons Peterson learned about the Golden Rule – about doing unto others as you would have them do unto you. The first is that it has nothing to do with being nice and the second is that it is an equation rather than an injunction. It is better for both parties to be strong, to stick up for what is right, because if you just give in and are “nice”, one will become a slave and the other a tyrant. Sticking up for yourself therefore is helpful to you and also beneficial to the other party
    4. Happy is by no means synonymous with good. When you give a child candy, the child is happy but it is not good
    5. There is no one enlightened, only those who seek to be closer to enlightenment.
    6. Overemphasize who you are becoming rather than who you are. This mindset, while often painful, is the fastest road to growth, fulfillment, and happiness.
    7. Aim to be the person at your father’s funeral who everyone can rely on
    8. A shared belief system simplifies communication and allows you to more easily understand where you stand in relation to others. It is inaccurate but a necessary mode of thinking. This simplification is absolutely vital and if it is threatened can lead to outcomes such as the Cold War. It is a system of value, providing a hierarchy and a structure for how to act and respond to others

 

What I got out of it

  1. An incredibly insight and interesting book, drawing from many different realms. I re-read it the minute I finished it and will return to it often

Competing Against Luck: The Story of Innovation and Customer Choice by Clayton Christensen

Summary
  1. This book is about how to better create, predict, and act upon innovation breakthroughs. It helps us better understand why customers behave the way they do and make decisions, shifting from relying on luck to competing against luck.
Key Takeaways
  1. It often looks like companies have good innovation processes but the fundamental problem is that the hordes of data we have today is not organized in such a way as to helpfully indicate which might be the next breakthrough idea. The data never tells you why the customers make the decisions that they do. Understanding this process and some of the questions you can pose will help you get away from relying on lucky and hit or miss innovations and being able to better predict what customers truly want. This leads us to “The Jobs Theory”
  2. The Jobs Theory
    1. The better question to ask is, “what job did you hire that product to do?” This change in perspective helps clear up what your customers truly want. Most of the focus is on customers and the products themselves and not how well the product is truly solving the job that the customer wants. This helps us understand the why of customer behavior, providing the fundamental driver of innovation success
    2. Customers hire a product to make progress, the job they’re trying to get done and the product/service solves these jobs.
    3. Jobs Theory also take into account circumstances, people’s values, emotional and social needs, and more.
    4. Never fall in love with your solution to the job, always try to find way to better understand the job and how to best solve it. These questions and lens will help you more accurately define who your competition truly is. For example, Netflix competes with every form of leisure including a bottle of wine and sleep
    5. The power lies in not being able to explain to successes but in helping a predict future innovation successes
    6. Jobs Theory is an integration mechanism allowing you to create a full narrative and to focus on the right type of complexity. The priorities and trade-offs of customers may totally change with this lens and it’ll get you to focus on what’s truly important the why of customer decision making
    7. These questions help you step into your customer shoes and truly see the world through their eyes
    8. You not only have to think of the product itself but how they find, purchase, and initially learn how to use your product
    9. Non-consumption could be your biggest opportunity as customers don’t do anything because there is no solution which satisfies their needs. This opportunity will not show up in any data but you can uncover it by observing people‘s behavior. You can learn everything you need to know about your product or service just by observing people who use and don’t use your products but you have to know what you’re looking for
    10. Whatever you see customers compensating see this as a great opportunity for some innovation which people would pay highly for
    11. Negative jobs, or what people don’t want to do, are also a rich resource for innovative ideas
    12. Observing customers use your product or service, especially in any unusual ways, is full of opportunities for improvement or for horizontal moves
    13. You have to think through and understand what other product/service/behavior is being “fired” or what you are replacing, in order to better understand where your product fits and what job it is truly doing for you and your customer
    14. Two important forces that are very rarely considered are habits (the fact that people are comfortable with something that tends to be good enough) and anxiety of choosing a new product
    15. Customers are infamously bad at knowing what they want but they can tell you very quickly and accurately where they struggle
    16. Only by constructing the narrative and taking everything into account that led to the purchase can you change the ending and see how your product could fit in
    17. You are selling progress, not products
    18. Consistent small “hires” is a great indicator you are satisfying the job needed
    19. Companies should be organized around the job to be done, rather than by geography, product line, etc.
    20. Products which nail the job they’re supposed to do don’t have to worry about price – customers are grateful for the solution
    21. Taking a job perspective will easily allow you to shift into a mindset and see clearly how to shift annoyances from the customer to internally so that the customer experience is better than ever before
    22. When a product commands high market share and has high pricing power, it is rarely the product itself which is amazing. The overall experience fits the job so perfectly that they’re hard to copy or replace. Creating experiences around this job almost inoculate you to competitors. You must understand the job, the set of experiences around the job that you need to create, and integrating around the job are critical. Helping the customer make progress, incorporating the functional/social/emotional aspects, and aligning experiences and the job
    23. Aligning around the job to be done and making that job crystal clear gives people confidence to act on their own and efficiently scales decision making because the goal is clear. This unlocks human ingenuity, innovation and enthusiasm
    24. Jobs to be done should be in verbs and nouns and not in adjectives and adverbs. It should describe the process itself and not what the customer feels
  3. A genuine insight is a thought which is known as true upon conception – no further analysis is needed
  4. Because it is so much easier to measure efficiency than effectiveness, that’s what most organizations optimize towards. It is hard but necessary to keep top of mind what is important (whether easy to measure or not) and work towards that
  5.  The voice of the customer must be the loudest voice in any decision
  6. Beware the fallacy of “data is always objective”. Data is man made and fallible
  7. SNHU keeps one vital statistic – if you could go back in time knowing what you know now, would you choose SNHU again?
What I got out of it
  1. What job is your product or service being hired to do. This framework helps you better understand what your customers need and how to best serve them. All customers buy products or services to make progress, not for the product/service itself

The Gervais Principle by Venkatesh Rao

Summary
  1. That, ultimately is what this book is about: organizational literacy, the reading and writing of organizational forms. But there is a cost to getting organizationally literate. This ability, once acquired, cannot be un-acquired. Just as learning a foreign language makes you deaf to the raw, unintelligible sound of that language you could once experience, learning to read organizations means you can never see them the way you used to, before. Literacy of any sort gives you the power to recognize and unambiguously label things that the illiterate can easily ignore as noise, fads and bullshit. This power can have very unpredictable effects. You may find yourself wishing, if you choose to acquire it, that you hadn’t. So acquiring organizational literacy is what some like to call a memetic hazard: dangerous knowledge that may harm you. A case of “where ignorance is bliss, ‘tis folly to be wise.”
Key Takeaways
  1. Idealized organizations are not perfect. They are perfectly pathological. So while most management literature is about striving relentlessly towards an ideal by executing organization theories completely, this school, which I’ll call the Whyte school, would recommend that you do the bare minimum organizing to prevent chaos, and then stop. Let a natural, if declawed, individualist Darwinism operate beyond that point. The result is the MacLeod hierarchy. It may be horrible, but like democracy, it is the best you can do.
  2. A Sociopath with an idea recruits just enough Losers to kick off the cycle. As it grows, it requires a Clueless layer to turn it into a controlled reaction, rather than a runaway explosion. Eventually, as value hits diminishing returns, both the Sociopaths and Losers make their exits, and the Clueless start to dominate. Finally, the hollow brittle shell collapses on itself, and anything of value is recycled by the Sociopaths, according to meta-firm logic.
  3. The Losers like to feel good about their lives. They are the happiness seekers, rather than will-to-power players, and enter and exit reactively, in response to the meta-Darwinian trends in the economy. But they have no more loyalty to the firm than the Sociopaths. They do have a loyalty to individual people, and a commitment to finding fulfillment through work when they can, and coasting when they cannot. The Clueless are the ones who lack the competence to circulate freely through the economy (unlike Sociopaths and Losers), and build up a perverse sense of loyalty to the firm, even when events make it abundantly clear that the firm is not loyal to them. To sustain themselves, they must be capable of fashioning elaborate delusions based on idealized notions of the firm – the perfectly pathological entities we mentioned. Unless squeezed out by forces they cannot resist, they hang on as long as possible, long after both Sociopaths and Losers have left
  4. Which brings us to our main idea – how both the pyramid and its lifecycle are animated. The dynamics are governed by the Newton’s Law of organizations: The Gervais Principle. The Gervais Principle is this: Sociopaths, in their own best interests, knowingly promote over-performing Losers into middle-management, groom under-performing Losers into Sociopaths, and leave the average bare-minimum-effort Losers to fend for themselves. The Gervais Principle differs from The Peter Principle, which it superficially resembles. The Peter Principle states that all people are promoted to the level of their incompetence. It is based on the assumption that future promotions are based on past performance. The Peter Principle is wrong for the simple reason that executives aren’t that stupid, and because there isn’t that much room in an upward-narrowing pyramid. They know what it takes for a promotion candidate to perform at the top level. So if they are promoting people beyond their competence anyway, under conditions of opportunity scarcity, there must be a good reason. Scott Adams, seeing a different flaw in The Peter Principle, proposed The Dilbert Principle: that companies tend to systematically promote their least-competent employees to middle management to limit the damage they can do. This again is untrue. The Gervais principle predicts the exact opposite: that the most competent ones will be promoted to middle management. Michael Scott was a star salesman before he become a Clueless middle manager. The least competent employees (but not all of them – only certain enlightened incompetents) will be promoted not to middle management, but fast-tracked through to senior management. To the Sociopath level.
  5. The minimum-effort Loser Stanley tells him coldly, “this here is a run-out-the-clock situation.” The line could apply to Stanley’s entire life. Stanley’s response shows both his intelligence and clear-eyed self-awareness of his Loser bargain with the company.
  6. The future Sociopath must be an under-performer at the bottom. Like the average Loser, he recognizes that the bargain is a really bad one. Unlike the risk-averse loser though, he does not try to make the best of a bad situation by doing enough to get by. He has no intention of just getting by. He very quickly figures out – through experiments and fast failures – that the Loser game is not worth becoming good at. He then severely under-performs in order to free up energy to concentrate on maneuvering towards an upward exit. He knows his under-performance is not sustainable, but he has no intention of becoming a lifetime-Loser employee anyway. He takes the calculated risk that he’ll find a way up before he is fired for incompetence.
  7. So let me introduce you to the main skill required here: mastery over the four major languages spoken in organizations. I’ll call the four languages Posturetalk, Powertalk, Babytalk and Gametalk.
    1. What distinguishes Powertalk is that with every word uttered, the power equation between the two speakers shifts just a little. Sometimes both gain slightly, at the expense of some poor schmuck. Sometimes one yields ground to the other. Powertalk in other words, is a consequential language.
    2. Another way to understand the difference between Powertalk and the other languages is with a card-playing analogy. In Powertalk, you play with valuable currency, usually reality-information. In the other languages, you are playing with no stakes. The most important enabling factor in being able to speak Powertalk is simply the possession of table stakes. Without it, whatever you say is Posturetalk. The only Powertalk you can speak without any table stakes is “silence.”
  8. Treacle is a vocabulary drawn from apparently win-win/play nice frameworks, but deployed with adversarial intent.
  9. So what is going wrong here? Why can’t you learn Sociopath tactics from a book or Wikipedia? It is not that the tactics themselves are misguided, but that their application by non-Sociopaths is usually useless, for three reasons. The first is that you have to decide what tactics to use and when, based on a real sense of the relative power and alignment of interests with the other party, which the Losers and Clueless typically lack. This real-world information is what makes for tactical surprise. Otherwise your application of even the most subtle textbook tactics can be predicted and easily countered by any Sociopath who has also read the same book. Null information advantage. The second reason is that tactics make sense only in the context of an entire narrative (including mutual assessments of personality, strengths, weaknesses and history) of a given interpersonal relationship. The Clueless have no sense of narrative rationality, and the Losers are too trapped in their own stories to play to other scripts. Both the Clueless and Losers are too self-absorbed to put in much work developing accurate and usable mental models of others. The result is one-size-fits-all-situations tactical choices which are easily anticipated and deflected. And the third and most important reason of course, is that your moves have to be backed up by appropriate bets using your table stakes, exposing you to real risks and rewards. A good way to remember this is to think of Powertalk as decisions about what verbal tactics to use when, and with what. The answer to with what is usually a part of your table-stakes. The stuff you are revealing and risking. If you cannot answer “with what?” you are posturing. You are not speaking Powertalk. In the Jim-Wallace example, Jim’s table stakes were his superior knowledge of the Michael-Jan story.
  10. You learn through real Powertalk conversations with other Sociopaths. Betting real stakes, like information, credibility, labor and literal dollars. You get played for a sucker a few times along the way before you wise up. Even if you are a kind Sociopath, you learn to swallow your distaste and occasionally play hardball when you have to.
  11. But if you do have the table stakes to join important conversations, and the mental toughness to play risk-and-reward games with every conversational move, there are a couple of skills worth practicing. The second skill is low-level utterance-by-utterance control, which is much harder. You cannot consciously engineer 7-8 meanings and calibrated amounts of power and leverage into every line you utter, through careful word choice.
  12. the depth of any transaction is limited by the depth of the shallower party.
  13. If the situational developmental gap between two people is sufficiently small, the more evolved person will systematically lose more often than they win. This is the Curse of Development. When you develop psychologically, and leave somebody behind, your odds of winning get worse before they get better.
  14. Well-adjustedness is a measure of the degree to which your worldview is socially acceptable and appropriate in a given environment. Since a messed-up personality can be well-adjusted with respect to a messed-up environment, well-adjustedness has very little to do with sanity and actual mental health. Environments and worldviews really come down to a series of situations and situational reactions. If your situational reactions are generally appropriate but against your best interests, you are a well-adjusted Loser. If they are both appropriate and in your best interests, you are a Sociopath. If your reactions are inappropriate (whether or not they are in your best interests – sometimes they are), you are Clueless.
  15. Here is the non-trivial stuff, compressed into three handy laws: Your development is arrested by your strengths, not your weaknesses. Arrested-development behavior is caused by a strength-based addiction. The mediocre develop faster than either the talented or the untalented. An alternative way of looking at these three laws is to note that defense mechanisms emerge to sustain addictions even when the developmental environment that originally nourished it vanishes. These then are the developmental psychology roots of the Gervais Principle. Recall that Cluelessness goes with overperformance. That overperformance is caused by arrested development around a strength, which has been hooked by an addictive environment of social rewards. Mediocrity is your best defense against addiction, and guarantor of further open-ended psychological development.
  16. Each pattern is based on a preferred, dominant variety of delusion: The Clueless distort reality. The Losers distort rewards and penalties. The Sociopaths distort the metaphysics of human life.
  17. To be an effective teacher at a given level, you need to have studied five years beyond that level. This has nothing to do with subject-matter expertise, and everything to do with trying to exit the Curse of Development zone.
  18. Status illegibility is necessary to keep a group of Losers stable. It is a deep form of uncertainty. I am not saying that there is a ranking that is just not known or knowable. I am saying there is no clear ranking to be known.
  19. Social groups grow from the illegible but stable center of the status spectrum, and leak at the legible but unstable edges.
  20. Remember, you are unique, just like everybody else. And everybody is uniquely above average. This is why, paradoxically, collectivist philosophies that value equality must necessarily value diversity. Nobody wants to be equally average. Everybody must be given a chance to be equally above average. Sociopaths detect and get wary of this dynamic very quickly:
  21. For the alpha, keeping contenders guessing through unpredictable signs of favor is the best idea. Exits work the same way. If an alpha or omega leaves, the new alpha or omega is plucked out of the illegible middle at that time. Not before. Succession planning may be a good idea in formal hierarchies, but it is a bad idea in social groups.
  22. Groups must remain socially fluid to work. Fluidity is the other side of illegibility.
  23. social skill, such as joke-telling ability, is a behavior whose effectiveness is determined by the reaction of a group. A joke is funny if the audience laughs. A proven mathematical theorem remains true even if a billion people scream that it isn’t. Theorem-proving is not a social skill in that sense. Like theorem-proving, social skills are information skills, since nothing tangible is produced besides an effect on others’ minds. Unlike theorem-proving though, the value of the product is based on social proof rather than objective proof. Social skills produce information; a social truth hypothesis (such as a joke). If it passes a social proof test, it becomes a piece of social capital, the grand narrative of the group. In other words: Social skills → Social truth hypotheses → Social proof → Social capital
  24. Most forms of humor attempt to raise or lower status of individuals via game-like structures, with defined roles and a structurally predictable script (the surprise comes from the content). There is always a jokester, a victim (which can be the same person by design or accident) and crucially, an audience. The victim may or may not be present. So there are at least three roles in a piece of humor, of which the role of audience may be played by a group. Sociopath jokes usually involve straight-faced delivery and private laughter, with no hint of mockery.
  25. Among the Sociopaths, status is irrelevant. Table stakes and skill at using them is what matters. Sociopaths pay attention to what you have, and how well you bargain with it. Not who you are.
  26. Clueless jokes are zero-sum, but Loser jokes are actually non-zero-sum. This does not mean they are win-win. This is a variety of non-zero-sum called mutual exploitation, that is sadly under-studied by game theorists. It simply means you can create net positive value by taking turns beating each other up competitively (aside for game-theory geeks: in the iterated prisoner’s dilemma, you get mutual exploitation by breaking the constraint that the cooperation payoff must be higher than the average of the defection and sucker payoffs). You can also create net-negative toxic non-zero-sum outcomes.
  27. Among Losers, in specific situations, status may go up or down, but overall, it just goes round and round. There is no grand status hierarchy. Only a top, a bottom, and an illegible middle. Newcomers attempt to successfully lose themselves in the middle. Situational wins and losses create a turbulent churn that maintains the illegibility without creating any decisive movement within the group.
  28. We’ve been drilling deep into social dynamics, and we finally get to that one deeply human quality that makes all this possible. It’s called empathy. The ability to feel what another human being is feeling. All this complicated social psychology does not need to be explicitly understood. For high-empathy people, all this is natural. By participating in collective feeling in groups of any size, and reacting to basic attraction/aversion drives, you can actually safely navigate all the complexity by instinct. Not only can you do this, you will actually feel good doing this. This feeling is called happiness. I don’t have time to go into this, but happiness is entirely a social phenomenon, and there’s plenty of evidence that the best way (and from my reading, the only way) to get happy is to get sociable. Non-social feelings that seem like happiness turn out, upon further examination, to be distinct emotions like contentment, equanimity or hedonistic pleasure. This isn’t particularly surprising. Our brains are designed like our bodies: just as we possess backs that others can scratch more easily than ourselves, our brains contain “backs,” so to speak. That’s where happiness lives, and is brought alive by empathic scratching.
  29. Why do we use the word “cringe” to describe the peculiar brand of humor in The Office? Think about the word. You cringe when you anticipate pain. Physical cringing, such as the cowering reaction you instinctively produce when you realize your car is going to hit another car, or when you realize somebody is going to hit you, serves to mitigate the anticipated damage. You also cringe via empathic anticipation of someone else’s impending pain.
  30. In this episode, Ryan is still not a Sociopath, so he cringes. Jan and David Wallace on the other hand, maintain an effortless poise no matter what Michael or Dwight get up to. To get there, they have to sequester empathy through detachment, and give up on happiness. We’ll see how and why that pact with the devil happens next chapter. In summary, seasoned Sociopaths maintain a permanent facade of strategic incompetence and ignorance in key areas, rather than just making up situational incompetence arguments. This is coupled with indirection and abstraction in requests given to reports. The result is HIWTYL (heads I win, tails you lose) judo.
  31. Loser group successes are effectively inflated, and blame discounted. So as Loser groups accumulate a history, internal valuations of earned credit are steadily inflated, and assessments of culpability run a deficit. A successful group systematically overvalues its capabilities and develops a blindness to its weaknesses. Sociopaths design the system this way because they are only interested in building an organization that lasts long enough to extract the easy value from whatever market opportunity motivated its formation. Expensive investments that will not pay off before the organization hits diminishing returns are not made. (It is revealing that the longest-lived businesses are family-owned – Sociopaths have an incentive to think long term if they intend to pass the business on to their progeny.)
  32. There are only three ways to get a bureaucracy to do anything it wasn’t designed to do: by stealth, with secret and deniable support from allies in the staff hierarchy; by getting air-cover from a sufficiently high-up Sociopath who can play poker with whichever oversubscribed Sociopath is in charge of exception-handling for the specific process (i.e. jumping the appeals queue and calling in favors to ensure the required ruling); and through corruption and bribery.
  33. That is what Sociopaths ultimately do with their lives if they survive long enough: generate amoral power from increasing inner emptiness, transforming themselves into forces of nature. As a side-effect, they also manufacture transient meanings to fuel the theaters of religiosity (including various secular religions) that lend meaning to lives of Losers and the Clueless. This meaning is achieved via subtraction, through withdrawal of complexities that the latter are predisposed to ignore, leaving behind simpler, more satisfying and more tractable realities for them to inhabit.
  34. Small minds discuss people, average minds discuss events, great minds discuss ideas. And in Jamesian solitude, Sociopaths find ideas contending in their minds. The creative destruction they script in the world of Losers and Clueless is mirrored by a creative destruction in their minds. This process creates power, but destroys meaning, especially the meanings of social realities. The result is increasing inner emptiness and external power. It is this very emptiness that allows the Sociopath to play hero for the Clueless and priest for Losers. Recall that Sociopaths create meaning for others through the things they subtract, rather than the things they add. This is something conspiracy theorists typically don’t get: manufacturing fake realities is very hard. But subtractive simplification of reality is much easier, and yields just as much power.
  35. Sociopathy is not about ripping off a specific mask from the face of social reality. It is about recognizing that there are no social realities. There are only masks. Social realities exist as a hierarchy of increasingly sophisticated and specialized fictions for those predisposed to believe that there is something special about the human condition, which sets our realities apart from the rest of the universe. There is, to the Sociopath, only one reality governing everything from quarks to galaxies. Humans have no special place within it. Any idea predicated on the special status of the human – such as justice, fairness, equality, talent – is raw material for a theater of mediated realities that can be created via subtraction of conflicting evidence, polishing and masking.
  36. To turn status-seeking into a control mechanism is to devalue status. To devalue something is to judge any meaning it carries as inconsequential. In terms of our metaphor of masks of gods, the moment you rip off a mask and wear it yourself, whatever that mask represents becomes worth much less. So the Sociopath’s journey is fundamentally a nihilistic one.
  37. The major theme of Office Space, unlike The Office, is not deciphering and navigating the gridlock on the road to power, but exiting the rat-race altogether, to a state held up as an ideal of freedom: exile.
  38. The only true exit is to a freer mind. The only true state of happy exile is one which allows you to penetrate the social fictions that surround you, whether you remain within a cubicle or build a life around Burning Man.
What I got out of it
  1. Fun read showing why and how The Office is so funny and cringe-worthy. Organizational literacy is a great filter to have in your arsenal – Sociopaths, Clueless, Losers make up the typical hierarchy

The Wisdom of Life by Arthur Schopenhauer

Summary
  1. Schopenhauer walks us through the art of ordering our lives to gain the maximum pleasure and fulfillment
Key Takeaways
  1. The wise of every age have said the same things and the fools have done the same
  2. The first and most essential factor in our happiness is our personality, what we are, for it is always with us and shapes everything around us and everything that happens to us.
  3. Man’s happiness can be summed up in three lots:
    1. What they are – their personality, what has been bestowed upon them by nature
      1. It is undeniable that lasting happiness and fulfillment comes from the first bucket, from their inner constitutions. External circumstances are worth relatively little because they are shaped by our experiences, thoughts, and ideas that shape the externalities and affect how we respond to them. It is what we are and not what we have that leads to lasting happiness
    2. What they have
      1. Excessive material wealth does little for happiness but we must be able to meet our needs or else we won’t have the luxury of time and space to focus on ourselves and what makes us really happy.
      2. Excessive wealth leads to so many unintended distractions that you can’t focus on what really matters to you.
      3. Focus on acquiring culture and gaining knowledge rather than material wealth
    3. The esteem others hold them in.
  4. Beauty
    1. The gift of beauty is not one which should be lightly thrown away it is an invitation to others to like us and should be used accordingly
  5. Health
    1. Health is the foundation of happiness
    2. Health accounts more for happiness than nearly any other factor.
    3. A sound mind in a sound body is the foundation for all happiness and without which it is very difficult if not impossible to be happy.
    4. For great health avoid every excess and exercise regularly – even the trees must be shaken by the wind in order to thrive.
    5. Therefore any action which deprives us of health is a poor decision as 9/10 of our happiness comes from health
  6. Boredom
    1. The greater one is in their wealth or knowledge, the less susceptible they are to boredom extravagance and other vices.
    2. The wise man aims for a life free from pain and annoyances and seeks one of leisure and quiet.  The less wise a man is, the more apt he is to become bored for when he has nothing to do, his intellect does not turn on and he loses interest in everything around him.
    3. With time, leisure, and intellect, truth becomes clear
  7. Being Self-Sufficient
    1. Happiness is to be self-sufficient which is why wise man needs a little outside stimulation and socialize less on average than the normal person
  8. One can learn best from the extreme examples for they give us a magnified looked at our own nature
  9. Man never feels the pain of not getting what he has never known to ask for
  10. What is worth doing is hard to do
  11. Rank and honor and pride are tied to what others think is useful and not truly what you want to do or what you think is useful or how you best spend your time.
What I got out of it
  1. Striving for leisure and lots of time to read and think are worthy goals; health is at the heart of happiness; it is one’s inner happiness which lasts and paints external circumstances

The Artist’s Journey: The Wake of the Hero’s Journey and the Lifelong Pursuit of Meaning by Steven Pressfield

Summary
  1. The artist’s journey begins with the hero’s journey, it is merely the beginning and it allows us to begin living authentically, to self-actualize. It is the gift you get from going through the often painful hero’s journey, it is what you do with your gift, how you help the world and those around you.
Key Takeaways
  1. The artist’s journey is personal, solitary, mental, an evolution, a constant, about self-discovery (as opposed to self-expression), yet universal
  2. The Hero’s Journey has 11 steps:
    1. The call to adventure
    2. Refusal of the call
    3. Meeting the mentor
    4. Crossing the threshold
    5. Tests
    6. Approaching the innermost cave
    7. Ordeal
    8. Reward/Bliss
    9. The road back
    10. Resurrection
    11. Master of two worlds
  3. Subject
    1. We are all born to find our “subject”, it finds us and not the other way around. It is our calling, what we are meant to do. It is terrifying to try to find which is my so many people put it off. Once we find it, we can’t turn away from it but it takes a risk to act on it
  4. Voice
    1. We have to find our voice, how we best express ourselves
  5. Point of View
    1. Once the artists develops their “point of view”, they can answer any question about any aspect regarding their work, they know what “movie” they’re making and what it takes to get there – they have the hologram in the head
  6. Medium of Expression
    1. The artist must determine the medium for the message.
  7. Style
    1. Every artist has a style that they must develop over time. Hemingway didn’t write with short, simple words because he didn’t know more complicated ones – it was because it was his style
    2. Your style must blend seamlessly with the medium
    3. Style is inseparable from voice, it evolves out of subject and point of view and blends seamlessly with medium of expression.
  8. Subject, voice, point of view, medium of expression, and style are all different ways of thinking of your gift, which is the same as asking the question, “who am I?” Finding the answer to these questions is not a rational journey, it cannot be rushed or planned, we are born with all of these but they are out of our normal consciousness and it takes time, suffering and persistence to find them. We must give up our control, our ego, to find them. Once you discover your gift, you become an artist. To the outside, nothing may seem to change but internally everything changes. Everything in your life which is “not artist” falls away. Externally, your life may look boring with no drama, binges, disrespecting your gift/voice/talent, the artist is now on a mission and her life has acquired a purpose. Your life is now about following their muse, about becoming who you really are, and this journey will take you through the rest of your life
  9. An artist is in touch with their time, they speak of and to their time
  10. In this journey, all enemies are mental and self-generated. But, on the flipside, same with all strengths
  11. All progression is made by increments and is done by accessing the unconscious, your muse. Everything you create as an artist comes beyond your conscious awareness. Artists do not know what they’re going to do before they do it, and often don’t know what they’re doing while they’re doing it. This “second” you is the real you and it is much smarter than the “you” you normally associate with
  12. The artist’s journey lasts the rest of your life
  13. Resistance (fear, distraction, temptation, etc.) is a mini refusal of the call. You can get over this by meeting with the mentor – it can be external but even better you become your own mentor, helping yourself get past the Resistance. The aim is to make ourselves Masters – not just of our crafts, but of ourselves
  14. Index of basic skills acquired during the Artist’s Journey
    1. Learns how to start
    2. Learns how to keep going
    3. Learns how to finish
    4. Learns how to hang on
    5. Learns how to let go
    6. Learns how to be alone – learns how to gain energy from her work alone, and need for third party validation attenuates
    7. Learns how to work with others – would rather produce something better with others than they otherwise could have alone than get credit
    8. Learns emotional distance – learns how to detach from the judgment, their emotional needs
    9. Learns how to handle rejection
    10. Learns how to handle praise
    11. Learns how to handle panic
    12. Learns how to give up
    13. Learns how to go beyond what you know
    14. Learns how to be brave – run towards what scares you
    15. Learns how to keep the pressure on
    16. Learns how to kill – either the Resistance wins or you do, which will it be?
    17. Learns how to help others and how to be helped
    18. Learns how to steal good ideas
    19. Learns how to how the marketplace works
    20. Learns how to gain perspective on their work
    21. Learns how to learn from history
    22. Learns how to learn from the masters who have come before them
    23. Learns how to be humble
    24. Learns how to self-validate
    25. Learns how to self-reinforce
    26. Learns how to self-evaluate
    27. Learns how to commit for a lifetime
    28. The amateur is one who does not have any of these skills – they are not mentally tough, they don’t have persistence
  15. A better name for the unconscious is the superconscious. You must develop the ability to go from the conscious to the superconscious and back again often and effectively. Most people are afraid of finding out what’s truly in us, of what we really have, of finding out who we are
  16. The artist believes in a different reality and shuttles back and forth between realities
  17. How the world works – The universe exists on at least two levels – the material world (physical world) and the ethereal (the higher realm, the soul, it cannot be seen or summoned but can be felt, it is the plane we are trying to access as artists). An artist’s skill lies in shuttling between the normal mind and the higher mind. They cease direct thinking and shift to a more intuitive, non-linear mindset, this is what makes the process addictive
  18. All art is about the recognition of beauty and the articulation of empathy and compassion for the other – the artist is a force for unity
  19. Mankind’s original sin, what got Adam and Eve cast out of Eden, is identifying with the ego
  20. Daimon = genius. It is us, yet it is separate
  21. The secret that every true artist knows is that the profound can be reached by focusing on the mundane. Sit down at the keyboard, stand before the easel, you have to show up
  22. The mysterious flow of creativity can be prompted, primed like a pump, by emotionally and physically creating a habit and a space where you want that energy to flow
  23. Who you are is what you produce, what you write/produce/paint…
  24. The artist’s journey is the hero’s journey of the human race
  25. How do you know when you’re ready? You decide. You act
What I got out of it
  1. The artist is one who can shift between the normal everyday world and the higher plane where inspiration hits, where the daimon resides, and being able to translate this higher plane into art

Intuition: Its Powers and Perils by David Myers

Summary
  1. To plumb the disparate discoveries about intuition – the powers and the perils and how we can use it to better our lives. To bring awareness that our intuition could benefit from some correction, in realms from sports to business to spirituality, makes clear the need for disciplined training of the mind. Intuition works well in some realms, but it needs restraints and checks in others. The biggest truth about learning is that its purpose is to unlock the human mind and to develop it into an organ capable of thought – conceptual thought, analytical thought, sequential thought
Key Takeaways
  1. Intuition
    1. The capacity for direct knowledge, it is experiential, emotional, mediate by vibes from past experience, self-evident, for immediate insight without observation or reason, perception-like, rapid, effortless
      1. Compared to deliberate thinking which is slow, rational, critical, analytic, mediated by conscious appraisal, justified with logic and evidence, differentiated
    2. If intuition is immediate knowing, without reasoned analysis, then perceiving is intuition par excellence. Human intelligence is more than logic, more than ordering words, more than conscious cognition
    3. Intuition is nothing more, nothing less than recognition, simply analyses frozen into habit. Intuition sometimes compresses years of experience into instant insight. Hence the importance of filling the brain/body/soul with positive information, ideal situations, getting quick/accurate feedback and learning/iterating towards the ideal
  2. The Powers
    1. We know more than we know we know. The autonomic nervous system responds with measurable perspiration and sped up pulse when a loved one’s face is shown, the body displays recognition although we may not react. What the conscious mind cannot understand, the heart knows
    2. Everyday perception – instant parallel processing and integration of complex information streams
    3. Automatic processing – absent-mindedness but allows you to focus on the big stuff. So much of who what we do/perceive is never conscious. Civilization advances by extending the number of operations which we can perform without thinking about them
    4. Young children’s intuitive learning
    5. Brain can rationalize and create a story about anything. When the two minds are at odds, the left brain acts as the brain’s press agent, doing mental gymnastics to rationalize unexplained actions. If the right brain commands an action, the left brain will intuitively justify it. Humans have a quick facility for constructing meaning. Beneath the surface there is much intelligence, and above the surface there is much self-delusion
    6. We are much more influenced by barely perceptible background noise than we like to believe. Priming is the awakening of associations. Implanted ideas and images can automatically – unintentionally, effortlessly, and without awareness – prime how we interpret and recall events. Sometimes we intuitively feel what we do not know we know. The subliminal influence experiments further support the reality of unconscious information processing.
    7. Micro-thin slices often reveal much about people – everything evaluated as good or bad within a quarter of a second of seeing it. Intuitive first impressions can be telling, especially when feelings rather than reasons guide behavior. Gut-level feelings not only predict some behaviors better than analyzed feelings, but they can also better predict the judgments of experts. Sometimes it pays to listen to our hearts. Our automatic, implicit attitudes regarding someone or something often differ from our consciously controlled, explicit attitudes. Our likes and dislikes, our preferences and prejudices, are partly unconscious, partly conscious.
    8. Dual attitude system – often our gut guides our actions and then we rationalize them
    9. Emotional intelligence – the ability to perceive, express, understand, and manage emotions. Emotionally intelligent people are self-aware. They cope with life without letting their emotions get hijacked by dysfunctional depression, anxiety, or anger. In pursuit of long-term rewards, they can delay gratification rather than letting themselves be overtaken by impulses. Their empathy enables them to read others’ emotions and respond skillfully – knowing what to say to a grieving friend, when to encourage a colleague, how to manage conflicts. They are emotionally astute and thus often more successful in careers, marriages, and parenting than are those academically smarter but emotionally denser.
      1. Comprised of: emotion perception, emotion understanding, emotion regulation
    10. Bodies hold an enormous amount of wisdom – thanks to our neural shortcuts, our storehouse of emotional memories, and our conditioned likes and dislikes, our bodies accumulate and express our adaptive intuitions
    11. Social intuitions – mere exposure effect, spontaneous trait inference, moral intuition, contagious moods, unconscious mimicry smoothes social interaction, empathic accuracy, poor at detecting lies
    12. We have two minds – two ways of knowing, two kinds of memory, two levels of attitudes. One is above the surface, in our moment to moment awareness; the other is below, operating the autopilot that guides us through most of life. We see the work of those downstairs cognitive laborers in the social intuitions they slip into our awareness, and also in our developing expertise and creative inspirations. Through experience we gain practical intuition – subtle, complex, ineffable knowledge that aids our problem solving
      1. Nonconscious learning – what you know, but don’t know you know, affects you more than you know
      2. Learned expertise – experts’ knowledge is more organized than novices’
      3. Tacit knowledge – street smarts, practical intelligence, knows how (rather than knows that, explicit knowledge/expert)
      4. Physical genius
    1. 5 components of creativity – expertise, imaginative thinking skills, venturesome personality (can handle ambiguity, risk, persevere), intrinsic motivation, a creative environment (humans sharpen other humans)
      1. You have to really think about nothing but that problem – just concentrate on it. Then you stop. Afterwards there seems to be a kind of period of relaxation during which the subconscious appears to take over, and its during that time that some new insight comes
      2. You get your intuition back when you make space for it, when you stop the chattering of the rational mind
      3. It is by logic we prove but it is by intuition that we discover
    2. Heuristics – perceptual or mental cues that usually work well but occasionally trigger illusions or misperceptions
  3. The Perils
    1. Often we don’t know why we do what we do
    2. Misreading our own minds – Many of life’s big decisions require intuiting our future feelings. Often our intuition is on target but we often fail in predicting an emotion’s duration and intensity. The human treadmill – duration of feelings low as we adapt quickly. Nothing you focus on will make as big a difference as you think
    3. Mispredicting our own feelings / behavior / hindsight bias / self-serving bias / overconfidence- Humans are often bad at predicting our own future behavior – look to a person’s past for better accuracy. Beware illusory, blind spots, complacency. Humility/Realism. So, despite our impressive capacity for thinking without awareness, for social intuitions, and for intuitive expertise and creativity, our intuitions sometimes mislead us as to what we have experienced, how we have changed, what has influenced us, and what we will feel and do. There are three things extremely hard: steel, a diamond, and to know one’s self. Asking people to explain their past actions or to guess their future actions sometimes gives us wrong answers. By being mindful of the limits on our self-knowledge, we can restrain our gullibility and motivate ourselves to think critically, to check our own and others’ intuition against reality, and to replace illusion with understanding.
    4. Nothing is so difficult as not deceiving oneself – Ludwig Wittgenstein
    5. Memories are fallible – reconstruct them as we remove them from storage – current moods, views, emotions all paint the past
    6. At the center of our worlds, more pivotal for us than anything else, are we ourselves. Whatever we do, whatever we perceive, whatever we conceive, whomever we meet will be filtered through our self. When we think about something in relation to ourselves, we remember it better. Ergo, memories form around our primary interest: ourselves
    7. Illusory correlation – perceiving relationships where none exist (caused by desire to explain, even if no correlation)
    8. Belief perseverance – the more we examine our intuitions and beliefs and explain how they might be true, the more closed we become to challenging information. We never truly change our beliefs. However, the solution lies in explaining the opposite. Imagining and explaining why an opposite theory might be true – why a cautious rather than a risk-taking person might be a better firefighter – reduce or eliminates belief perseverance. To open people to a different idea, don’t just argue your point. Instead, get them to imagine why someone else might hold an opposite view. Indeed, mindful of our fallibility, perhaps we would all do well to recall Oliver Cromwell’s 1650 plea to the Church of Scotland: “I beseech ye in the bowels of Christ, consider that ye may be mistaken.”
  4. Sports Intuition
    1. Hot hands / streaks not as random as you think – expect them to happen
    2. Investment Intuition
    3. Loss aversion, endowment effect, sunk cost, anchoring, overconfidence (greatest for most unpredictable events), diversification, sustainability (surviving is the number one goal)
  5. Clinical Intuition
    1. Vulnerable to illusory correlations, hindsight biases, belief perseverance, self-confirming diagnoses
    2. Must monitor the predictive powers of your intuition. Beware the tendency to see associations you expect to see. Recognize the seductiveness of hindsight, which can lead you to feel overconfident (but sometimes also to judge yourself too harshly for not having foreseen and averted catastrophes). Recognize that theories, once formed, tend to persevere even if groundless. Guard against the tendency to ask questions that assume your ideas are correct; consider the ideas and test them, too. Better yet, harness the underappreciated power of statistical prediction. Actuarial science strengthens clinical judgment, or at least offers a second opinion. Actuarial science also helps protect practitioners from malpractice suits, which might otherwise allege that the clinician made aberrant decisions without attending to relevant research
    3. To sift true intuitions from false, sense from nonsense, requires a scientific attitude: being skeptical but not cynical, open but not gullible. By testing clinical intuition – discerning its wisdom and fallibility, and learning when to undergird it with actuarial science – a hard-headed process promises to pay kind-hearted dividends.
  6. Psychic Intuition
    1. A particular specified event or coincidence will is very unlikely; some astonishing unspecified events will occur is certain (which is why remarkable coincidences are noted in hindsight, not predicted in with foresight)
  7. Risk
    1. Perceived risk is not equal to actual risk. We exaggerate some and under play others – availability heuristic, lack of control, short-term effects
    2. Remedy – weigh the costs and benefits, communicate risk transparently, communicate risks as feelings
  8. Other
    1. The opposite of a great truth is also true
    2. How we perceive others reveals something of ourselves
    3. The secretary’s intuition on new hires is often on point
    4. Direct parental nurturing has surprisingly little effect on kids’ personalities and tastes
    5. Nature abhors a vacuum and human nature abhors chaos. Show us randomness and we will find order, pattern, clusters, and streaks. The tendency to impute order to ambiguous stimuli is simply built into the cognitive machinery we use to apprehend the world – illusory coherence, superstition, folly. Random sequences seldom look random, because they contain more streaks than people expect. We are descendants of skilled pattern-detectors. True to our legacy, we look for order, for meaningful patterns, even in random data.
    6. The irrepressibility of expressiveness is why, in seconds, we can typically gauge how outgoing someone is
    7. Interviews aren’t great predictors. Someone’s past track record is their best predictor. Structuring interviews with examples of past job relevant behaviors enhances its reliability and validity and, hence, its usefulness for prediction and decision making
    8. The underestimation of the power of the situation is one of the greatest lessons from social psychology (fundamental attribution error)
What I got out of it
  1. Fun book about how to build, harness, and take advantage of our intuition and when to be wary of it

The HeartMath Solution: The Heartmath Institute’s Revolutionary Program for Engaging the Power of the Heart’s Intelligence by Doc Lew Childre, Howard Martin, Donna Beech

Summary
  1. Our heart has an intelligence which impacts our physical/mental/emotional health more than most people realize. This book will teach you how to harness the power of the heart to potentially help you make better decisions, better control your emotions, increase personal productivity, slow down aging, enhance creativity, and many more positive benefits
Key Takeaways
  1. Why the heart and the HeartMath Solution?
    1. Our theory is that the heart links us to a higher intelligence through an intuitive domain where spirit and humanness merge. We can develop the perceptual capacity as we learn to do with stages and philosophers have asked us to do for ages simply listen to and follow the wisdom of the heart. Heart intelligence is truly emotional intelligence and we’ve concluded that intelligence and intuition are heightened when we learn to listen more deeply to our own heart
    2. Too often the relationship of our thoughts and emotions and how they effect physical change is ignored
    3. Health is a delicate balance of rhythm, while disease (“dis-ease”) results from dis-rhythm
    4. The heart is at the core of our body and at the core of how we think and feel. The solution is derived from realizing that the heart is both a physical object, a rhythmic organ, and love itself
    5. By practicing the HeartMath solution, you’ll be able to clearly see when you’re in stress. Then you can use Freeze-Frame to determine your best course of action. But even once you have intuitive clarity on what to do, you may still experience residues of uncomfortable or perplexing feelings. When those residues clog the system, you need to apply Cut-Thru, shifting your emotional state so that you’re not only thinking better but also feeling better. Both intelligence and intuition are heightened when we learn to listen more deeply to our own hearts
    6. Activating heart intelligence + managing the mind + managing the emotions = energy efficiency, increased coherence, enhanced awareness, and greater productivity.
    7. A primary goal of the HeartMath Solution is to increase coherence, bringing us to a state of optimal efficiency. Stress creates incoherence in our system, so increasing coherence necessitates reducing stress.
    8. The goal of HeartMath is to help you learn to generate emotional and mental coherence deliberately – on demand – so that ultimately you spend more of your day at this optimal, regenerative level of energy efficiency
  2. 10 key techniques and tools that govern the HeartMath solution
    1. Acknowledge your heart intelligence and its importance for making choices big and small
    2. Reduce stress and live more often in a state of coherence
    3. Learn and apply Freeze Frame which creates a balance between the two branches of the autonomic nervous system, the sympathetic and parasympathetic
    4. Accumulate energy assets and decreased energy deficits
    5. Activate core heart feelings such as love compassion courage patients sincerity forgiveness appreciation care and more
    6. Manage your emotions
    7. Care but don’t overcare – when we care too much, it turns into anxiety, worry, insecurity
    8. Learn and apply Cut-Thru – a method to help you stop experiencing emotions that create incoherence and energy deficits
    9. Do heart Lock-Ins – amplifies the power of your heart. Quieting the mind and sustaining a solid connection with the heart – locking into its power – adds buoyancy and regenerative energy to your entire system. it also makes it easier to stay in contact with your heart intelligence and its intuitive messages amidst your daily activities
    10. Actualize what you know – applying all these tools to your daily life
  3. Heart Rate Variability (HRV)
    1. Our emotional states are reflected best in our heart rhythms, as seen in HRV measurements. HRV is defined as a measurement of beat-to-beat changes in the heart rate. Loss of variability is actually a sign of disease and a strong predictor of future health problems. In essence, HRV is a measure of the flexibility of our heart and nervous system, and as such reflects our health and fitness. It also allows us to listen in on and interpret ongoing, two-way conversations between our heart and our brain and is an important measurement to how well we’re balancing our lives mentally and emotionally. Disharmony in our heart rhythms leads to inefficiency and increased stress on the heart and other organs, while harmonious rhythms are more efficient and less stressful to the body’s systems. Our heart rhythms affect the brain’s ability to process information, make decisions, and solve problems, and experience and express creativity.
    2. Head is great at pattern recognition but it can easily get locked into set patterns. Getting locked into this closed mindset can often hurt us and cut off our creativity. The intelligence of the heart, on the other hand, processes information in a less linear, more intuitive and direct way. The heart isn’t only open to new possibilities, it actively scans for them, ever seeking new, intuitive understanding. The head “knows” but the heart “understands”
    3. The head often leads us into rationalizing and conceptualizing an issue instead of actualizing what the heart already knows and has communicated. When we react to life from the head without joining forces with the heart, our single-mindedness often leads us into childish, inelegant behavior that we’re ashamed of. If, on the other hand, we get the head in sync with the heart, we have the power of their teamwork on our side and can make the changes we know we ought to make
    4. The lower heart refers to those feelings that are colored by the attachments and conditions placed on them by the mind. Conditional love is a good example. The higher heart is more allowing. It doesn’t hedge or barter. Authenticity is its own reward for the higher heart. But it takes emotional maturity to manifest the heart’s qualities with consistency
    5. When we learn to manage our emotions long enough to stop and shift our attention to the quieter message of the heart, we can gain a wider perspective on any situation, often saving ourselves from hurt, frustration, and pain
  4. Entrainment
    1. The heart is the strongest biological oscillator in the human system and therefore, the rest of the body’s systems are pulled into entrainment with the hearty’s rhythms. The heart communicates with the rest of the body in three ways: neurologically (nerve impulses), biochemically (hormones and neurotransmitters), and biophysically (pressure waves). However, there may be a fourth way – energetically (through electromagnetic field interactions). The heart’s EMF is the most powerful produced by the body, it not only permeates every cell in the body but also radiates outside of us; it can be measured up to 8-10 feet away with sensitive detectors called magnetometers. It not only affects our own brains and bodies but can also be registered by the people around us. When your body is in entrainment, its major systems work in harmony. Your biological systems operate at higher efficiency because of that harmony, and as a result you think and feel better
    2. When we get the head in sync with the heart, the power of both works for us and we can make changes that we know we ought to make
    3. Can develop their ability to maintain entrainment by sustaining sincere, heart-focused states such as appreciation and love
  5. Freeze-Frame
    1. A technique to increase and improve the communication between your heart and mind while reducing stress. It is invaluable for managing thoughts to prevent the needless depletion of energy. Because this technique increases mental clarity, it will help you make sound decisions, even in what would formerly have been highly stressful situations
    2. It is important to monitor our inner thoughts and feelings. Some of it adds energy, while others deplete it. Understanding energy assets and deficits provides a key to accessing your heart intelligence. Core heart feelings such as appreciation, non-judgment, and forgiveness increase energy assets and eliminate many deficits.
    3. We can look at life as a high-speed movie. We get so caught up in the momentum of the story that we forge that it’s made up of individual moments. From one minute to the next, we having an astonishing range of thoughts, emotions, and experiences. So, Freeze-Frame enhances your power to stop your reaction to the move of life at any moment. It allows you to get a clearer perspective on what’s happening in a single frame and allows you to edit the next frame from a point of balance and understanding. It can be done anytime, anywhere, whenever you want to stop stress in its tracks and get quick intuitive access. Setting daily alarms and reminders can be helpful
    4. You must learn to entrain your biological systems to your heart. This allows in access to new information and a shift in perfection. By shifting focus toward your heart and away from whatever problem you face, you divert energy from your perception of the problem. When you consciously act from a point of heart balance, you connect more naturally with what real self – not your reactive self – wants to think or do. Listening to your heart isn’t hard, but attuning to its inner signals is different for everyone and often takes a little practice
    5. Don’t underestimate the power of neutral. The ability to find neutral, and stay put there until your heart shows you clearly what to do, is a sign of balance and maturity. The neutral state is a conduit for objectivity in the moment
    6. The 5-step process creates a harmonious relationship between the head and the heart
      1. Recognize the stressful feeling and Freeze-Frame it. Take a time out
      2. Make a sincere effort to shift your focus away from the racing mind or disturbed emotions to the area around your heart. Pretend you’re breathing through your heart to help focus your energy in this area. Keep your focus there for ten seconds or more
      3. Recall a positive, fun feeling or time you’ve had in life and try to experience it
      4. Now, using your intuition, common sense, and sincerity, ask your heart, what would be a more efficient response to the situation, one that would minimize future stress?
      5. Listen to what your heart says in answer to your question. It’s an effective way to put your reactive mind and emotions in check and an in-house source of common sense solutions
    7. When to practice
      1. At transition points (from home to work or work to home) so that you are fully present in the moment
      2. Before conversations
      3. Any time communication is going off-track
      4. At the beginning of the day – set the tone for positive activity, calibrate your system for a coherent day, clear mental and emotional cobwebs
      5. At the end of the day, to feel positive completion of the day and ensure a good night’s sleep
  6. Coherence
    1. The state that makes the difference between a book light and a laser beam. Inner coherence is a benchmark of intelligence and a cornerstone of effective living.
    2. When a system is coherent, virtually no energy is wasted, because all its components are operating in harmony. When every system in your body is aligned, your personal power is at its peak. Learning to cultivate that rewarding state of coherence enhances our ability to adapt, to flex, and to innovate. It allows us to rapidly get back to a feeling of balance and poise after stressful events and to improve communication, health, and overall well-being. A balanced heart and agile mind create access to innate intelligence and an enhanced capacity for greater internal coherence – the optimal state of being
    3. An age of rising complexity, speed, distractions is taking away from our ability to be in coherence so, those who are able to, have a greater advantage than ever before. New research has found that what creates more stress for people than any other is having to shift concepts, intentions, and focus to too many different tasks, many times an hour.
    4. Lack of coherence affects our vision, listening ability, reaction time, mental clarity, feeling states, and sensitivity.
    5. It’s a vicious cycle: stress destroys coherence, and incoherence causes stress. Chronic stress is one of the most prevalent and dangerous situations today and affects every part of our health and psyche. The brain doesn’t know between real threat and perceived threat so the physical and emotional reaction is the same. Indulging anger is harmful in more ways than one. So, if we can’t express it or repress it, what do we do? The answer is to recognize the anger but choose to respond to the situation differently.
    6. The solution to stress management lies in how we perceive the stressors in our lives. It’s not really the events that cause stress; it’s how we perceive those events. Improving the communication between the heart and brain helps one achieve coherence. By paying attention to our perceptions and reactions, we can eliminate the chronic stress that seeps through our bodies like a slow poison. Learning how to alter our standard stress reactions by perceiving life’s events from a place of intuition, balance, poise, and flexibility require a major shift – through a shift from head to heart
    7. Heart + Head = Coherence
      1. The brain is not the sole source of intelligence. We can realize that it’s a  remarkable partner to the heart, not its master
  7. Energy efficiency
    1. Mental and emotional diets determine our overall energy levels, health, and well-being to a far greater extent than most people realize. Every thought, feeling, no matter how big or small, impacts our inner energy reserves
    2. Life is an energy economy game. Each day ask yourself, “Are my energy expenditures (actions, reactions, thoughts, and feelings) productive or nonproductive? During the course of my day, have I accumulated more stress or more peace?
    3. Keeping an asset/deficit sheet for a few days will give you a clear picture of your energy account
    4. Consciously evoking core heart feelings nourishes our bodies at every level
    5. Learning to “just say no” to emotional reactions isn’t repression. Saying no means not engaging the frustration, anger, judgement, or blame. Without engagement, you won’t have anything to repress
    6. By using your heart as a compass, you can see more clearly which direction to go to stop self-defeating behavior. If you take just one mental or emotional habit that really bothers or drains you and apply heart intelligence to it, you’ll see a noticeable difference in your life
  8. Power Tools of the Heart
    1. Sincerity is the generator that brings core heart feelings such as appreciation and forgiveness into coherence and gives them power. By coming into coherence, we learn to take our emotions from a light bulb to a laser beam, applying them with focused intention and consistency. Sincerity is essential, it motivates our heart and aligns our true intentions.
    2. Power Tool 1: Appreciation
      1. Appreciation is a blend of thankfulness, admiration, approval, and gratitude
      2. It is magnetic and highly energizing, helping to bring you into coherence and entrainment
      3. Opening your heart is like putting a wide-angle lens on the camera of your perception. Suddenly, more of the world comes into view
    3. Power Tool 2: Non-judgment
      1. Judgments create stress and incoherence, and these limit the full range of our intelligence. Yet we’re socially conditioned to judge
      2. One of the most important things to note about the downside of judgment is that the person judging is the one who’s hurt the most
      3. Making a mistake and then judging yourself harshly is simply adding fuel to the fire
      4. The heart can give you the awareness needed to become more neutral, letting things unfold. That’s what non-judgment is all about. It allows you to be aware of your opinions but always be open to new thoughts, actions, ideas, people, etc.
      5. When you find yourself in strong judgment, use the Freeze-Frame technique to get neutral and find a more balanced, intuitive perspective
    4. Power Tool 3: Forgiveness
      1. You don’t forgive others for their sake, but for yours. Forgiveness is simply the most energy-efficient option you face, and the only one that will foster health and well-being
      2. The incoherence that results from holding on to resentments and unforgiving attitudes keeps you from being aligned with your true self and blocks you from your next level of quality life experience
      3. Forgiving yourself is often the hardest part but also the most important. Compromised forgiveness means that somehow the effort was incomplete. That lack of completion can mean the difference between a breakthrough into a completely new and different life experience and the same old patterns repeating themselves.
    5. Fulfillment is based on two elements: awareness and performance. Self-development comes from the increased awareness of where you are right now and learning what is needed in order to grow. And self-expression is how you perform, what you do about it
  9. Management of emotions
    1. Emotion = energy in motion. It’s the feeling sensation and physiological reaction that make a specific emotion positive or negative, and it’s our thoughts about it that give it meaning.
    2. Emotional energy works at a higher speed than the speed of thought because your feeling world operates at a higher level than your mind. We evaluate everything emotionally as we perceive it. We think about it afterwards
    3. Heart coherence helps balance our emotional state. It aligns head and heart to facilitate higher brain function, which appears to create a direct link to intuition or super-high-speed intelligence. Intuition bypasses mental analysis and gives us direct perception independent of any reasoning process. Intuition gives us clarity on how to direct and manage our feelings before we invest emotional energy into them
    4. Emotions in themselves aren’t really intelligent but have an organizing intelligence behind them. How we organize our thoughts and emotions and what we do with them reflect our intelligence. When we let our unmanaged thoughts dictate how we respond emotionally, we’re asking for trouble
    5. A benchmark of new emotional management lies in realizing that our past can no longer be blamed for our actions in the present
    6. Biochemistry affects our emotional responses, but our emotions affect our biochemistry in turn as well. Biochemicals are actually the physiological correlates of emotions
    7. Emotional intelligence implies the ability to self-regulate our moods, control our impulses, delay gratification, persist despite frustration, and motivate ourselves. When we’re equipped with these strengths, the twists and turns of life don’t get us down. We roll with them
    8. There are two major mind-sets that quickly compromise efforts at emotional management: justification and principle. These mind-sets trap your emotional energy in hurt, blame, fear, disappointment, betrayal, regret, remorse, and/or guilt, which create cumulative drain and deficits in your system. Any rationalization of deficit emotions traps our emotional energy in hurt, blame, fear, disappointment, betrayal, regret, remorse, or guilt
    9. Taking the significance out of issues and events is second nature to adults dealing with kids but we don’t tend to offer that same help to ourselves. The problem is that when we ignore one deficit emotion and refuse to take the significance out even after we’re aware of it, the emotional depletion builds, undermining our progress in other areas
    10. One of the main keys to emotional management is learning to quickly arrest a draining or deficit emotion and generate an attitude shift from a place of deep heart maturity. To reclaim the energy out of a deficit emotion, we have to take out the significance we’ve assigned to it. To take the significance out, we first make an effort to back off; then the heart can open up.
    11. Emotions liquefied become flow, and mind aligned with heart becomes intuition
  10. Care and Overcare
    1. Care is a powerful motivator. It inspires and gently reassures us. Care feels good – whether we’re giving it or receiving it. Care provides a conduit for your spirit’s expression in the midst of human existence. The more you truly care, the more you’ll come to know of yourself and others
    2. When we cross the line into overcare, our original caring is tainted by stress. It then becomes self-defeating, because it compromises our available energy to perform
    3. Perfectionism, over-attachment, projection of thoughts/mental images about the future, worry, anxiety, insecurity, expectations, comparisons are all manifestations of overcare
    4. Signals from the heart let you know when your care has become overcare, if you’re willing to listen. Every time you eliminate an overcare, the relief is tremendous, and you store away power that makes fighting overcare easier the next time
  11. Cut-Thru
    1. The purpose of Cut-Thru is to help people recognize and reprogram the subconscious emotional memory paths that, through long-term reinforcement, influence our perception, color our day-to-day thoughts and feelings, and condition our responses to future situations. Cut-Thru is for more deeply ingrained emotional issues than Freeze-Frame can help you resolve
    2. Cut-Thru facilitates emotional coherence and allows you to transform emotions you don’t want into new, regenerative feelings. And it does so without resorting to rationalization or repression
    3. Use Cut-Thru to shift out of emotions that are draining your energy, regain emotional balance, and eliminate long-standing emotional issues
    4. Managing emotions with Cut-Thru requires that you first recognize how you’re feeling. Breathing through the heart and solar plexus helps you anchor your emotions. Assuming objectivity leads to emotional maturity
    5. Cut-Thru helps you build your self-motivation, emotional capabilities, empathy, and you’ll begin to move through life at the most efficient speed possible – the speed of balance
    6. The 6 Steps of Cut-Thru
      1. Be aware of how you feel about the issue at hand
      2. Focus on the heart and solar plexus – breathe love and appreciation through this area for ten seconds or more to help anchor your attention there
      3. Assume objectivity about the feeling or issue – as if it were someone else’s problem
      4. Rest in neutral – in your rational, mature heart
      5. Soak and relax any disturbed or perplexing feelings in the compassion of the heart, dissolving the significance a little at a time. Take your time doing this step; there’s no time limit. Remember, it’s not the problem that causes energy drain as much as the significance you assign the problem
      6. After extracting as much significance as you can, from your deep heart sincerely ask for appropriate guidance or insight. If you don’t get an answer, find something to appreciate for a while. Appreciation of anything often facilitates intuitive clarity on issues you’ve been working on
  12. Heart Lock-In
    1. This technique helps you discover that you have your own internal source of regeneration. Quieting the mind and sustaining a solid connection with the heart – locking into its power – adds buoyancy and regenerative energy to your entire system. The more your core heart feelings come into play, the more you realize how much can be gained from a loving, open-hearted perspective. It helps with coherence, entrainment, improves immune functions, helping with mental, physical, and emotional health
  13. HeartMath in school and at home
    1. Heart Lock-In can be done with your children at the start of family time, quality time, or before dinner or bed
    2. Having kids do Freeze-Frame or Cut-Thru helps them calm emotions, better communicate, gain mental clarity, gain wider perspective and better understand what they’re feeling and why. Fostering emotional management from the heart may be one of the greatest gifts you can give children
    3. When emotions run high at school or during sports, performing these same techniques will have similar positive effects
What I got out of it
  1. Some really helpful tips and shows the power of coherence, HRV, entrainment, breathing properly, the power of neutrality. A physical, minimum effective dose to get many (not nearly all!) of the benefits associated with meditation.