Tag Archives: Business

The Wit and Wisdom of Lee Kuan Yew

Summary

  1. A collection of quotes from LKY on a whole host of subjects

Key Takeaways

  1. Lee’s pragmatism and unwillingness to be influenced by external pressures characterized his leadership style: “I was never a prisoner of any theory. What guided me were reason and reality. The acid test I applied to every theory or scheme was, would it work?”
  2. Between Japan and Europe, we must make Singapore the best place to bunker and repair ships, either in drydock or on water. Once we have established ourselves as the ship repairing and shipbuilding centre, we will remain so for a very long time. For once supremacy has been established, whether it is an airport, a harbour, or a dockyard, it is very difficult for any other place to dislodge us. For others have to compete against an established centre with superior facilities, higher skills and expertise, and long-standing established customers.
  3. Hard-headed industrialists and bankers of developed countries never take unnecessary risks. They look round the world for places where there is political stability and industrial peace before they invest. In Singapore they find such a place. Hence the massive inflow of capital, machinery, technological know-how and banking expertise.
    1. Deep fluency in being able to see from other’s perspectives
  4. We can build up this team spirit, this esprit de corps, where every individual gives of his best for the team, for the nation, to achieve its maximum. And the team, the nation, in turn, takes care of the individual, fairly and equitably. The art of government is the art of building up team spirit.
  5. A society to be successful must maintain a balance between nurturing excellence and encouraging the average to improve. There must be both cooperation and competition between people in the same society. The Singapore cooperation and competition have improved standards of life for all.
  6. Singapore has survived and prospered by making ourselves relevant to the world. In the last century, we traded in spices; this century, in tin and rubber. After independence in 1965, we moved into simple manufacturing. Now, we are in wafer fabs, pharmaceuticals and Asian currency units. As the world economy changed, so did we.
  7. We have made home ownership the cornerstone of Singapore’s public housing policy – the vast majority of the population own, not rent, their homes. Ownership is critical because we were an immigrant community with no common history. Our peoples came from many different parts of Asia. Home ownership helped to quickly forge a sense of rootedness in Singapore. It is the foundation upon which nationhood was forged. The pride people have in their homes prevents our estates from turning into slums, which is the fate for public housing in other countries.
  8. It is not the individual performance that counts. Of this, I’m quite certain. You can have a great leader, you know. If the herd hasn’t got it in it, you can’t make the grade. The herd must have the capacity, the stamina, sufficient social cohesiveness to survive.
  9. One of the by-products of a migrant community is that it produces a population of triers. Whatever else they may lack, the offsprings of migrants are prepared to try anything to improve themselves. Having left tradition, their history, their past behind, they have only the future to go in quest of.
  10. An island city-state in Southeast Asia could not be ordinary if it was to survive. We had to make extraordinary efforts to become a tightly knit, rugged and adaptable people who could do things better and cheaper than our neighbours, because they wanted to bypass us and render obsolete our role as the entrepôt and middleman for the trade of the region. We had to be different.
    1. Check out Howard Bloom for more on this
  11. Our way forward is to upgrade our levels of education, skills, knowledge and technology. Life-long learning is a must for everyone in this knowledge economy with rapidly changing technology.
  12. Even in the sixties, when the government had to grapple with grave problems of unemployment, lack of housing, health and education, I pushed for the planting of trees and shrubs. I have always believed that a blighted urban jungle of concrete destroys the human spirit. We need the greenery of nature to lift up our spirits. So in 1967, I launched the Garden City programme to green up the whole island and try to make it into a garden.
  13. As a nation, we must have other goals. Economic growth is not the end itself. After the success of the economy, you want to translate it into high standards of living, high quality of life, with recreation, the arts, spiritual fulfilment, and intellectual fulfilment. So, we are also spending considerable sums for the arts, which will create a more gracious society.
  14. Politics is about human beings and their lives. It is an art, not a science. It is the art of the possible. In Singapore, it means what is possible, given a hard-working people, with a realistic understanding of our narrow economic base and the need for social discipline and high performance, to keep ahead of other developing countries with low wages and more natural resources.
  15. If democratic socialists are to make a contribution to the course of events, they must cease to think in terms of abstractions. They must give meaning to socialist ideals in pragmatic and realistic policies to produce changes for the better in the daily lives of their peoples.
  16. If you want to be popular, do not try to be popular all the time. Popular government does not mean that you do popular things all the time. We do not want to be unpopular or to do unpopular things. But when they are necessary, they will be done.
  17. How do you think today’s Singapore came about? Because everyone knows if I say that we are going in a certain direction and that we’re going to achieve this objective, if you set out to block me, I will take a bulldozer and clear the obstruction. I leave nobody in any doubt that is where we are going and that any obstruction will be cleared. So there were very few obstructions. So we got the highway cleared and travelled to our destination.
  18. When you put up an idea which I know is wrong and believe profoundly to be wrong and will do us harm, I must crush it. I don’t crush you, I crush your idea. I mean, if I’m wrong then my ideas deserve to be crushed. Maybe ‘crush’ is a harsh word, but this is a harsh world. It is a contest of whose idea is right because if it is wrong, we are going to do harm to many people.
  19. The weakness of democracy is that the assumption that all men are equal and capable of equal contribution to the common good is flawed.
  20. Contrary to what American political commentators say, I do not believe that democracy necessarily leads to development. I believe that what a country needs to develop is discipline more than democracy. The exuberance of democracy leads to undisciplined and disorderly conditions which are inimical to development. The ultimate test of the value of a political system is whether it helps that society to establish conditions which improve the standard of living for the majority of its people plus enabling the maximum of personal freedoms compatible with the freedoms of others in society.
  21. The very fact that we are not challenged is a pretty strong mandate.
  22. There is no easy way to win power or stay in power. If the PAP does not renew itself regularly with fresh blood from the younger generation, stay honest and clean, upgrade the economy and improve the education and skills of our people, to have economic growth and bring a better life to people, it will soon begin to lose seats and eventually be defeated and ousted. So the PAP accepts the realities that the world is changing and we have to adapt ourselves to this different world. We are not stuck in any policy, theory or ideology.
  23. The system that we inherited from the British was lopsided. Too much emphasis was laid on the examination and the paper qualification. We were, therefore, rearing a whole generation of softies, who are clever; who wore spectacles but who were weak from want of enough exercise, enough sunshine, and with not enough guts in them. That was all right for a British colony, because the officers came from England [and] had the necessary brawn and toughness. It was they who gave the orders and our people just executed them. That is not good enough. We have to give our own people the orders. And you have to throw up a whole generation capable of that leadership, conscious of its responsibilities, jealous of its rights, not allowing anyone to bully it and push it around, prepared to stand up and fight and die. That kind of a generation will endure till the end of time.
  24. One of the reasons why Singapore thrived was because so many of the merchants, both British and non-British, when they gave their word, they kept to it, and the government when it gave its undertaking, invariably honoured it.
  25. Great leaders mirror the qualities of the nations they lead.
  26. We have continually to draw out younger leaders to fulfil the roles played by the traditional community leaders. Those with the higher social conscience must come forward to give of their time to get things done for the community. This is one of the strengths of Singaporean society, the absence of class divisions. It grew from our immigrant history. All started at or near the bottom. The successful immigrants have a tradition of helping the less successful.
  27. Good governance includes the pursuit of national interest regardless of theories or ideologies. Good government is pragmatic government.
  28. No army, however brave, can win when its generals are weak.
  29. Singapore’s progress, its verve, its vitality is assured because the administrative machine works. There is no grit. You don’t have to grease somebody to crank up the machine. We must keep it that way. To ensure this, I am thinking of an amendment to the law. The innovation is: if any official is found with wealth which cannot be explained and there is uncorroborative evidence of corruption, his whole property can be sequestered.
  30. Singaporean teachers feel unhappy at the higher salaries paid to native English teachers. Well, this cannot be avoided. We have to pay them what will bring them to Singapore – the market rate in the UK plus an extra to attract them to Singapore. I frequently meet expat bankers, executives of multinationals, indeed occasionally expat officers working for the Singapore government on contract, who are paid more than I am. I have learned not to let it disturb me. 
  31. It would be stupid for us not to recognise that language and culture is a stronger force that motivates human beings than political or ideological ideals.
  32. I learnt as a student that a word has three meanings: what the speaker intends it to mean; what the mass of people understand it to mean; what I understand it to mean.
  33. I paid a heavy price for not having learned Mandarin when young. To this day I meet my teacher/friend once a week to keep my Mandarin alive. Every day I spend 20 minutes listening to Mandarin lessons on tape and 15 minutes reading ZaoBao, or Chinese newspapers online. These keep up my passive vocabulary.
  34. Every time I think of people whom I have met and known as friends in school or in college, I think of those who became too de-culturalised too quickly. I had a friend who was a Sikh. He threw his past away: he shaved his beard; he threw away his turban; he had a haircut. No harm at all. But something happened to him and in next to no time, he was doing foolish things. He lost his anchorage. You know, it gets very difficult for a ship without an anchor in a harbour when it gets stormy. I want you therefore, to have your anchorage. But slowly, we must begin to learn to have the same basic points of anchorage. It may take a hundred years.
  35. Whatever our race or religion, it is what we produce that entitles us to what we get, not our race or religion. Developing the economy, increasing productivity, increasing returns, these make sense only when fair play and fair shares make it worth everyone’s while to put in his share of effort for group survival and group prosperity.
  36. A US-style constitution failed [in the Philippines] long before Marcos declared martial law. It was re-adopted in 1987 by President Aquino. The system worked in America because of a super-abundance of resources and riches in a vast underpopulated continent. I do not believe that Korea, Taiwan, Hong Kong or Singapore could have succeeded as they have done if they had to work under such a constitution, where gridlock on every major issue is a way of life. And you will notice that since the Vietnam War and the Great Society some 28 years ago, the US system has not functioned even for the United States. 
  37. If the US tries to thwart China’s growth, China will surely want to return the compliment when it can do so. 
  38. Japan’s best investment is in the younger generation of potential leaders of China. The more Chinese students there are in Japan, especially the children of central and provincial leaders, the better the prospects for long-term understanding and cooperation between the two countries.
  39. Americans are not criticising Singapore because they are concerned about democracy and human rights enjoyed by three million Singaporeans. Whether Singapore succeeds as a multiracial community in Southeast Asia or fails makes little difference to the future of America. Their real interest is what Freedom House has stated, that Singapore sets the wrong example for China, showing China that it can maintain social discipline and order with high economic growth but without becoming a full-fledged American-style democracy. This is the reason why the American media always attacks Singapore.
  40. From time to time in the history of human civilisations, more civilised, more cultivated societies, with higher standards of living, have been overrun and subjugated by barbaric and less advanced groups. So the Roman Empire fell. And so successive Chinese and Indian civilisations were conquered by virile warrior races, who were socially and culturally of a cruder order, and less sophisticated in their social organisations. We must be on our toes all the time. We must never allow this to happen to Singapore through our growing self-indulgent and soft.
  41. Our basic approach is never to allow fears and tensions to grow and mount in intensity. Early preventive action can forestall an ugly build-up. So whether it is a communist conspiracy to create pressure points for mass action, or growing interracial or inter-religious frictions and tension, they have to be defused early.
  42. The communists failed because it was a propaganda based on the barricade, and you get men running to the barricades only if they are really hungry, really desperate. Then, they are prepared to take up the stone, throw it into the glass window, turn the car over and burn it. When they are not desperate, when they are reasonably fed, reasonably clothed, I won’t say contented, but not altogether frustrated and dissatisfied, then argument and reason become operative factors.
    1. Mao Zedong said: “A single spark can light a prairie fire.” LEE: A prairie fire will only start if there’s a dry spell.
  43. Communism, like so many other things, is best met when one knows it and gets immune to it. I believe the policy of complete isolation from communist thought, tactics, thinking, policy, is a dangerous thing. One day the windows will come open and like the South Sea islanders, when they first meet the tuberculosis bacilli, we will all perish. It is better to let these things come in gradual doses, containable, enough to generate a counter toxin in our wholesome society.
  44. The difficulty arises from America’s expressed desire to make China more democratic. China resents and resists this as an interference in its domestic matters. Outside powers cannot re-fashion China into their own image. Let us not forget that even China’s conquerors like the Mongols in the 13th and 14th centuries, and the Manchus in the 17th to 19th centuries, could not change Chinese culture. Instead China changed them and they were absorbed and assimilated. The language and culture of its conquerors could not overcome Chinese language and culture.
  45. Fortunately, we never attempted to subsidise rice or other staple foodstuffs. Those governments which have done so face grave problems, as more and more of their revenue goes into feeding more and more mouths at subsidised prices, generating overpopulation, under-education, low economic growth, massive unemployment and resulting social unrest. And this is what has happened because elected governments in several new countries have baulked at taking unpopular decisions.
  46. While the western MNCs have the know-how, the Asian conglomerates have the know-who as they are conveniently plugged into the social, cultural, political and business networks in the region.
  47. Like Nehru, I had been influenced by the ideas of the British Fabian Society. But I soon realised that before distributing the pie I had first to bake it. So I departed from welfarism because it sapped a people’s self-reliance and their desire to excel and succeed. I also abandoned the model of industrialisation through import substitution. When most of the Third World was deeply suspicious of exploitation by western MNCs, Singapore invited them in. They helped us grow, brought in technology and know-how, and raised productivity levels faster than any alternative strategy could.
    1. See How Asia Works
  48. Every citizen already feels he has a stake, a sense of proprietorship, in the stability and progress of Singapore. Every citizen can expect to get his commensurate shares of the prosperity to which he has contributed.
  49. For over 30 years we have aimed for an egalitarian society. If we want to have successful entrepreneurs, Singaporeans have to accept a greater income disparity between the successful and the not so successful.
  50. Knowledge and technology once disseminated, cannot be put back into the bottle and corked up.
  51. We cannot predict which of our younger managers, engineers and professionals will have the entrepreneurial flair. It has to be by trial and error, tossing them into the deep end of the pool.
  52. Corporations that get their ideas from only one culture will lose out on innovations.
  53. Japanese people have been excellent in perfecting technologies. The standard example was the way they improved on the Chinese abacus which has seven beads, two above, five below, rounded and noisy. The Japanese reduced the seven beads to five, one above, four below, with sharp edges, silent and fast. So too Japanese chopsticks. The pointed ends make it easier to manage small rounded morsels like peanuts that are difficult to handle with the Chinese chopsticks. This ability to improve on present technology is worth preserving and maintaining. But improving on what others have invented is not enough. You have to be like the Americans and invent products that others have not thought of, that will be desired and bought by billions across the world.
  54. No nation has ever become the major power without a clear lead in technology, both civilian and military. From the Roman legions, to the naval powers of Portugal, Spain and Great Britain, to Germany in World War I and the US post-World War II, great power status was achieved by those nations that were able to harness their technological advantage for holistic development of their civilian and military capabilities.
  55. In the earlier stages of our labour movement, the trade union often became a place of refuge for the inefficient, the slack, the lazy and the anti-social. As has happened elsewhere, these are the first to join the union to seek protection against the natural desire of any employer to be rid of bad workers. […] I am not asking our trade union leaders, in an open democratic society, to take on the role of management. But I do urge them, with the help of these new laws, to stop giving cover to those who do not pull their weight. We must avoid slipping into a situation where trade unionism is the practice of protecting the weakest and the slowest worker and, with everybody being paid the same wage, nobody will have the slightest incentive to work harder than the weakest and the slowest.
  56. We are mindful of the dangers of high welfare and unemployment benefits, watching the consequences of this compassionate policy on the job-seeking habits of the unemployed. Visiting the major cities of the industrial countries, I am struck by this curious phenomena of high unemployment and yet a shortage of waiters, cab drivers, nurses and garbage collectors. Some jobs are not worth doing, as a result of welfare benefits. Whatever principles may be applicable in highly developed industrial countries, for a resource-poor country like Singapore, hard work, and high performance amply rewarded, is the best way to attract capital and technology into the country to generate wealth.
  57. When people get equal handouts, whether or not they work harder or better, everybody then works less hard. The country must go down. It is when people are encouraged to excel by being able to keep a large part of the extra reward earned by their extra efforts that the society as a whole becomes wealthier and everyone thrives and prospers.
  58. I believe that life is a process of continuous change and a constant struggle to make that change one for the better.
  59. Even in the capitalist West where they have tried throwing money at problems, what is the end result? You go down New York, Broadway. You will see the beggars, people on the streets. Worse than in the 1950s and in the early ’60s before the Great Society programmes. Why? Why did it get worse after compassion moved a President, motivated with a great vision of a society which was wealthy and cared for, could look after everybody – the blacks, the minorities, the dispossessed, the disadvantaged. There is more unhappiness and more hardship today and more beggars, more muggers. Why is that? Have we not learnt? Where are the beggars in Singapore? Show me. I take pride in that. Has anybody died of starvation? Anybody without a home left to die in the streets and have to be collected as dead corpses? Because we came to the realistic conclusion that the human being is motivated by instincts that go deep down into the basic genes of life. And the first basic instinct is to protect yourself, and stronger than that, to protect your offspring so that there is the next generation. You kill that link, you have killed off mankind.
  60. East Asians are highly competitive peoples training themselves to win life’s marathons.
  61. My experience in governing Singapore, especially the difficult early years from 1959 to 1969, convinced me that we would not have surmounted our difficulties and setbacks if a large part of the population of Singapore were not imbued with Confucian values. The people had a group cohesion and a pragmatic approach to government and to the problems in society. Confucianist traditions have made Chinese Singaporeans revere scholarship and academic excellence, and also respect officials when they are chosen on the basis of their scholarship.
  62. They accepted that the interests of society were above that of the individual. They did not believe in the unlimited individualism of the Americans…One fundamental difference between American and Oriental culture is the individual’s position in society. In American culture an individual’s interest is primary. This makes American society more aggressively competitive, with a sharper edge and higher performance. In Singapore, the interests of the society take precedence over that of the individual. Nevertheless Singapore has to be competitive in the market for jobs, goods and services. On the other hand the government helps lower income groups to meet their needs for housing, health services and education so that their children will have more of an equal chance to rise through education.
  63. The first principle of any civilisation is orderly living and the rearing of the young.
  64. There is one aspect of this process of change or modernisation which we must avoid at all costs – that is the break up of the three-generation family. The three-generation family is a rarity now in Western Europe and in America. Yet it is still common in Japan, South Korea, Taiwan and Hong Kong, despite their industrialisation and modernisation. It is a question of family structure, of social framework, of filial ties and bonds, which hold family units together. Our strong family structure has been a great strength for continuity in bringing up our next generation. The family has transmitted social values, more by osmosis than by formal instruction. We must preserve this precious family structure if our society is to regenerate itself without loss of cultural vigour, compassion and wisdom. There is another compelling reason why we must preserve the three-generation family: simply, that we do not have the land to build the flats needed if we break up the three-generation family.
  65. That we have the will, the ability and the discipline with which to acquire higher knowledge and new skills, there is little doubt. The question is whether the next generation will have the same drive to keep well out in front fighting against the complacency which greater comfort and ease bring in their train.
  66. If I have to choose one profession in which you give the most for the least it is probably teaching – if you take it seriously. You have to have the temperament for it to coax, to stimulate, to cajole, to discipline a young mind into good habits. You must have an aptitude.
  67. We have given every student, regardless of language, race or religion, equal opportunities for education and employment. Hundreds get scholarships every year, over 150 to go to universities abroad. All are judged and rewarded according to their performance, not their fathers’ wealth or status. Economic progress has resulted from this and made life better for all. This has checked communist subversion and recruitment, especially of good cadres.
  68. Performance in examinations depends upon two factors: nature and nurture – nature being the natural intelligence of the child, nurture being the training and education. Or to use computer language, it depends on hardware and software, the hardware is the size or capacity of the computer, and the software is the teaching or educational programme. What weightings are allotted to hardware as against software, or nature against nurture, is a matter of deep controversy between the experts, the psychologists and doctors. The fact is, individuals are born with different capacities. What we must set out to do, therefore, is to help students achieve the maximum potential of whatever nature has endowed them with. In other words, to nurture them, to give them the software, to encourage, support and help them to achieve their fullest.
    1. I had never thought of nature/nurture through this analogy and find it intriguing
  69. If we want high morale, we must have high standards. If we want high standards, the law must be enforced fairly and firmly. There will be no squatters or beggars sleeping on our pavements doing their ablutions in our drains. People will be housed and cared for. Hawkers will not clog up the main streets. There will be thorough and proper cleansing every day of the year. Laws will have to be passed to help rid us of the malpractices that have crept into our workforce. Only a year before last, malingering and shirking and sabotage to create overtime and treble pay for public holidays was a way of life. Discipline and efficiency must be re-established.
  70. It is Asian values that have enabled Singapore to contain its drug problem. To protect the community we have passed laws which entitle police, drug enforcement or immigration officers to have the urine of any person who behaves in a suspicious way tested for drugs. If the result is positive, treatment is compulsory. Such a law in the United States will be unconstitutional, because it will be an invasion of privacy of the individual.
  71. Rest on laurels? I wish I could do that. No, you rest when you’re dead.
  72. I always tried to be correct, not politically correct.
  73. At the end of the day, what I cherish most are the human relationships. With the unfailing support of my wife and partner I have lived my life to the fullest. It is the friendships I made and the close family ties I nurtured that have provided me with that sense of satisfaction at a life well lived, and have made me what I am.

What I got out of it

  1. Amazing lessons from one of our generation’s great leaders and nation builders. Do what works, be pragmatic, honor incentives and human nature, have conviction

Anything You Want: 40 lessons for new kind of Entrepreneur by Derek Sivers

Summary

  1. “I hope you find these ideas useful in your own life or business. I also hope you disagree with some of them. Then I hope you email me to tell me about your different point of view, because that’s my favorite part of all. (I’m a student, not a guru.)”

Key Takeaways

  1. What’s Your Compass?
    1. Business is not about money. It’s about making dreams come true for others and for yourself
    2. Making a company is a great way to improve the world while improving yourself
    3. When you make a company, you make a utopia. It’s where you design your perfect world
    4. Never do anything just for the money
    5. Don’t pursue business just for your own gain. Only answer the calls for help
    6. Success comes from persistently improving and inventing, not from persistently promoting what’s not working
    7. Your business plan is moot. You don’t know what people really want until you start doing it.
    8. Starting with no money is an advantage. You don’t need money to start helping people
    9. You can’t please everyone, so proudly exclude people
    10. Make yourself unnecessary to the running of your busienss
    11. The real point of doing anything is to be happy, so do only what makes you happy
  2. If it’s not a hit, switch
    1. We’ve all heard about the importance of persistence. But I think had misunderstood. Success comes from persistently improving and inventing, not from persistently doing what’s not working. When you present one to the world and it’s not a hit, don’t keep pushing it as is. Instead, get back to improving and inventing
  3. No “yes.” Either “Hell yeah!” or “no.”
  4. The advantage of no funding
    1. Never forget that absolutely everything you do is for your customers. Make every decision – even decisions about whether to expand the business, raise money, or promote someone – according to what’s best for your customers. If you’re ever unsure what to prioritize, just ask your customers the open-ended question, “How can I best help you now?” Then focus on satisfying those requests. None of your customers will ask you to turn your attention to expanding. They want you to keep your attention focused on them. It’s counter-intuitive, but the way to grow your business is to focus entirely on your existing customers. Just thrill them, and they’ll tell everyone. 
  5. Proudly exclude people
  6. This is just one of many options
    1. You can’t pretend there’s only one way to do it. Your first idea is just one of many options. No business goes as planned, so make ten radically different plans. Same thing with your current path in life
  7. How do you grade yourself?
    1. Knowing what you’re keeping track of determines how you play the game
  8. Care more about your customers than you do yourself. 
    1. That’s the Tao of Business: care about customers more than about yourself, and you’ll do well
  9. Act like you don’t need the money
    1. It’s another Tao of business: set up your business like you don’t need the money, and it’ll likely come your way
  10. The most successful email I ever wrote
    1. Your CD has been gently taken from our CD Baby shelves with sterilized contamination-free gloves and placed onto a satin pillow. A team of 50 employees inspected your CD and polished it to make sure it was in the best possible condition before mailing. Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD into the finest gold-lined box that money can buy. We all had a wonderful celebration afterwards and the whole party marched down the street to the post office where the entire town of Portland waved “Bon Voyage!” to your package, on its way to you, in our private CD Baby jet on this day, Friday, June 6th. I hope you had a wonderful time shopping at CD Baby. We sure did. Your picture is on our wall as “Customer of the Year.” We’re all exhausted but can’t wait for you to come back to CDBABY.COM!!
    2. When you’re thinking of how to make your business bigger, it’s tempting to try to think all the big thoughts and come up with world-changing massive-action plans. But please know that it’s often the tiny details that really thrill people enough to make them tell all their friends about you
  11. Delegate or Die: The self-employment trap
    1. Always do whatever would make the customer happiest, as long as it’s not outrageous. Little gestures like these go a long way toward him telling his friends we’re a great company
  12. Make it anything you want
    1. Never forget that you can make your role anything you want it to be. Anything you hate to do, someone else loves. So find that person and let her do it. 
  13. Delegate, but don’t abidcate

What I got out of it

  1. A great, quick book which is fun and has a lot of worthwhile lessons. While all 40 lessons are key, I’ve only included the ones that seem most relevant/differentiated. Make yourself unnecessary, build a business for the love of it

The Idea Factory: Bell Labs and the Great Age of American Innovation by Jon Gertner

Summary

  1. “This book is about innovation—about how it happens, why it happens, and who makes it happen. It is likewise about why innovation matters, not just to scientists, engineers, and corporate executives but to all of us. That the story is about Bell Labs, and even more specifically about life at the Labs between the late 1930s and the mid-1970s, isn’t a coincidence.” The people helping to make it happen including Mervin Kelly, Jim Fisk, William Shockley, Claude Shannon, John Pierce, and William Baker.

Key Takeaways

  1. Where is the knowledge we have lost in information? —T. S. Eliot, The Rock
  2. Yet understanding the circumstances that led up to that unusual winter of 1947 at Bell Labs, and what happened there in the years afterward, promises a number of insights into how societies progress. With this in mind, one might think of a host of reasons to look back at these old inventions, these forgotten engineers, these lost worlds.
  3. Edison’s genius lay in making new inventions work, or in making existing inventions work better than anyone had thought possible. But how they worked was to Edison less important.
  4. Contrary to its gentle image of later years, created largely through one of the great public relations machines in corporate history, Ma Bell in its first few decades was close to a public menace—a ruthless, rapacious, grasping “Bell Octopus,” as its enemies would describe it to the press. “The Bell Company has had a monopoly more profitable and more controlling—and more generally hated—than any ever given by any patent,” one phone company lawyer admitted.
  5. AT&T’s savior was Theodore Vail, who became its president in 1907, just a few years after Millikan’s friend Frank Jewett joined the company.11 In appearance, Vail seemed almost a caricature of a Gilded Age executive: Rotund and jowly, with a white walrus mustache, round spectacles, and a sweep of silver hair, he carried forth a magisterial confidence. But he had in fact begun his career as a lowly telegraph operator. Thoughtfulness was his primary asset; he could see almost any side of an argument. Also, he could both disarm and outfox his detractors. As Vail began overseeing Bell operations, he saw that the costs of competition were making the phone business far less profitable than it had been—so much so, in fact, that Vail issued a frank corporate report in his first year admitting that the company had amassed an “abnormal indebtedness.” If AT&T were to survive, it had to come up with a more effective strategy against its competition while bolstering its public image.
  6. Vail didn’t do any of this out of altruism. He saw that a possible route to monopoly—or at least a near monopoly, which was what AT&T had always been striving for—could be achieved not through a show of muscle but through an acquiescence to political supervision. Yet his primary argument was an idea. He argued that telephone service had become “necessary to existence.” Moreover, he insisted that the public would be best served by a technologically unified and compatible system—and that it made sense for a single company to be in charge of it. Vail understood that government, or at least many politicians, would argue that phone subscribers must have protections against a monopoly; his company’s expenditures, prices, and profits would thus have to be set by federal and local authorities. As a former political official who years before had modernized the U.S. Post Office to great acclaim, Vail was not hostile toward government. Still, he believed that in return for regulation Ma Bell deserved to find the path cleared for reasonable profits and industry dominance. In Vail’s view, another key to AT&T’s revival was defining it as a technological leader with legions of engineers working unceasingly to improve the system.
  7. The Vail strategy, in short, would measure the company’s progress “in decades instead of years.” Vail also saw it as necessary to merge the idea of technological leadership with a broad civic vision. His publicity department had come up with a slogan that was meant to rally its public image, but Vail himself soon adopted it as the company’s core philosophical principle as well. It was simple enough: “One policy, one system, universal service.” That this was a kind of wishful thinking seemed not to matter.
  8. “Of its output,” Arnold would later say of his group, “inventions are a valuable part, but invention is not to be scheduled nor coerced.” The point of this kind of experimentation was to provide a free environment for “the operation of genius.” His point was that genius would undoubtedly improve the company’s operations just as ordinary engineering could. But genius was not predictable. You had to give it room to assert itself.
  9. From the start, Jewett and Arnold seemed to agree that at West Street there could be an indistinctness about goals. Who could know in advance exactly what practical applications Arnold’s men would devise? Moreover, which of these ideas would ultimately move from the research department into the development department and then mass production at Western Electric? At the same time, they were clear about larger goals. The Bell Labs employees would be investigating anything remotely related to human communications, whether it be conducted through wires or radio or recorded sound or visual images.
  10. The industrial lab showed that the group—especially the interdisciplinary group—was better than the lone scientist or small team. Also, the industrial lab was a challenge to the common assumption that its scientists were being paid to look high and low for good ideas. Men like Kelly and Davisson would soon repeat the notion that there were plenty of good ideas out there, almost too many. Mainly, they were looking for good problems.
  11. Quantum mechanics, as it was beginning to be called, was a science of deep surprises, where theory had largely outpaced the proof of experimentation. Some years later the physicist Richard Feynman would elegantly explain that “it was discovered that things on a small scale behave nothing like things on a large scale.” In the quantum world, for instance, you could no longer say that a particle has a certain location or speed. Nor was it possible, Feynman would point out, “to predict exactly what will happen in any circumstance.”
  12. The Great Depression, as it happened, was a boon for scientific knowledge. Bell Labs had been forced to reduce its employees’ hours, but some of the young staffers, now with extra time on their hands, had signed up for academic courses at Columbia University in uptown Manhattan.
  13. “The [Bell] System,” Danielian pointed out, “constitutes the largest aggregation of capital that has ever been controlled by a single private company at any time in the history of business. It is larger than the Pennsylvania Railroad Company and United States Steel Corporation put together. Its gross revenues of more than one billion dollars a year are surpassed by the incomes of few governments of the world. The System comprises over 200 vassal corporations. Through some 140 companies it controls between 80 and 90 percent of local telephone service and 98 percent of the long-distance telephone wires of the United States.”
  14. The 512A was an example of how, if good problems led to good inventions, then good inventions likewise would lead to other related inventions, and that nothing was too small or incidental to be excepted from improvement. Indeed, the system demanded so much improvement, so much in the way of new products, so much insurance of durability, that new methods had to be created to guarantee there was improvement and durability amid all the novelty.
  15. We usually imagine that invention occurs in a flash, with a eureka moment that leads a lone inventor toward a startling epiphany. In truth, large leaps forward in technology rarely have a precise point of origin. At the start, forces that precede an invention merely begin to align, often imperceptibly, as a group of people and ideas converge, until over the course of months or years (or decades) they gain clarity and momentum and the help of additional ideas and actors. Luck seems to matter, and so does timing, for it tends to be the case that the right answers, the right people, the right place—perhaps all three—require a serendipitous encounter with the right problem. And then—sometimes—a leap. Only in retrospect do such leaps look obvious.
  16. There was something in particular about the way he [William Shockley] solved difficult problems, looking them over and coming up with a method—often an irregular method, solving them backward or from the inside out or by finding a trapdoor that was hidden to everyone else—to arrive at an answer in what seemed a few heartbeats.
  17. By intention, everyone would be in one another’s way. Members of the technical staff would often have both laboratories and small offices—but these might be in different corridors, therefore making it necessary to walk between the two, and all but assuring a chance encounter or two with a colleague during the commute. By the same token, the long corridor for the wing that would house many of the physics researchers was intentionally made to be seven hundred feet in length. It was so long that to look down it from one end was to see the other end disappear at a vanishing point. Traveling its length without encountering a number of acquaintances, problems, diversions, and ideas would be almost impossible. Then again, that was the point. Walking down that impossibly long tiled corridor, a scientist on his way to lunch in the Murray Hill cafeteria was like a magnet rolling past iron filings.
  18. Essentially Kelly was creating interdisciplinary groups—combining chemists, physicists, metallurgists, and engineers; combining theoreticians with experimentalists—to work on new electronic technologies.
  19. If the ingredients in the alloy weren’t pure—if they happened to contain minute traces of carbon, oxygen, or nitrogen, for instance—Permendur would be imperfect. “There was a time not so long ago when a thousandth of a percent or a hundredth of a percent of a foreign body in a chemical mixture was looked upon merely as an incidental inclusion which could have no appreciable effect on the characteristics of the substance,” Frank Jewett, the first president of the Labs, explained. “We have learned in recent years that this is an absolutely erroneous idea.”
  20. For Scaff and Theurer—and, in time, the rest of the solid-state team at Bell Labs—one way to think of these effects was that purity in a semiconductor was necessary. But so was a controlled impurity. Indeed, an almost vanishingly small impurity mixed into silicon, having a net effect of perhaps one rogue atom of boron or phosphorus inserted among five or ten million atoms of a pure semiconductor like silicon, was what could determine whether, and how well, the semiconductor could conduct a current. One way to think of it—a term that was sometimes used at the Labs—was as a functional impurity.
  21. The formal purpose of the new solid-state group was not so much to build something as to understand it. Officially, Shockley’s men were after a basic knowledge of their new materials; only in the back of their minds did a few believe they would soon find something useful for the Bell System.
  22. On November 17, Brattain and an electrochemist in the solid-state group, Robert Gibney, explored whether applying an electrolyte—a solution that conducts electricity—in a particular manner would help cut through the surface states barrier. It did. Shockley would later identify this development as a breakthrough and the beginning of what he called “the magic month.” In time, the events of the following weeks would indeed be viewed by some of the men in terms resembling enchantment—the team’s slow, methodical success effecting the appearance of preordained destiny. For men of science, it was an odd conclusion to draw. Yet Walter Brattain would in time admit he had “a mystical feeling” that what he ultimately discovered had been waiting for him.
  23. Any Bell scientist knew about the spooky and coincidental nature of important inventions. The origins of their entire company—Alexander Bell’s race to the patent office to beat Elisha Gray and become the recognized inventor of the telephone—was the textbook case.
  24. If an idea begat a discovery, and if a discovery begat an invention, then an innovation defined the lengthy and wholesale transformation of an idea into a technological product (or process) meant for widespread practical use. Almost by definition, a single person, or even a single group, could not alone create an innovation. The task was too variegated and involved.
  25. “It is the beginning of a new era in telecommunications and no one can have quite the vision to see how big it is,” Mervin Kelly told an audience of telephone company executives in 1951. Speaking of the transistor, he added that “no one can predict the rate of its impact.” Kelly admitted that he wouldn’t see its full effect before he retired from the Labs, but that “in the time I may live, certainly in 20 years,” it would transform the electronics industry and everyday life in a manner much more dramatic than the vacuum tube. The telecommunications systems of the future would be “more like the biological systems of man’s brain and nervous system.” The tiny transistor had reduced dimensions and power consumption “so far that we are going to get into a new economic area, particularly in switching and local transmission, and other places that we can’t even envision now.” It seemed to be some kind of extended human network he had in mind, hazy and fantastical and technologically sophisticated, one where communications whipped about the globe effortlessly and where everyone was potentially in contact with everyone else.
  26. He could remember, too, that as the tubes became increasingly common—in the phone system, radios, televisions, automobiles, and the like—they had come down to price levels that once seemed impossible. He had long understood that innovation was a matter of economic imperatives. As Jack Morton had said, if you hadn’t sold anything you hadn’t innovated, and without an affordable price you could never sell anything. So Kelly looked at the transistor and saw the past, and the past was tubes. He thereby intuited the future.
  27. “A Mathematical Theory of Communication”—“the magna carta of the information age,” as Scientific American later called it—wasn’t about one particular thing, but rather about general rules and unifying ideas. “He was always searching for deep and fundamental relations,” Shannon’s colleague Brock McMillan explains. And here he had found them. One of his paper’s underlying tenets, Shannon would later say, “is that information can be treated very much like a physical quantity, such as mass or energy.”
  28. One shouldn’t necessarily think of information in terms of meaning. Rather, one might think of it in terms of its ability to resolve uncertainty. Information provided a recipient with something that was not previously known, was not predictable, was not redundant. “We take the essence of information as the irreducible, fundamental underlying uncertainty that is removed by its receipt,” a Bell Labs executive named Bob Lucky explained some years later. If you send a message, you are merely choosing from a range of possible messages. The less the recipient knows about what part of the message comes next, the more information you are sending.
  29. (1) All communications could be thought of in terms of information; (2) all information could be measured in bits; (3) all the measurable bits of information could be thought of, and indeed should be thought of, digitally. This could mean dots or dashes, heads or tails, or the on/off pulses that comprised PCM.
  30. His calculations showed that the information content of a message could not exceed the capacity of the channel through which you were sending it. Much in the same way a pipe could only carry so many gallons of water per second and no more, a transmission channel could only carry so many bits of information at a certain rate and no more. Anything beyond that would reduce the quality of your transmission. The upshot was that by measuring the information capacity of your channel and by measuring the information content of your message you could know how fast, and how well, you could send your message. Engineers could now try to align the two—capacity and information content.
  31. Shannon’s paper contained a claim so surprising that it seemed impossible to many at the time, and yet it would soon be proven true. He showed that any digital message could be sent with virtual perfection, even along the noisiest wire, as long as you included error-correcting codes—essentially extra bits of information, formulated as additional 1s and 0s—with the original message. In his earlier paper on cryptography, Shannon had already shown that by reducing redundancy you could compress a message to transmit its content more efficiently. Now he was also demonstrating something like the opposite: that in some situations you could increase the redundancy of a message to transmit it more accurately.
  32. And yet Kelly would say at one point, “With all the needed emphasis on leadership, organization and teamwork, the individual has remained supreme—of paramount importance. It is in the mind of a single person that creative ideas and concepts are born.” There was an essential truth to this, too—John Bardeen suddenly suggesting to the solid-state group that they should consider working on the hard-to-penetrate surface states on semiconductors, for instance. Or Shockley, mad with envy, sitting in his Chicago hotel room and laying the groundwork for the junction transistor. Or Bill Pfann, who took a nap after lunch and awoke, as if from an edifying dream, with a new method for purifying germanium. Of course, these two philosophies—that individuals as well as groups were necessary for innovation—weren’t mutually exclusive. It was the individual from which all ideas originated, and the group (or the multiple groups) to which the ideas, and eventually the innovation responsibilities, were transferred.
  33. He would acknowledge that building devices like chess-playing machines “might seem a ridiculous waste of time and money. But I think the history of science has shown that valuable consequences often proliferate from simple curiosity.” “He never argued his ideas,” Brock McMillan says of Shannon. “If people didn’t believe in them, he ignored those people.”
  34. In truth, the handoff between the three departments at Bell Labs was often (and intentionally) quite casual. Part of what seemed to make the Labs “a living organism,” Kelly explained, were social and professional exchanges that moved back and forth, in all directions, between the pure researchers on one side and the applied engineers on the other. These were formal talks and informal chats, and they were always encouraged, both as a matter of policy and by the inventive design of the Murray Hill building.
  35. Physical proximity, in Kelly’s view, was everything. People had to be near one another. Phone calls alone wouldn’t do. Kelly had even gone so far as to create “branch laboratories” at Western Electric factories so that Bell Labs scientists could get more closely involved in the transition of their work from development to manufacture.
  36. Bell Labs had the advantage of necessity; its new inventions, as one of Kelly’s deputies, Harald Friis, once said, “always originated because of a definite need.”
  37. To innovate, Kelly would agree, an institute of creative technology required the best people, Shockleys and Shannons, for instance—and it needed a lot of them, so many, as the people at the Labs used to say (borrowing a catchphrase from nuclear physics), that departments could have a “critical mass” to foster explosive ideas.
  38. There was no precise explanation as to why this was such an effective goad, but even for researchers in pursuit of pure scientific understanding rather than new things, it was obvious that their work, if successful, would ultimately be used. Working in an environment of applied science, as one Bell Labs researcher noted years later, “doesn’t destroy a kernel of genius—it focuses the mind.”
  39. An instigator is different from a genius, but just as uncommon. An instigator is different, too, from the most skillful manager, someone able to wrest excellence out of people who might otherwise fall short. Somewhere between Shannon (the genius) and Kelly (the manager), Pierce steered a course for himself at Bell Labs as an instigator. “I tried to get other people to do things, I’m lazy,” Pierce once told an interviewer.
  40. Pierce’s real talent, according to Friis and Pierce himself, was in getting people interested in something that hadn’t really occurred to them before.
  41. Pierce had been correct in some respects about the traveling wave tube’s potential. But as he came to understand, inventions don’t necessarily evolve into the innovations one might at first foresee. Humans all suffered from a terrible habit of shoving new ideas into old paradigms. “Everyone faces the future with their eyes firmly on the past,” Pierce said, “and they don’t see what’s going to happen next.”
  42. A terrestrial signal could be directed toward the orbiting satellite in space; the satellite, much like a mirror, could in turn direct the signal to another part of the globe. Pierce didn’t consider himself the inventor of this idea; it was, he would later say, “in the air.”
  43. Ideas may come to us out of order in point of time,” the first director of the Rockefeller Institute for Medical Research, Simon Flexner, once remarked. “We may discover a detail of the façade before we know too much about the foundation. But in the end all knowledge has its place.”
  44. Why move in this direction? What kind of future did the men envision? One of the more intriguing attributes of the Bell System was that an apparent simplicity—just pick up the phone and dial—hid its increasingly fiendish interior complexity. What also seemed true, and even then looked to be a governing principle of the new information age, was that the more complex the system became in terms of capabilities, speed, and versatility, the simpler and sleeker it appeared. ESS was a case in point.
  45. I liked Fisk very much. But the combination of Fisk, who didn’t know a lot about what was going on in the bowels of the place, and Julius, who knew everything about what was going on in the bowels of the place, was a good combination.”
  46. Colleagues often stood amazed that Baker could recall by name someone he had met only once, twenty or thirty years before. His mind wasn’t merely photographic, though; it worked in some ways like a switching apparatus: He tied everyone he ever met, and every conversation he ever had, into a complex and interrelated narrative of science and technology and society that he constantly updated, with apparent ease.
  47. To Pollak, this was a demonstration not of Bill Baker’s cruelty but of his acumen—in this case to push his deep belief that science rests on a foundation of inquiry rather than certainty. Also, it revealed how nimble Baker’s mind really was. “A very small number of times in my life I’ve been in the presence of somebody who didn’t necessarily answer the question I asked. They answered the question I should have asked,” Pollak says. “And Bill Baker was one of those people. And there are other people who just build a mystique and give the impression of a mystique around them. And Bill had that, too.”
  48. New titles might not have increased his influence. By the start of the 1960s Baker was engaged in a willfully obscure second career, much like the one Mervin Kelly had formerly conducted, a career that ran not sequentially like some men’s—a stint in government following a stint in business, or vice versa—but simultaneously, so that Baker’s various jobs in Washington and his job at Bell Labs intersected in quiet and complex and multifarious ways. Baker could bring innovations in communications to the government’s attention almost instantly.
  49. “So often,” says Ian Ross, who worked in Jack Morton’s department at Bell Labs doing transistor development in the 1950s, “the original concept of what an innovation will do”—the replacement of the vacuum tube, in this case—“frequently turns out not to be the major impact.” The transistor’s greatest value was not as a replacement for the old but as an exponent for the new—for computers, switches, and a host of novel electronic technologies.
  50. Innovations are to a great extent a response to need.
  51. In the wake of the 1956 agreement, AT&T appeared to be indestructible. It now had the U.S. government’s blessing. It was easily the largest company in the world by assets and by workforce. And its Bell Laboratories, as Fortune magazine had declared, was indisputably “the world’s greatest industrial laboratory.” And yet even in the 1960s and 1970s, as Bill Baker’s former deputy Ian Ross recalls, the “long, long history of worry about losing our monopoly status persisted.” To a certain extent, Bill Baker and Mervin Kelly believed their involvement in government affairs could lessen these worries. In the view of Ross and others, such efforts probably helped delay a variety of antitrust actions. Ross recalls, “Kelly set up Sandia Labs, which was run by AT&T, managed by us, and whenever I asked, ‘Why do we stay with this damn thing, it’s not our line of business,’ the answer was, ‘It helps us if we get into an antitrust suit.’ And Bell Labs did work on military programs. Why? Not really to make money. It was part of being invaluable.”
  52. The fundamental goal in making transistor materials is purity; the fundamental goal in making fiber materials is clarity. Only then can light pass through unimpeded; or as optical engineers say, only then can “losses” of light in the fiber be kept to an acceptable minimum.
  53. Indeed, a marketing study commissioned by AT&T in the fall of 1971 informed its team that “there was no market for mobile phones at any price.” Neither man agreed with that assessment. Though Engel didn’t perceive it at the time, he later came to believe that marketing studies could only tell you something about the demand for products that actually exist. Cellular phones were a product that people had to imagine might exist.
  54. Pierce later remarked that one thing about Kelly impressed him above all else: It had to do with how his former boss would advise members of Bell Labs’ technical staff when they were asked to work on something new. Whether it was a radar technology for the military or solid-state research for the phone company, Kelly did not want to begin a project by focusing on what was known. He would want to begin by focusing on what was not known. As Pierce explained, the approach was both difficult and counterintuitive. It was more common practice, at least in the military, to proceed with what technology would allow and fill in the gaps afterward. Kelly’s tack was akin to saying: Locate the missing puzzle piece first. Then do the puzzle.
  55. Shannon had become wealthy, too, through friends in the technology industry. He owned significant shares in Hewlett-Packard, where his friend Barney Oliver ran the research labs, and was deeply invested in Teledyne, a conglomerate started by another friend, Henry Singleton. Shannon sat on Teledyne’s board of directors.
  56. “Ideas and plans are essential to innovation,” he remarked, “but the time has to be right.”
  57. “It is just plain silly,” he wrote, “to identify the new AT&T Bell Laboratories with the old Bell Telephone Laboratories just because the new Laboratories has inherited buildings, equipment and personnel from the old. The mission was absolutely essential to the research done at the old Laboratories, and that mission is gone and has not been replaced.”
  58. At the time of the breakup, in fact, it was widely assumed in the business press that IBM and AT&T would now struggle for supremacy. What undermined such an assumption was the historical record: Everything Bell Labs had ever made for AT&T had been channeled into a monopoly business. “One immediate problem for which no amount of corporate bulk can compensate is the firm’s lack of marketing expertise,” one journalist, Christopher Byron of Time, noted. It was a wise point. Bell Labs and AT&T had “never really had to sell anything.”3 And when they had tried—as was the case with the Picturephone—they failed. Government regulation, as AT&T had learned, could be immensely difficult to manage and comply with. But markets, they would soon discover, were simply brutal. AT&T’s leaders, such as CEO Charlie Brown, “had never had the experience or the training to compete,” Irwin Dorros, a former Bell Labs and AT&T executive, points out. “They tried to apply the skills that they grew up with, and it didn’t work.” In later years, the downsizing at Bell Labs, in terms of both purpose and people, would mostly be linked to this inability to compete.
  59. The purpose of innovation is sometimes defined as new technology. But the point of innovation isn’t really technology itself. The point of innovation is what new technology can do. “Better, or cheaper, or both”—Kelly’s rule—is one way to think about this goal.
  60. A large group of physicists, certainly, created a healthy flow of ideas. But Kelly believed the most valuable ideas arose when the large group of physicists bumped against other departments and disciplines, too. “It’s the interaction between fundamental science and applied science, and the interface between many disciplines, that creates new ideas,” explains Herwig Kogelnik, the laser scientist. This may indeed have been Kelly’s greatest insight.
  61. Eugene Kleiner, moreover, a founding partner at the premier venture capital firm Kleiner Perkins, was originally hired by Bill Shockley at his ill-fated semiconductor company. But the Silicon Valley process that Kleiner helped develop was a different innovation model from Bell Labs. It was not a factory of ideas; it was a geography of ideas. It was not one concentrated and powerful machine; it was the meshing of many interlocking small parts grouped physically near enough to one another so as to make an equally powerful machine. The Valley model, in fact, was soon so productive that it became a topic of study for sociologists and business professors. They soon bestowed upon the area the title of an “innovation hub.”
  62. “You may find a lot of controversy over how Bell Labs managed people,” John Mayo, the former Bell Labs president, says. “But keep in mind, I don’t think those managers saw it that way. They saw it as: How do you manage ideas? And that’s very different from managing people. So if you hear something negative about how John Pierce managed people, I’d say, well, that’s not surprising. Pierce wasn’t about managing people. Pierce was about managing ideas. And you cannot manage ideas and manage people the same way. It just doesn’t work. So if somebody tells you Pierce wasn’t a great manager . . . you say, of what?”
  63. Pierce, to put it simply, was asking himself: What about Bell Labs’ formula was timeless? In his 1997 list, he thought it boiled down to four things: A technically competent management all the way to the top. Researchers didn’t have to raise funds. Research on a topic or system could be and was supported for years. Research could be terminated without damning the researcher.
  64. What seems more likely, as the science writer Steven Johnson has noted in a broad study of scientific innovations, is that creative environments that foster a rich exchange of ideas are far more important in eliciting important new insights than are the forces of competition.
  65. To think long-term toward the revolutionary, and to simultaneously think near-term toward manufacturing, comprises the most vital of combinations.

What I got out of it

  1. The dominance of AT&T and how they were able to structure the organization to take advantage of the talent at Bell Labs was great to learn more about. Having to build or invent something which will have to go to market is important, having a diverse group of people who interact often, and “A technically competent management all the way to the top. Researchers didn’t have to raise funds. Research on a topic or system could be and was supported for years. Research could be terminated without damning the researcher.”

First Principles of Value Creation by Joe Plumeri

A beautiful read that is worth reading and re-reading. Joe was CEO of North America at Citi which was the best performing stock in the 1990s and now is a senior executive at KRR, having turned around Willis and First Data. In this 2019 talk he shares eight of his first principles of value creation

Plumeri’s 8 Principles

  1. Vision
    1. Where’s grandma’s house? Where as we going
    2. We all need a vision. Without one, people will make up their out
  2. Purpose
    1. Do you passionately care about the client and vision?
  3. Make a big deal out of everything
    1. Delegate authority but never responsibility
    2. Write notes to everyone and recognize people as often as possible
    3. Gerald Ford helping to get friend buried at Arlington made me cry
  4. Create a no doors culture
    1. Go “play in traffic” – go make things happen
  5. Create a performance-based culture
    1. Citi had a program where if you didn’t exercise the stock, then you got double the amount. That’s how Sandy Weill was able to keep everyone
    2. Gave stock wherever he worked and he always put shareholders first. Would never even visit a tourist attraction if he was traveling because it was the shareholders who had paid to get him there
    3. Ownership, team building, everybody on the same page
  6. Widen the value gap
    1. The value gap is what people or companies can do for themselves compared to what you can do for them. You always want to be expanding this gap
    2. Never be in a commodity business
    3. Are you competent or compelling?
    4. Price is an issue in the absence of value
  7. Your reach should exceed your grasp
    1. Always ask, “What else?”
  8. Surround yourself with people who want to do great things
    1. Viking effect of burning boats, getting everyone all-in

Business Adventures by John Brooks

Summary

  1. Brooks discusses 12 classic financial cases 

Key Takeaways

  1. The Ford Edsel disaster – Ford spent $250m in designing and selling the car but it was an absolute flop. 
  2. The Saunders’ story about how the founder of Piggly Wiggly tried to corner the market. 

What I got out of it

  1. I’ve heard so much about this book and was a bit disappointed. Some fun stories, but overall wouldn’t recommend

Let My People Go Surfing by Yvon Chouinard

Summary

  1. Patagonia exists to challenge conventional wisdom and present a new style of responsible business. We believe the accepted model of capitalism that necessitates endless growth and deserves the blame for the destruction of nature must be displaced. Patagonia and its two thousand employees have the means and the will to prove to the rest of the business world that doing the right thing makes a good and profitable business. Make the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.

If you’d prefer to listen to this article, use the player below.

You can also find more of my articles in audio version at Listle

Key Takeaways

  1. History
    1. Chouinard started off making pitons and replaced the European attitude of “conquering” mountains with the American view of leaving no trace
    2. We were our own best customers from the start. We made the tools, gear, clothes that we wanted.
    3. We didn’t have much competition – no one else was foolish enough to want to get into that market!
    4. Kris McDivitt when she became CEO of Patagonia – I had no business experience so I started asking people for free advice. I just called up presidents of banks and said, “I’ve been given these companies to run and I’ve no idea what I’m doing. I think someone should help me. And they did. If you just ask people for help – if you just admit that you don’t know something – they will fall all over themselves trying to help. So, from there I began building the company. I was really the translator for Yvon’s vision and aims for the company
    5. We had to surround ourselves with people we wanted to spend a lot of time with, who would be our product’s first customer. They had to come to work on the balls of their feet and go up steps two at a time, dress however they wanted, even barefoot, have all the flextime to surf the saves when they were good or be home with a sick child. We needed to blur that distinction between work and play and family
    6. I couldn’t find any American company we could use as a role model
    7. I’ve always thought of myself as an 80 percenter. I like to throw myself passionately into a sport or activity until I reach about an 80% proficiency level. To go beyond that requires an obsession and degree of specialization that doesn’t appeal to me. Once I reach that 80% level I like to go off and do something totally different; that probably explains the diversity of the Patagonia product line – and why our versatile, multifaceted clothes are the most successful.
    8. You can’t wait until you have all the answers to ask! I had faith the product was good, and I knew the market, so we forged ahead to shift our entire line of polypropylene underwear to the new Capilene polyester. Our loyal customers quickly realized the advantages of Capilene and Synchilla, and our sales soared. Other companies, just introduced rip-offs of our bunting and propylene clothes, had to scramble to keep up.
    9. I abide by the MBA – management by absence
    10. I was the outside guy, responsible for bringing back new ideas. A company needs someone to go out and get the temperature of the world, so for years I would come home excited about ideas for products, new markets, or new materials. I also began to see the environmental degradation happening. Some countries were in so much trouble that they were eating their seed corn
      1. Great term for being too short-sighted. Have to be planting your tree farm continuously, can’t be eating your seed corn
    11. Before he could help us, he said he wanted to know why we were in business. I told him the history of the company and how I considered myself a craftsman who had just happened to grow a successful business. I told him I’d always had a dream that when I had enough money, I’d just sail off to the South Seas looking for the perfect wave and the ultimate bonefish flat. We told him the reason we hadn’t sold out and retired was that we were pessimistic about the fate of the world and felt a responsibility to use our resources to do something about it. We told him about our tithing program, how we had given away a million dollars just in the past year to more than 200 organizations, and that our bottom-line reason for staying in the business was to make money we could give away.
  2. Values
    1. Never exceed your limits. You push the envelope, and you live for those moments when you’re right on the edge, but don’t go over. You have to be true to yourself; and you have to know your strengths and limitations and live within your means. The same is true from business. The sooner a company tries to be what it is not, the sooner it tries to “have it all,” the sooner it will die. It was time to apply a bit of Zen philosophy to our business
    2. The Iroquois have a 7-generation planning. As part of their decision process, the Iroquois had a person who represented the seventh generation in their future. If Patagonia could survive this crisis, we had to begin to make all our decisions as though we would be in business for 100 years. We would grow only at a rate we could sustain for that long.
    3. I’ve hard that smart investors and bankers don’t trust a growing company until it has proved itself by how it survives its first big crisis. If that’s true, then we’ve been there
    4. We have controlled our growth to what we call organic growth. We don’t force our growth by stepping out of the specialty outdoor market and trying to be who we aren’t. We let our customers tell us how much we should grow each year. Some years it could be 5% growth or 25%, which happened during the middle of the Great Recession. Customers become very conservative during recessions. They stop buying fashionable silly things. They will pay more for a product that is practical, multifunctional, and will last a long time. We thrive during recessions
    5. Some crises were created by management to keep the company in yarak, a falconry term meaning when your falcon is super alert, hungry, but not weak, and ready to hunt
  3. Product Design Philosophy
    1. Our philosophies aren’t rules, they’re guidelines. They’re the keystones of our approach to any project, and although they are “set in stone,” their application to a situation isn’t. in every long-lasting business, the methods of conducting business may constantly change, but the values, the culture, and the philosophies remain constant. At Patagonia, these philosophies must be communicated to everyone working in every part of the company, so that each of us becomes empowered with the knowledge of the right course to take, without having to follow a rigid plan or wait for orders from the boss. Living the values and knowing the philosophy of each part of the company aligns us all in a common direction, promotes efficiency, and avoids the chaos that comes from poor communication. We have made many mistakes during the past decade, but at no point have we lost our way for very long. We have the philosophies for a rough map, the only kind that’s useful in a business world whose contours, unlike those of the mountains, change constantly without much warning
    2. Having useful and high-quality products anchors our business in the real world and allows us to expand our mission. “Make the best,” period.
    3. Quality = degree of excellence
    4. Function of an object should determine its design and materials
    5. The more you know, the less you need
    6. Good design is as little design as possible
    7. We’ve found that each new line requires the hiring of 2.5 new people. The best-performing firms make a narrow range of products very well. The best firms’ products also use up to 50% fewer parts than those made by their less successful rivals. Fewer parts means a faster, simply (and usually cheaper) manufacturing process. Fewer parts means less to go wrong; quality comes built in. and although the best companies need fewer workers to look after quality control, they also have fewer defects and generate less waste
    8. I’d rather design and sell products so good and unique that they have no competition…The value of our products even seems to grow over time. In Tokyo there are stores that deal only in vintage Patagonia clothing
    9. When I’m working on a problem, I never think about beauty. I think only how to solve the problem. But when I have finished, if the solution is not beautiful, I know it is wrong – Buckminster Fuller
    10. Because of our commitment to quality, we run at such a slow pace that we’re the turtles in the fashion race. Our design and product development calendar are usually 18 months long, too long to be a contender in any new fads
      1. Use their slow cycles quality to their advantage by “missing” fads
    11. It’s almost as if every idea has its own time
  4. Production Philosophy
    1. Coming in second, even with a superior product at a better price, is often no substitute for just plain being first. This doesn’t mean we should be “chasing” trends or products. It applies more to “discovering” a new fabric or a new process. Again, the key word is discovering instead of inventing. There’s imply no time for inventing. Maintaining a sense of urgency throughout a company is one of the most difficult challenges in business. The problem is further compounded by having to depend on outside suppliers who may not have the same sense of expediency. I constantly hear people giving lame excuses of why something is impossible or why a job didn’t get done on time
    2. To stay ahead of competition, our ideas have to come from as close to the source as possible. With technical products, our “source” is the dirtbag core customer. He or she is the one using the products and finding out what works, what doesn’t, and what is needed. On the contrary, sales representatives, shop owners, salesclerks, and people in focus groups are usually not visionaries. They can tell you only what is happening now: what is in fashion, what the competition is doing, and what is selling. They are good sources of information, but the information is too old to have the leading-edge products. There are different ways to address a new or idea or project. If you take the conservative scientific route, you study the problem in your head or on paper until you are sure there is no chance of failure. However, you have taken so long that the competition has already beaten you to market. The entrepreneurial way is to immediately take a forward step and if that feels good, take another, if not, step back. Learn by doing, the process is faster
    3. The designer must work with the producer up front. this applies to every product. This team approach is concurrent rather than assembly-line manufacturing. A concurrent approach brings all participants together at the beginning of the design phase. Only about 10% of a product’s costs are incurred during the design phase, but 90% of the costs are irrevocably committed
    4. This level of quality requires a level of mutual commitment much deeper than the traditional business relationships. Mutual commitment requires nurture and trust, and those demand personal time and energy. Consequently, we do as much business a we can with as few suppliers and contractors as possible. The downside is the risk of becoming highly dependent on another company’s performance. But that’s exactly the position we want to be in because those companies are also dependent on us. Our potential success is linked. We become like friends, family, mutually selfish business partners; what’s good for them is good for us. The best often finds us attractive business partners because they know our reputation for quality, long-term relationships, that we’ll pay a fair price, commit to fabric purchases, and keep their sewing lines running at an even clip
    5. I think of Patagonia as an ecosystem, with its vendors and customers an integral part of that system. A problem anywhere in the system eventually affects the whole, and this gives everyone an overriding responsibility to the health of the whole organism. It also means that anyone, low on the totem pole or high, inside the company or out, can contribute significantly to the health of the company and to the integrity and value of our products…The whole supply chain has to be a functioning, interconnected system.
    6. You identify the goal and then forget about it and concentrate on the process
  5. Distribution Philosophy
    1. At Patagonia we sell our products at a wholesale level to dealers, sell through our own retail stores, through mail order, and through e-commerce, and do it all worldwide
    2. We fulfill orders at 93-95% throughout the selling season. This has been determined to be “ideal” because to fulfill at lower rates loses too many customers but to get to 98% is inefficient for inventory. You might have to double inventory to achieve a 98% fulfillment rate
    3. The customer should only have to make one phone call. Just as the Patagonia production philosophy requires on-time product delivery from its suppliers, so Patagonia must deliver its products on time to tis customers, and “on time” means when the customer wants it. Our model for customer service is the old-fashioned hardware store owner who knows his tools and what they’re made for. his idea of service is to wait on a customer until the customer finds the right widget for the job, no matter how long it takes.
    4. In owning our own retail stores, we’ve learned that it is far more profitable to turn that inventory more quickly than to have high margins or raise prices. This was especially true when we had to pay high interest rates on our loans. You want sharp customers who know the market and its customers. They place small orders from suppliers but more often. You don’t want to waste expensive retail space to carry extra inventory. You display the products as if it were a showroom but keep the backstock in the basement or nearby stockroom
    5. Key benefits of having a working partnership with a few good dealers
      1. We don’t have to expend the effort, time, and money to seek out new dealers
      2. We limit our credit risks
      3. We minimize the legal problems associated with cutting off a dealer whose bad service is a reflection on us
      4. We develop loyal buyers who make a commitment to the line and either carry a broad representation of the line, or in the case of a small specialty shop, in-depth inventory
      5. We maintain better control over our product and image
      6. We receive better information about the market and our products
    6. Our dealers win because they have a product line that sells year after year, protection from market saturation, a stable pricing structure, expertise from us in buying, merchandising, and displaying our products, being part of Patagonia’s synergistic marketing and distribution program.
    7. Marketing Philosophy
      1. Patagonia’s image arises directly from the values, outdoor pursuits, and passions of its founders and employees. While it has practical and nameable aspects, it can’t be made into a formula. In fact, because so much of the image relies on authenticity, a formula would destroy it. Ironically, part of Patagonia’s authenticity lies in not being concerned about having an image in the first place. Without a formula, the only way to sustain an image is to live up to it. Our image is a direct reflection of who we are and what we believe.
      2. Our guidelines for all promotional efforts
        1. Our charter is to inspire and educate rather than promote
        2. We would rather earn credibility than buy it. The best resources for us are the word of mouth recommendation from a friend or favorable comments in the press
        3. We advertise only as a last resort and usually in sport-specific magazines
  1. Financial Philosophy
    1. Who are businesses really responsible to their customers? Shareholders? We would argue that it’s none of the above. Fundamentally, businesses are responsible to their resource base. Without a healthy environment there are no shareholders, no employees, no customers, and no business
    2. At Patagonia, making a profit is not the goal, because the Zen master would say profits happen “when you do everything else right.” In our company, finance consists of much more than management of money. It is primarily the art of leadership thought he is balancing of traditional financing approaches in a business that is anything but traditional. In many companies, the tail (finance) wags the dog (corporate decisions). We strive to balance the funding of environmental activities with the desire to continue in business for the next hundred years…We avoid, at all costs, to go on a growth at any cost (suicide) track
    3. We recognize that we make the most profit by selling to our loyal customers. A loyal customer will buy new products with little sales effort and will tell all his friends. A sale to a loyal customer is worth 6-8x more to our bottom line than a sale to another customer
    4. Quality, not price, has the highest correlation with business success
    5. Whenever we are faced with a serious business decision, the answer almost always is to increase quality. When we make a decision because it’s the right thing to do for the planet, it ends up also being good for the business
    6. Returns and bad quality in manufacturing cost millions of dollars each year. But what is the cost of a dissatisfied customer?
    7. By growing at a “natural rate,” by growing by how much our customers tell us they want our products, we do not create artificial demand for our goods by advertising. We want customer who need our clothing, not just desire it.
    8. We never wanted to be a big company. We wanted it to be the best company, and it’s easier to be the best small company than the best big company. We have to practice self-control, growth in one part of the company may have to be sacrificed to allow growth in another. It’s also important that we have a clear idea of what the limits are to this “experiment” and live within those limits, knowing that the sooner we expand beyond them, the sooner the type of company we want will die
    9. We have little to no debt and this allows us to take advantage of opportunities as they come up or invest in a start-up without having to go further in debt or find outside investors. In any age when change happens so quickly, any strategic plan must be updated at least every year. An inflexible plan is centralized planning at its worst. It is oblivious to changes in reality
    10. We win with the government as well. We don’t play games, we aim to pay our fair share but not a penny more
  2. HR Philosophy
    1. A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he always appears to be doing both. – LP Jacks
    2. A business that thrives on being different requires different types of people
    3. We provide on-site childcare because we know parents are more productive if they’re not worrying about the safety and well-being of their children. Ours has an infant care room for children as young as 8 weeks and rooms progressively for toddlers to kindergarteners. The staff-to-child ratio in all parts of the center exceeds what is required by the state, and the caregivers are highly trained, and most speak more than one language to the kids. We encourage parents to interact with their child by breast-feeding, having lunch together, or visiting at any time. More than once we have had a father who fell asleep with this child at naptime. The first few years of a child’s life are recognized as being the most important learning period of their entire lives. When their brains are actively growing is the best time for them to learn cognitive skills, including problem solving and sensory processing, and language, social, and emotional skills. They are also learning physical skills, including gross and fine motor skills, as well as perceptual skills. Our child development facility is producing one of our best products, excellent kids. The babies are constantly being held and handled by lots of caregivers; they are being raised by a whole village, with lots of stimulation and learning experiences. As a result, when a stranger says hello to them, they don’t run and hide behind their mother’s skirts
    4. There are more than 500 employees in Ventura and more than 60 children in the center. We charge the parents rates that are comparable to local child-care centers, because we fund it with another $1m in subsidies. But what appears to be a financial burden is in fact a profit center. Studies have shown that it costs a company an average of 20% of an employee’s salary to replace an employee – from recruiting costs, training, and loss of productivity. 58% of our employees in Ventura are women, and many occupy high-level management positions. Our center helps us retained our skilled moms by making it easier for women to progress in their careers. Both moms and dads are motivated to be more productive, and the center attracts great employees.
    5. One cautionary tale we learned: if you’re going to have a child development center, you also need to give at least 8 weeks of paid maternity/paternity leave (we actually offer 16 weeks fully paid leave and 4 weeks’ unpaid for the mother, as well as 12 weeks fully paid paternity leave). Otherwise, many young parents still unclear on the concept of parenthood dump the baby in the nursery as soon as possible and go back to work and to pay for the new car or whatever. Those first few months are extremely important for children’s bonding with the parents instead of child-care workers.
    6. The child development center, with tax subsidies, pays for itself, ad the cafeteria requires only a small company subsidy. Patagonia is consistently included in a list of the 100 best companies to work for and for working mothers. Why on earth would anyone run a company that was hard to work for?
  3. Management Philosophy
    1. We never order employees around, so they have to be convinced that what they’re being asked to do is right, or they have to see for themselves it’s right. Some independent people, until the point arrives that they “get it” or it becomes “their idea,” will outright refuse to do a job.
    2. In a company as complex as ours, no one person has the answer to our problems, but each has a part of its solution. The best democracy exists when decisions are made through consensus, when everyone comes to an agreement that the decision made is the correct one. Decisions based on compromise, as in politics, often leave the problem not completely solved, with both sides feeling cheated or unimportant, or worse. The key to building a consensus for action is good communication. A chief in an American Indian tribe was not elected because he was the richest or had a strong political machine; he was often chosen as chief because of his bravery and willingness to take risks and for his oratory skills, which were invaluable for building consensus within the tribe. In this information age it’s tempting for managers to manage from their desks, staring at their computer screens and sending out instructions, instead of managing by walking and talking to people. The best managers are never at their desks yet can be easily found and approached by everyone reporting to them. No one has a private office at Patagonia, and everyone works in open rooms with no doors or separation. What we lose in “quiet thinking space” is more than made up for with better communication and an egalitarian atmosphere. Animals and humans that live in groups or flocks constantly learn from another. Our cafeteria, besides servicing healthy organic food, is convenient for everyone and is open all day as an informal meeting place.
    3. Systems in nature appear to be chaotic but in reality, are very structured, just not in a top-downs centralized way. Like in an ant colony, no one ant is in charge of a colony, there is no central control. Yet each ant knows what its job is, and ants communicate with one another by way of very simple interactions; altogether they produce a very effective social network. A top-down central system like a dictatorship takes an enormous amount of force and work to keep the hierarchy in power. Of course, all top-down systems eventually collapse, leaving the system in chaos
    4. A familial company like ours runs by trust rather than on authoritarian rule. I’ve found that whenever we’ve had a top manager or CEO leave the company, there is no chaos. In fact, the work continues as if they were still there. It’s not that they were doing nothing but that the system is pretty much self-regulating
    5. A study found that the most successful CEOs in America (not the celebrity CEOs) all enjoy working with their hands. They solved problems for themselves rather than looking for a repairman. The longevity of a CEO’s career is directly proportional to his or her problem-solving skills and ability to adapt and grow with the job
    6. If for whatever reason we have another downturn in our business like we had in 90-91, our policy is to first cut the fat, freeze hiring, reduce unnecessary travel, and generally trim expenses. if the crisis were more serious, we would eliminate bonuses and reduce salaries of all top-level managers and owners. Then shorten the workweek and reduce pay, and finally, as a last resort, lay people off
    7. How you climb a mountain is more important than reaching the top.
    8. You might think that a nomadic society packs up and moves when things get bad. However, a wise leader knows that you also move when everything is going too well; everyone Is laid-back, lazy, and happy. If you don’t move now, then you may not be able to move when the real crisis happens. Teddy Roosevelt said, “In pleasant peace and security, how quickly the soul in a man being to die.” Bob Dylan says, “He not busy being born is busy dying.” New employees coming into a company with a strong culture and values may think that they shouldn’t rock the boat and shouldn’t challenge the status quo. On the contrary, while values should never change, every organization, business, government, or religion must be adaptive and resilient and constantly embrace new ideas and methods of operation.
  4. Environmental Philosophy
    1. Anyone who thinks you can have infinite growth on a finite planet is either a madman or an economist. – Kenneth Boulding
    2. Elements of our environmental philosophy
      1. Lead an examined life
      2. Clean up our own act
      3. Do our penance
      4. Support civil democracy
      5. Do good
      6. Influence other companies
    3. Every time we’ve elected to do the right thing, it’s turned out to be more profitable
    4. I have a definition of evil different than most people. Evil doesn’t’ have to be an overt act; it can be merely the absence of good. If you have the ability, the resources, and the opportunity to do good and you do nothing, that can be evil
    5. When you get away from the idea that a company is a product to be sold to the highest bidder in the shortest amount of time, all future decisions in the company are affected. The owners and the officers see that since the company will outlive them, they have responsibilities beyond the bottom line. Perhaps they will even see themselves as stewards, protectors of the corporate culture, the assets, and of course the employees
    6. It seems to me if there is an answer, it lies in these words: restraint, quality, and simplicity. We have to get away from thinking that all growth is good. There’s a big difference between growing fatter and growing stronger
    7. The ship’s carpenter on Shackleton’s lifeboat the James Caird took only three simple hand tools with him on the passage from Antarctica to South Georgia Island, knowing that, if he needed to, he could build another boat with those tools. I believe the way toward mastery of any endeavor is to work toward simplicity; replace complex technology with knowledge. The more you know, the less you need. From my feeble attempts at simplifying my own life I’ve learned enough to know that we should have to, or choose to, live more simply, it won’t be an impoverished life but one richer in all the ways that really matter.

What I got out of it

  1. A really fun read on someone who never wanted to get into business but ended up founding a very successful and robust one. Grow appropriately, infinite growth is impossible, live simply, treat your people/suppliers/customers well, be the first customer for your products and know them intimately

An Elegant Puzzle: Systems of Engineering Management

Summary

  1. This book starts with organizational design – it gets the right people in the right places, empowers them to make decisions, and then holds them accountable for their results. Next are some tools of management – from systems thinking to vision documents, metrics, reorgs, and career narratives. Approaches touches on how you might need to adjust how you manage as the organization scales. Culture is covered next and touches on how to nurture an inclusive team. Last is a focus on careers – interviewing hiring, and performance management

Key Takeaways

Organizations

  1. When I want to solve a problem quickly and cheaply, I think about process design. If process is too weak a force, culture too slow, and there isn’t much time, then organizational design is a good option
  2. One of the fundamental challenges of organizational design is sizing teams
  3. Managers should support 6-8 engineers and managers-of-managers should support 4-6 managers
  4. A team is at least 4 people as this diversity helps attack and solve complex problems in a more efficient manner
  5. Keep innovation and maintenance together as this leads to higher morale and will avoid creating a two-tiered class system of innovators and maintainers
  6. 4 states of a team and the general solution. Teams want to climb from falling behind to innovating, while entropy drags them backward. Each
    1. Falling behind – add people
    2. Treading water – reduce WIP
    3. Repaying debt – add time
    4. Innovating – add slack
  7. Consolidate your efforts as a leader. Don’t “peanut butter” the situation by trying to evenly spread yourself out. Spend the most time on the teams that need the most help. Adding new individuals to teams disrupts that team’s gelling process, so have rapid growth periods followed by consolidation/gelling periods
  8. Do not separate high-performing teams. They can tackle new problems but should stay together. Shifting scope works better than moving people because it avoids re-gelling costs, and it preserves system behavior. You can also try rotating individuals for a fixed period into an area that needs help
    1. Campbell – Teams > Individuals > Problems
  9. You obviously don’t want to stop growth, but you can concentrate that growth such that your teams alternate between periods of gelling and consolidation
  10. Counterintuitively, you can slow a team down by shifting resources to it, because doing so creates new upstream constraints. Slack is a beautiful thing. It gives people and teams time to improve areas and do it with minimal coordination costs
  11. The real system killer is not system rewrites but the migrations that follow those rewrites
  12. You only get values from projects you finish. To make progress, above all else, you must ensure that some of your projects finish
  13. Funnel interruptions into an increasingly small area, and then automate that area as much as possible. Ask people to file tickets, create chatbots that automate filing tickets, create a service cookbook, and so on.
  14. Projects and tasks must have owners – “Who owns X?”
  15. Block out large chunks of time each week to focus. Telecommute, block out 8-11 each morning, experiment until you find something that works for you. The best solution is a culture of documentation – read documents, and a documentation reach that actually works. Try to get off the “critical path” – don’t be a gatekeeper. This is a significant implementation bug rather than a stability feature to be emulated (except for very important legal/financial/other matters that should have a gatekeeper.)
  16. Organizational debt – the sibling of technical debt and represents things like biased interview processes and inequitable compensation mechanisms, systemic problems which prevents your organization from reaching its potential. Responding to this is central to being an effective leader. A great way to attack this is to focus on a few areas you want to improve and if you’re making progress, feel good about it. You can slack off on the other areas (for now). You can’t do it all at once
  17. Succession planning is thinking through how the organization would function without you, documenting those gaps, and starting to fill them in. This is often overlooked but is vital for the long-term success of your team and organization. First step is to figure out what you do – write down what meetings you attend, what your role is in those meetings, recurring processes, individuals you support, emails you send, requests coming in, to-do lists, external relationships. Taking 2-3-week vacations is actually a beautiful thing – you can see what slips through the cracks and these items can be the start of next year’s list.

Tools

  1. Change is the catalyst of complexity and these tools are meant to help lead efficient change – systems thinking, metrics, and vision
  2. Creating an arena for quickly testing hypotheses about how things work, without having to do the underlying work beforehand, is the aspect of systems thinking that I appreciate most
  3. Problem discovery – problem selection – solution validation – execution – problem discovery…
  4. For problem discovery look at – users’ pain, users’ purpose, benchmark, cohorts, competitive advantages/moats
  5. Must align on strategy and vision in order to scale effectively. Strategies are grounded documents which explain the trade-offs and actions that twill be taken to address a specific challenge. Visions are aspirational documents that enable individuals who don’t work closely together to make decisions that fit together cleanly
  6. No extent of artistry can solve a problem that you’re unwilling to admit
  7. Vision – vision statement, value proposition, capabilities, solve constraints, future constraints, reference materials, narrative
  8. Define goals through a target, baseline, trend, time frame
    1. See John Doerr on OKRs
  9. Since value is gained when a project is completed, you must celebrate completions, no matter how small
  10. Rolling out the change can be difficult/awkward but here are 3 steps to help
    1. Explanation of reasoning driving the reorganization (particularly those who are heavily impacted)
    2. Documentation of how each person and team will be impacted
    3. Availability and empathy to help bleed off frustration from impacted individuals
  11. The 3 rules for speaking with the media
    1. Answer the question you’re being asked – reframe difficult questions
    2. Stay positive
    3. Speak in threes – three concise points, make them your refrain, and continue to refer back to your three speaking points
  12. Failure modes – domineering personalities, bottlenecks, status-oriented groups, inert groups
  13. Presenting to senior management
    1. Communication is company-specific
    1. Start with the conclusion
    2. Frame why the topic matters
    3. Everyone loves a narrative
    4. Prepare for detours
    5. Answer directly
    6. Dive deep into the data
    7. Derive actions from principles
    8. Discuss the details
    9. Prepare a lot, practice a little
    10. Make a clear ask
  14. Communicating with teams/peers
    1. Be a facilitator, not a lecturer
    2. Brief presentations, long discussions
    3. Small breakout groups
    4. Bring learnings to the full group
    5. Choose topics that people already know about
    6. Encourage tenured folks to attend
    7. Optional pre-reads
    8. Checking-in – your name, your team, one sentence about what’s on your mind
    9. Every quarter I spend a few hours categorizing my calendar from the past 3 months to figure out how I’ve invested my time. This is useful for me to reflect on the major projects I’ve done, and also to get a sense of my general allocation of time. I then use this analysis to shuffle my goal time allocation for the next quarter

Approaches

  1. Work the policy, not the exceptions – consistency is a precondition of fairness so cultures which allow frequent exceptions are not only susceptible to bias, but also inefficient
  2. Collect every escalation as a test case for reconsidering your constraints. This approach is powerful because it creates a release valve for folks who are frustrated with edge cases in your current policies – they’re still welcome to escalate – while also ensuring that everyone is operating in a consistent, fair environment; escalations will only be used as inputs for updated policy, not handled in a one-off fashion. The approach also maintains working on policy as a leveraged operation for leadership, avoiding the onerous robes of an exceptional judge
  3. Velocity – when folks want you to commit to more work than you believe you can deliver; your goal is to provide a compelling explanation for how your team finishes work. Finishes is particularly important, as opposed to does, because partial work has no value, and your team’s defining constraints are often in the finishing stages.
  4. Management, at its core, is an ethical profession. To see ourselves, we don’t look at the mirror, but rather at how we treat a member of the team who is not succeeding. Not at the mirror, but at our compensation policy. Not at the mirror, but at how we pitch the roles to candidates
  5. Strong relationships > any problem. Start debugging problems from the relationship angle before anything else. With the right people, any process works, and with the wrong people, no process works
  6. Instead of avoiding the hardest parts, double down on them
  7. Do the right thing for the company, the right thing for the team, and the right thing for yourself, in that order
  8. The best management philosophy never stands still, but – in the model of the Hegelian dialectic – continues to evolve as it comes into contact with reality. The worst theory of management is to not have one at all, but the second worst is one that doesn’t change.
  9. Long bones have growth plates at their ends, which is where the growth happens, and the middle doesn’t grow. This is a pretty apt metaphor for rapidly growing companies, and a useful mental model to understand why your behaviors might not be resonating in a new role. Execution is the primary currency in the growth plates because you typically have a surplus of fairly obvious ideas to try and there is constrained bandwidth for evaluating those ideas. What folks in the growth plates need is help reducing and executing the existing backlog of ideas, not adding more ideas that must be evaluated. Teams in these scenarios are missing the concrete resources necessary to execute, and supplying those resources is the only way to help. Giving more ideas feels helpful, but it isn’t. Away from the growth plates you’re mostly working on problems with known solutions. Known solutions are amenable to iterative improvement, so it would make sense for execution to be highly valued, but I find that, in practice, ideas – especially ideas that are new within your company – are most highly prized.
  10. Leadership is matching appropriate action to your current context
  11. As managers looking to grow ourselves, we should really be pursuing scope: not enumerating people but taking responsibility for the success of increasingly important and complex factors of the organization and company. This is where advancing a career can veer away from a zero-sum competition to have the largest team and evolve into a virtuous cycle of empowering the organization and taking on more responsibility. There is a lot less competition for hard work. Aim to grow scope through broad, complex projects
  12. You need to learn how to set your own direction – talk to peers and see what they’re thinking about, read technical papers, cast the widest net possible so that you understand the problem space
  13. For every problem that comes your way – close out, solve, or delegate

Culture

  1. An inclusive organization is one in which individuals have access to opportunity and membership
  2. Useful metrics – retention, usage rate, level distribution, time at level
  3. Useful programs – recurring weekly events, employee resource groups, team offsites, coffee chats, team lunches,
  4. Ingredients for a great ream – awareness of each other’s work, evolution from character to person, refereeing defection, avoiding zero-sum culture
  5. The best learning doesn’t always come from your manager – create a community of learning with your peers
  6. Humans are prone to interpreting events as causal, but it may be more appropriate to see problems in terms of a series of stockpiles that grow and shrink based on incoming and outgoing flows

Careers

  1. Interviewing tips
    1. Be kind to the candidate
    2. Ensure that all interviewers agree on the role’s requirements
    3. Understand the signal your interview is checking for
    4. Come to your interview prepared to interview
    5. Deliberately express interest in candidates
    6. Create feedback loops for interviewers and the loop’s designer
    7. Instrument and optimize as you would any conversion funnel
  2. If you like an interviewee and will extend an offer, have everyone who interviewed them send them an email or letter saying how much they enjoyed meeting them
  3. Have interviewers write up their feedback on candidates individually
  4. The most sacred responsibilities of management are selecting your company’s role model, identifying who to promote, and deciding who needs to leave
  5. If hiring from within, some necessary ingredients are: an executive sponsor, a recruiting partner, self-sustaining mission, a clear career ladder, role models, dedicated calibrations (performance reviews)

Appendix

  1. Teams have a limited appetite for new processes: try to roll out one change at a time and don’t roll out the next change until the previous change has enthusiastic compliance
  2. Process needs to be adapted to its environment, and success comes from blending it with your particular context

What I got out of it

  1. Some great tools, ideas, perspective on how to manage a quickly scaling organization

V > Λ: The Inverted Hierarchy



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My Years With General Motors by Alfred P. Sloan

Some brilliant insights into human nature and organizational impact (annual car models, coordinated policy with decentralized authority, a policy of filling the gaps, how to incentivize employees with their bonus/compensation plans, the importance of sound dealer relations, and more). Too long of a book in many ways but worthwhile for anyone interested in business or GM’s history

Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives by Kip Tindell

Summary

  1. The purpose of The Container Store is clear: to improve the quality of our customers’ lives through the gift of organization, fueled by our 7 Foundation Principles. Those principles begin with our commitment to our employee-first culture, of course, but they also ensure that we ultimately create value for ALL of our stakeholders, including vendors, customers, community, and shareholders – so that everyone associated with our business thrives

Key Takeaways

  1. The 7 Principles: We use principles rather than rules because rules are too rigid. I often tell my people that retail is like real life – it’s far too situational to use the typical phone book sized procedural manual. Instead, just use these principles to guide you. Once we agree on the ends, you are free to choose the means to achieve those ends. Employees are their most productive when they use their own unshackled, intuitive genius to handle any situation. That goes for everybody in the company, whether it’s our finance people negotiating with a bank, a salesperson helping a customer, or a distribution center employee talking to a truck driver in the 110-degree Dallas heat. All employees can make decisions based on the same set of values, principles, and information as everyone else 
    1. 1 Great Person = 3 God People (or much more!)
      1. Pay up for the best people (up to 50-100% more!) and allow them to fail.
      2. The best people demonstrate the following traits:
        1. Commitment and accountability
        2. Planning, organizing, and attention to detail
        3. Communication IS leadership
        4. Professionalism
        5. Problem solving
        6. Teamwork/”wake”
        7. Ability and attitude
      3. Being part of a great team is one of the the best human experiences
      4. Once you hire the best people, give them space to run, even if they fail. Trust people and help hem grow into the type of people they want to be
    2. “Fill the other guy’s basket to the brim. Making money then becomes an easy proposition” – Andrew Carnegie
      1. Carnegie thought that this was his one beacon, his one guiding light, that he attributed all his business success to
      2. The more win-win relationships you create, the more you’ll succeed
      3. What we’re trying to do is create synergy. That’s the most pleasurable, joyful way of doing business. Those who make the most money for the longest time adopt this form of capitalism – creating these mutually beneficial, long-term relationships. So why don’t people seek out win-win situations more often? I’m convinced it’s because of their own insecurity. If you’re secure in yourself and your own abilities, you won’t feel threatened by filling the other guy’s basket. You won’t worry that someone else will succeed more than you will, or somehow will use your own spirit of fair play against you. On the contrary, you’ll be open hearted and supportive. You’ll realize that helping other people succeed is actually the best way to succeed yourself. That’s why it’s so important to be mindful of our wake. With every action we take, we’re not just affecting other people far more than we realize. We’re also creating powerful waves and endless ripple effects that ultimately find their way back to us. 
      4. It’s hard to overstate how crucial these close relationships are to our success – it’s why our vendors give us exclusive, custom-made products, fast delivery, and high quality. And it’s why they give us great pricing. We can’t beat the mass merchants on volume, but we can always beat them on relationships 
      5. Our vendors often tell us, “Your people know our products better than our own employees do!” Because many of our vendors started as entrepreneurs, we filled their basket with encouragement, product ideas, and, when times got tough, deep loyalty
    3. Man in the Desert Selling
      1. Discover all the customer’s problems and solve them. Don’t assume you know what they need. Truly understand what they’re trying to solve for and do that. Often times customers don’t know what solutions are available and need to be coached 
      2. Strong long-term relations, built on affection, hard work, trust, and respect, are a huge key to success in business and in life
      3. We all benefit from giving – life is full of win-win propositions
    4. Communication IS leadership
      1. We must practice consistent, reliable, predictable, effective, thoughtful, compassionate, and even, yes, courteous communication every single day to successfully sustain, develop, and grow our business
      2. We share company goals, financial details, daily sales results, real estate expansion plans, marketing plans, major initiatives, sales campaign results, company-wide leadership meeting notes, product information – truly, the list goes on and on. and this communication comes in many forms: scheduled meetings, off the cuff encounters, voice mail, video, company conference calls, email, and old-fashioned written memos – any way possible. And, of course, the daily ongoing communication that happens between employees – sharing perspectives and insight – is a key component of our communication/leadership-driven culture 
    5. The best selection, service, and price
      1. Stick to what you know and do it well
      2. Competitive advantage to sell the hard stuff because you need more knowledge and better trained staff to sell it
      3. Having low prices and high margins creates a tremendous economic incentive to turn those high margin products into your biggest sellers. It’s another thing the world thinks is impossible. I’m mystified that so many retailers put so much effort into building up the volume of their low-margin, commodity-type products – mostly because that’s the way things have always been done. But why not perfect the selling methodology of your highest-margin products? Why not give those products the best shelf space, train employees in those products more, advertise them more, and work harder with vendors to create high margin for both of you? In others words, why not spend more time in the gold mine rather than the copper mine? It’s the best way for any business to succeed. 
    6. Intuition does not come to an unprepared mind. You need to train before it happens
      1. Must blend logic and intuition – and intuition requires proper training
      2. One reason training is more important at TCS than other retailers is because our motto is “we sell the hard stuff.” We actually tell our buyers to look for products that are hard to sell. Why? Because we know other retailers won’t touch those products, giving us an exclusive and yet another reason for our customers to shop with us. It may seem crazy to base a store around things that are hard to sell, like our elfa shelving system. But we make it work, selling tons of products like elfa that make people come back for more – a new shelving system for every closet in the house (like potato chips they can’t stop eating). And we make it work because our deep commitment to employee training creates unparalleled customer service. 
    7. Air of Excitement 
      1. Create a culture, an environment, that people are excited about and can thrive in. You can copy a company two-dimensionally, but you can’t copy its heart and soul
      2. The smartest thing you can do is hire your customers. DO that long enough and they’ll end up running your business
      3. All about natural laws of human behavior
      4. Hosts an annual “we love our employee’s day” held every Valentine’s day, an annual chili cook off, and an annual distribution center derby
      5. Celebrate mothers on Mother’s Day and fathers on Father’s Day, host baseball games, celebrate Halloween, have family movie night every year, and great holiday parties every December. 
      6. Sometimes it’s the little touches that matter the most. Like finding your desk decorated with balloons and signs on your birthday, receiving a heartfelt card on the anniversary of the day you joined the company or an engraved silver spoon when you have a baby. These days, people often spend more time with their coworkers than with their own family, so we encourage our employees to bond in ways very much like a close-knit family
      7. Some people may say that these events detract from more “productive” work, but this is classic zero-sum thinking. What conventional business minds don’t understand is that all the positive feeling this activity generates is really the fuel that drives our company. Without it, we’d be just another retailer with no spark, no air of excitement – and, I’m quite certain, no profits
  2. Conscious Capitalism
    1. Serve all stakeholders
    2. Profit is not the #1 priority which paradoxically leads to higher profits
    3. There are 4 key tenets:
      1. Having a higher purpose beyond generating profits
      2. Harmonizing the needs of all stakeholders to create win-win outcomes for all
      3. Having leaders who are motivated primarily by serving the firm’s higher purpose and creating value for all stakeholders
      4. Creating a conscious culture based on qualities like trust, accountability, transparency, integrity, loyalty, egalitarianism, fairness, personal growth, love, and care
  3. Other
    1. You get your best ideas when relaxing, when mind and body can wander
    2. Women make better executives as they are better listeners and communicator
    3. TCS never had any layoffs. They aim to make their employees better people overall. Treating employees with respect and affection is the fastest and most effective way to gain success. If you take better care of your employees, they take better care of the customer, which leads to more customer loyalty and financial success. Business is all about making sure everyone thrives
    4. A company is stronger if it is bounded by love rather than by fear
    5. “Our Wake” – the ripples our actions make are greater than we can imagine
    6. Positively spring-load every counterparty relationship so that when down times come, which they always do, you have built the trust and respect to come out stronger. In this case, everyone conspires to assist you
    7. Kip describes the culture at TCS as “yummy” which he means to say is caring, communicative, and “feels good”
    8. As important as what you do is how you do it – be clear, open, honest
    9. Companies take on the traits of their top people
    10. When Kip was young he kept a “Philosophy Epistle File” – a common journal for storing inspiring quotes and ideas
    11. A person’s first 25% of effort is mandatory, but after that it is due to the boss and culture
    12. Good management is wise allocation of resources – say “no” unless it is a top priority
    13. Price is mostly an issue about perception rather than reality
    14. At the time of publication, TCS achieved a 21% CAGR over 36 years
    15. At the moment of commitment, the world conspires to assist you
    16. As a manager, you need to help our employees understand the values our company is based on, then help them develop attitudes and behavior consistent with those values
    17. Why do so many companies die young? Mounting  evidence suggests that corporations fail because their policies and practices are based too heavily on the thinking and the language of economics. Put another way, companies die because their managers focus exclusively on producing goods and services and forget that the organization is a community of human beings that is in business – any business – to stay alive. Managers concern themselves with land, labor, and capital, and overlook the fact that labor means real people. 

What I got out of it

  1. Some great perspective on culture and how important it is in building a business, purposely sell the hard stuff, also makes clear how hard it is to swim against the tide, no matter how dedicated and hard you work (offline retailer with finite shelf space going up against the rising tide of ecommerce)