Tag Archives: Business

A Ghost’s Memoir: The Making of Alfred P. Sloan’s My Years with General Motors by John McDonald

Summary

  1. McDonald wrote Sloan’s biography and was barred from releasing it for a long time because of GM’s fears of revealing too much about their being a monopoly

Key Takeaways

  1. Far from being the legendary crisp man of decision, Mr. Sloan was, when he chose to be, a master of ambivalence. He had described himself remarkably well in his testimony in the Du Pont suit: “It is generally my custom, when I get some resistance, to back out of it and try to do a selling job rather than to force the issue.” And he said: “I have never had much respect for my own ability as a negotiator. I am too apt to look at two sides of the question.”
  2. Its twenty-eight pages, replete with organization charts, set forth the future design of the corporation now known in the famous corporate aphorism “decentralization with coordinated control.”
  3. Mr. Sloan’s genius, as far as I could see, was in a complex of corporate arrangements and activities; his skill was in the internal strategies of the automobile industry and in the market: He could hold that industry, so to speak, in the palm of his hand.
  4. The project had something useful about it for his state of mind after his wife died. On the occasion of his previous birthday, he had written me a thank-you note for noticing it, saying that at eighty “there is little to look forward to … but I have much to look backward on. And, in a way, that’s consolation.”
  5. John J. Raskob was Pierre Du Pont’s mentor and guide in matters of finance, as Charles Kettering came to be in technology-both very good in their fields but with flaws that would endanger the survival of General Motors. With great foresight into the future of the automobile business, Raskob wrote down several good reasons for the Du Pont company to invest in General Motors. Among these reasons, which he numbered, was that together with Durant they could secure joint control of the company and “assume charge and be responsible for the financial operation of the company.” His Point Five would later bring big trouble. He wrote: “Our interest in the General Motors Company will undoubtedly secure for us the entire Fabrikoid, Pyralin, paint, and varnish business of those companies, which is a substantial factor.” The Du Ponts were persuaded, and in1917 the Du Pont company made the large investment in General Motors that gave them about a twenty-three percent interest in the company.
  6. Before considering the subject of particular products it is advisable to outline the controlling purposes that presumably underlie the organization and proposed operations of the Corporation. That is, the whole picture should first be clearly drawn in order that the present particular subject may be considered, not just alone, but in its essential relations to the chief objectives of the General Motors Corporation.It is to be presumed that the first purpose in making a capital investment is the establishment of a business that will both pay satisfactory dividends and preserve and increase the capital value. The primary object of the General Motors Corporation, therefore, is to make money, not just to make motor cars.How is it proposed to earn satisfactory dividends on the investment? And how does the earning purpose of the General Motors Corporation differ from the business objectives of other manufacturers of automobile vehicles?A monopoly is not planned. It is recognized that there will always be competing cars. But it is believed that by “covering the market for all grades of automobiles that can be produced and sold in large quantities” the Corporation will be able to secure many advantages over manufacturers of but one or two grades; even if General Motors cars in the respective grades are no better than the best competing automobiles of the same grade. . . .(Ajs soon as practicable the following grades shall constitute the entire line of cars,(a) $450.00 – $600.00(b) $600.00 – $900.00(c) $900.00 – $1200.00(d) $1200.00 – $1700.00(e) $1700.00 – $2500.00(f) $2500.00 – $3500.00It is recognized that there will always be a considerable market for cars priced above $3500.00, but the demand for any one type will be limited to such a number as would not permit of “quantity” production. These might almost be called custom-built cars, and it is not recommended that the General Motors Corporation attempt to cover that field.
  7. The field of cars of the first grade is now practically monopolized by the Ford. At present it is being invaded by Chevrolet. It is not recommended that the General Motors Corporation attempt to build and sell a car of the Ford grade, as the Ford sells at the lowest price within the first grade. Instead it is recommended that the General Motors Corporation market a car much better than the Ford, with a view to selling it at or near the top price in the first grade. It is not proposed to compete with the Ford grade, but to produce a car that will be so superior to the Ford, yet so near the Ford price, that demand will be drawn from the Ford grade and lifted to the slightly higher price in preference to putting up with the Ford deficiencies.It is believed that the converse of this effect will be produced when the new General Motors first grade car, selling at approximately $600.00, is compared with cars of competitors in the next highest grade, selling at $750.00 or slightly below. Even though the new General Motors (a) grade car may not be quite as good as competing cars selling at approximately $750.00, it should be so near the grade of competing cars selling at the middle of the second price range, that prospective buyers will prefer to save $150.00 and to yield the comparatively slight preference they might have for the competing car if the prices were nearly equal …
  8. There should be absolutely no duplication within the Corporation of any car planned to cover a particular grade field, since a sufficientselection of models will be offered by the overlapping sales scopes of each model, above and below the limits of its planned price range. All competition within the Corporation itself should be eliminated.It is recognized that the future of the Corporation and its earning power depend on its ability to design and produce automobiles of maximum utility value and attractiveness of appearance, in such quantities and by such coordinated methods of efficiency as will result in a minimum cost for the models required to supply all the markets of greatest demand for automobiles….The core of the policy, as we wrote in My Years with General Motors, lay “in its concept of mass producing a line of cars graded upward in quality and price. This principle supplied the first element in differentiating the General Motors concept from the old Ford Model T
  9. Frank Donovan, a lifetime close friend and a lawyer from Detroit. He was known among his friends and clients as a brilliant legal analyst with a nonaggressive temperament. No litigator. When we were both twenty, I remember him saying: “When there’s a fight, I pick up my hat and go home.” He had a large head, somewhat out of proportion to his medium build, and the kind of languid grace that was great for sitting around talking, as we had since our teens. Altogether these characteristics did not quite account for his having been captain of Notre Dame’s tennis team under Knute Rockne’s athletic directorship and three times tennis champion of Detroit.

What I got out of it

  1. A bit boring and too much legal background but gave some good insights into Alfred Sloan and GM

That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea by Marc Randolph

Summary

  1. Marc describes the formation and foundation of Netflix, his role, and the evolution of Netflix from DVD store/rental to dominant international media company. “Goal is to puncture myths but also reveal what they did and why it worked, turning Netflix from an unlikely idea into the media behemoth it is today – not let’s or principles but hard won truths (like distrust epiphanies)”

Key Takeaways

  1. The daily car rides with Reed and Marc seem enviable – what an amazing gift to be able to share ideas and have them destroyed without it impacting the relationship 
  2. From the beginning, Reed was intent on focusing on a business with recurring revenues that scaled massively 
  3. In one of the brainstorms with Reid, Marc brought up a VHS delivery service. After doing research it became clear that the tapes and shipping was too expensive, but once DVD’s came out, the whole equation changed and the business model now seemed viable 
  4. One of Marc’s guiding philosophies is to have his team loosely coupled but highly aligned – show the team where you want to go but not how to get there. Treat people like adults, trust them, give them a vision to go all in on
  5. It was expensive to acquire all the dvds at the beginning, trying to claim they have every dvd ever made, but they reframed it so that this expense was really cheap advertising. A dvd costs $20 but the reputation for having every dvd is priceless 
  6. Instituted a Tuesday date night with his wife where he would leave work at 5pm no matter what to spend time with her and no kids 
  7. Learned many of his leadership lessons from his time outdoors and exploring nature 
  8. Focus and doing your core competency extremely well is a matter of life and death for a startup 
  9. Environment of freedom and responsibility coupled with radical honesty is the foundation of Netflix’s culture
  10. They were struggling getting people to rent DVDs although being at success selling online. Eventually they tested out the idea of a subscription service with no late fees and an automatic sending of the next DVD in your queue when you return the old one. Mark would never have thought this was the path Netflix would have taken but it was immediately successful, so they ran with it 
  11. Nobody knows anything. This isn’t an indictment, ira a reminder. If this is true, you have to trust yourself, try things, and be ok with failing
  12. Randolph’s rules for success 
    1. Do at least 10% more than you’re asked to
    2. Never state as fact something which you don’t know 
    3. Be curteous always, up and down 
    4. Never complain 
    5. Don’t be afraid to make decisions when you have the facts 
    6. Be open minded but skeptical 
    7. Quantify whenever possible 
    8. Be prompt 
  13. You have to love the problem rather than the solution. This will keep you engaged and motivated even in difficult times 

What I got out of it

  1. Nobody knows anything so you won’t know whether an idea is good or bad until you try it. Marc’s enthusiasm is palpable even through the pages and the car ride him and Reed shared for years where they discussed and batted down ideas with radical honesty seems like an incredible gift

Augustine’s Laws by Norman Augustine

Summary

  1. There have been some many superb books published in recent years dealing with successful busines sundertakings. This book, however, takes a contrapuntal viewpoint and adopts the perspective of learning from a business gone awry. It is much as is the practice at medical conventions – where it is generally considered that a greatl deal can be learned by not focusing on healthy people. 

Key Takeaways

  1. There are 52 total laws, the most compelling (to me), outlined below
    1. There are no lazy veteran lion hunters – margin between victory and defeat is miniscule
    2. If you can afford to advertise, you don’t need to
    3. 1/10th of the participants produce 1/3 of the output. increasing the number of participants simply reduces the average output
    4. The last 10% of performance generates 1/3 of the costs and 2/3 of the problems
    5. It is very expensive to achieve high unreliability. It is not uncommon to increase the cost of an item by a factor of ten for each factor of ten degradation accomplished 
    6. Any task can be completed in only 1/3 more time than is currently estimated
    7. If a sufficient number of management layers are superimposed on top of each other, it can be assured that disaster is not left to chance
    8. The optimum committee has no members
    9. Hiring consultants to conduct studies can be an excellent means of turning problems into gold – your problems into their gold
    10. The weaker the data available upon which to base one’s conclusion, the greater the precision which should be quoted in order to give the data authenticity.
    11. The more time you spend talking about what you have been doing, the less time you have to do what you have been talking about. Eventually, you spend more and more time talkinga bout less and less until finally you spend all your time talking about nothing. 
  2. Other
    1. Managerial intellect wilted in competition with managerial adrenaline
    2. In the words of Rick Mears, “to finish first you must first finish.”
    3. Quantity has a quality all its own
    4. An irate banker demadned that Alexander Graham Bell remove “that toy” from his office. The toy was the telephone. A Hollywood producer scrawled a rejection note on a manuscript that became Gone with the Wind. Henry Ford’s largest origianl investor sold all his stock in 1906. Today, Sears may sell $25,000 of goods in 16 seconds. 
    5. Adding people to speed up a late software project just makes it later
    6. Key Lessons
      1. People are the key to success in most any underatking
      2. Teamwork is the fabric of effective business organizations
      3. Self-image is as important in business as in sports
      4. Motivation makes the diference
      5. Recognition of accomplishment (and lack thereof) is an essential form of feedback
      6. Listening to employees and customers pay dividends – they know their jobs and needs better than anyone else
      7. Delegation, whenver practicable, is the best course. As Plato suggested, justice is everyone doing their own job
      8. Openness with empoyees and customers alike is essential to building trust
      9. Customers deserve the very best
      10. Quality is the key to customer satisfaction. It means giving the customer what was agreed upon – every time.
      11. Stability of funding, schedules, goals, and people is critical to any smooth business operation. Avoid turbulence at all costs
      12. Demanding that last little bit of effort from oneself is essential – it can make the difference against competitors who don’t have the will to put out the extra effort
      13. Provision for the unexpected is a business person’s best insurance policy. It is said that the ultimate form of management is managing under uncertainty. One must identify sources of risks and unknowns and make provisions to overcome them – in the form of financial reserves, schedule reserves, and performance reserves. Promise only that which can be produced and produce that which has been promised.
      14. “Touch Labor” – people who actually come into contact with the product – are the only certain contributors in any organization. Others may contribute – managers, lawyers, accountants, consultants, auditors – but they may not. 
      15. Rules, regulations, policies, reports,a nd organization charts are not a subsitutte for sound management judgment. 
      16. Logic in presenting decision options, consequences, benefits, and risks is imperative. Whenever parameters can be quantified, it is usually desirable to do so
      17. Conservatism, prudent conservatism, is generally the best path in financial matters
      18. Integrity is the sine qua non of all human endeavors including business. It has even been said that if rascals knew the value of honesty they would be honest simply because of their rascality.
      19. Much of the above simply boils down to DISCIPLINE – and in particulars that finest form of the art – SELF-discipline. DIscipline not to take the easy way out, discipline to forgeo “nice-to-have” features, discipline to minimize change, discipline to demand a quality product, discipline to treat a customer fairly even when it costs, and discipline to “tough out” and solve the problems which will occur in even the best-managed undertakings. As Robert Townsend, the former chairman of AVIS, put it in his book Up the Organization, managers must have the discipline not to keep pulling up the flowers to see if their roots are healthy. Most of our problems, it seems, are, as could be their solutions, self-imposed.

What I got out of it

  1. Ironic, sarcastic, hysterical, correct.

The HP Way by David Packard

Summary

  1. David Packard walks through the evolution of Hewlett-Packard from tiny startup to behemoth

Key Takeaways

  1. Finally, they hit upon the audio oscillator and sold eight units to Walt Disney, earning the company its first substantial revenues.
  2. Culture and the HP Way
    1. “But they had a great idea—the ultimate source of competitive advantage—if you can just see it,” I’d push back. “What might that be?” After ten or fifteen minutes, someone would likely voice the key point: Bill Hewlett and David Packard’s greatest product was not the audio oscillator, the pocket calculator, or the minicomputer. Their greatest product was the Hewlett-Packard Company and their greatest idea was The HP Way.
    2. The point is not that every company should necessarily adopt the specifics of the HP Way, but that Hewlett and Packard exemplify the power of building a company based on a framework of principles. The core essence of the HP Way consists of five fundamental precepts.
      1. The Hewlett-Packard company exists to make a technical contribution, and should only pursue opportunities consistent with this purpose;
      2. The Hewlett-Packard company demands of itself and its people superior performance—profitable growth is both a means and a measure of enduring success;
      3. The Hewlett-Packard company believes the best results come when you get the right people, trust them, give them freedom to find the best path to achieve objectives, and let them share in the rewards their work makes possible;
      4. The Hewlett-Packard company has a responsibility to contribute directly to the well-being of the communities in which its operates;
      5. Integrity, period.
    3. Hewlett and Packard rejected the idea that a company exists merely to maximize profits. “I think many people assume, wrongly, that a company exists simply to make money,” Packard extolled to a group of HP managers on March 8, 1960. “While this is an important result of a company’s existence, we have to go deeper to find the real reasons for our being.” He then laid down the cornerstone concept of the HP Way: contribution. Do our products offer something unique—be it a technical contribution, a level of quality, a problem solved—to our customers? Are the communities in which we operate stronger and the lives of our employees better than they would be without us? Are people’s lives improved because of what we do? If the answer to any these questions is “no,” then Packard and Hewlett would deem HP a failure, no matter how much money the company returned to its shareholders.
    4. Therein we find the hidden DNA of the HP Way: the genius of the And. Make a technical contribution and meet customer needs. Take care of your people and demand results. Set unwavering standards and allow immense operating flexibility. Achieve growth and achieve profitability. Limit growth to arenas of distinctive contribution and create new arenas of growth through innovation. Never compromise integrity and always win in your chosen fields. Contribute to the community and deliver exceptional shareholder returns. Behind these specifics lies the biggest “And” of all, the principle that underpins every truly great company: preserve the core and stimulate progress.
    5. Any great social enterprise—whether it be a great company, a great university, a great religious institution, or a great nation—exemplifies a duality of continuity and change. On the one hand, it is guided by a set of core values and fundamental purpose that change little over time, while on the other hand, it stimulates progress—change, improvement, innovation, renewal—in all that is not part of the core guiding philosophy. In a great company, core values remain fixed while operating practices, cultural norms, strategies, tactics, processes, structures, and methods continually change in response to changing realities. Lose your core values, and you lose your soul; refuse to change your practices, and the world will pass you by.
    6. Yet the ultimate test of a great company is not the absence of difficulty, but the ability to recover from setbacks—even self-inflicted wounds—stronger than before.
    7. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively which they could not accomplish separately. They are able to do something worthwhile—they make a contribution to society (a phrase which sounds trite but is fundamental).
    8. We must realize that supervision is not a job of giving orders; it is a job of providing the opportunity for people to use their capabilities efficiently and effectively.
    9. If our main thought is to make money, we won’t care about these details. If we don’t care about the details, we won’t make as much money. They go hand in hand.
    10. Our first obligation, which is self-evident from my previous remarks, is to let people know they are doing something worthwhile. We must provide a means of letting our employees know they have done a good job. You as supervisors must convey this to your groups. Don’t just give orders. Provide the opportunity for your people to do something important. Encourage them.
    11. Profit is the measure of our contribution to our customers—it is a measure of what our customers are willing to pay us over and above the actual cost of an instrument.
    12. Get the best people, stress the importance of teamwork, and get them fired up to win the game.
    13. I found, after much trial and error, that applying steady gentle pressure from the rear worked best. Eventually, one would decide to pass through the gate; the rest would soon follow. Press them too hard, and they’d panic, scattering in all directions. Slack off entirely, and they’d just head back to their old grazing spots. This insight was useful throughout my management career.
    14. Another example of sharing, though in a much different way, occurred in 1970. Because of a downturn in the U.S. economy, our incoming orders were running at a rate quite a bit less than our production capability. We were faced with the prospect of a 10 percent layoff. Rather than a layoff, however, we tried a different tack. We went to a schedule of working nine days out of every two weeks—a 10 percent cut in work schedule with a corresponding 10 percent cut in pay. This applied to virtually all our U.S. factories, as well as to all executives and corporate staff. At the end of a six-month period, the order rate was up again and everyone returned to a full work schedule. Some said they enjoyed the long weekends even though they had to tighten their belts a little. The net result of this program was that effectively all shared the burden of the recession, good people were not released into a very tough job market, and we had our highly qualified workforce in place when business improved.
    15. GE was especially zealous about guarding its tool and parts bins to make sure employees didn’t steal anything. Faced with this obvious display of distrust, many employees set out to prove it justified, walking off with tools or parts whenever they could. Eventually, GE tools and parts were scattered all around town, including the attic of the house in which a number of us were living. In fact, we had so much equipment up there that when we threw the switch, the lights on the entire street would dim. The irony in all of this is that many of the tools and parts were being used by their GE “owners” to work on either job-related projects or skill-enhancing hobbies—activities that would likely improve their performance on the job. When HP got under way, the GE memories were still strong and I determined that our parts bins and storerooms should always be open. Keeping storerooms and parts bins open was advantageous to HP in two important ways. From a practical standpoint, the easy access to parts and tools helped product designers and others who wanted to work out new ideas at home or on weekends. A second reason, less tangible but important, is that the open bins and storerooms were a symbol of trust, a trust that is central to the way HP does business.
    16. Many companies have a policy stating that once employees leave the company, they are not eligible for reemployment. Over the years we have had a number of people leave because opportunities seemed greater elsewhere. We’ve always taken the view that as long as they have not worked for a direct competitor, and if they have a good work record, they are welcomed back. They know the company, need no retraining, and usually are happier and better motivated for having had the additional experience.
    17. No operating policy has contributed more to Hewlett-Packard’s success than the policy of “management by objective.” Although the term is relatively new to the lexicon of business, management by objective has been a fundamental part of HP’s operating philosophy since the very early days of the company. MBO, as it is frequently called, is the antithesis of management by control. The latter refers to a tightly controlled system of management of the military type, where people are assigned—and expected to do—specific jobs, precisely as they are told and without the need to know much about the overall objectives of the organization. Management by objective, on the other hand, refers to a system in which overall objectives are clearly stated and agreed upon, and which gives people the flexibility to work toward those goals in ways they determine best for their own areas of responsibility. It is the philosophy of decentralization in management and the very essence of free enterprise.
    18. I don’t argue that the job can’t be done that way, but I do argue strongly that the best job can be done when the manager has a genuine and thorough understanding of the work. I don’t see how managers can even understand what standards to observe, what performance to require, and how to measure results unless they understand in some detail the specific nature of the work they are trying to supervise.
    19. I learned everything I could about the causes of failure and decided to spend most of my time on the factory floor, making sure every step in the manufacturing process was done correctly. I found several instances where the written instructions provided the manufacturing people were inadequate, and I worked with them on each step in the process to make sure there were no mistakes. This painstaking attention to detail paid off, and every tube in the next batch passed its final test.
    20. That was the genesis of what has been called MBWA. I learned that quality requires minute attention to every detail, that everyone in an organization wants to do a good job, that written instructions are seldom adequate, and that personal involvement is essential.
    21. It needs to be frequent, friendly, unfocused, and unscheduled—but far from pointless. And since its principal aim is to seek out people’s thoughts and opinions, it requires good listening.
    22. Linked with MBWA is another important management practice at Hewlett-Packard, and a basic tenet of the HP Way. It’s called the “open door policy.” Like MBWA, this policy is aimed at building mutual trust and understanding, and creating an environment in which people feel free to express their ideas, opinions, problems, and concerns.
    23. The open door policy is very important at HP because it characterizes the management style to which we are dedicated. It means managers are available, open, and receptive. Everyone at HP, including the CEO, works in open-plan, doorless offices. This ready availability has its drawbacks in that interruptions are always possible. But at HP we’ve found that the benefits of accessibility far outweigh the disadvantages. The open door policy is an integral part of the management-by-objective philosophy. Also, it is a procedure that encourages and, in fact, ensures that the communication flow be upward as well as downward.
  3. Business
    1. Bill’s audio oscillator represented the first practical, low-cost method of generating high-quality audio frequencies needed in communications, geophysics, medicine, and defense work. The audio oscillator was to become the Hewlett-Packard Company’s first product.
    2. We designated this first product the Model 200A because we thought the name would make us look like we’d been around for a while. We were afraid that if people knew we’d never actually developed, designed, and built a finished product, they’d be scared off. Our pricing was even more naive: We set it at $54.40 not because of any cost calculations but because, of all things, it reminded us of “54°4o’ or Fight!” (the 1844 slogan used in the campaign to establish the northern border of the United States in the Pacific Northwest). We soon discovered we couldn’t afford to build the machines for that price. Luckily, our nearest competition was a $400 oscillator from General Radio, which gave us considerable room to maneuver.
    3. At the end of 1939, our first full year in business, our sales totaled $5,369 and we had made $1,563 in profits. We would show a profit every year thereafter.
    4. In those early days Bill and I had to be versatile. We had to tackle almost everything ourselves—from inventing and building products to pricing, packaging, and shipping them; from dealing with customers and sales representatives to keeping the books; from writing the ads to sweeping up at the end of the day. Many of the things I learned in this process were invaluable, and not available in business schools.
    5. He said that more businesses die from indigestion than starvation. I have observed the truth of that advice many times since then.
    6. Although the pressure to meet production deadlines was enormous, there was also lots of excitement and a great sense of camaraderie.
    7. Eventually, because of big gains in productivity, the bonus to our entire workforce rose to as much as 85 percent of base wages. At that point, which was some time after the war, we abandoned this particular bonus plan. But in no way did we discontinue the practice of sharing profits among all our people. To this day, Hewlett-Packard has a profit-sharing program that encourages teamwork and maintains that important link between employee effort and corporate success.
    8. Bill and I had decided we were going to reinvest our profits and not resort to long-term borrowing. I felt very strongly about this issue, and we found we were clearly able to finance 100 percent growth per year by reinvesting our profits. After some discussion with the members of the board, they seemed to be impressed with what we were doing but said they had a limit of 12 percent of profit they could allow on equity. I pointed out that our business had been doubling every year and that it would continue to do so for several years. I also told them that I had kept my salary at a lower level than it should have been because I did not think it was fair for my salary to be higher than Bill’s army salary.
    9. We developed additional instruments, and later on, again working with Dr. Haeff, we built a device his group developed that was capable of jamming an enemy’s ship-board radar. It was at the core of what was code-named the Leopard project. We were very conscientious about meeting our delivery schedule on this project, working around the clock. I recall moving a cot into the factory and sleeping there many nights.
    10. I believe this decision to focus our efforts was extremely important, not only in the early days of the company but later on as well. During the war, for example, we could have taken on some big—at least for us—production contracts. But that would have built the company to a level that probably couldn’t be sustained later on. I felt that we should take on no more than we could reasonably handle, building a solid base by doing what we did best—designing and manufacturing high-quality instruments.
    11. The counter was so useful when it did work that our customers tolerated its unreliability.
    12. Our collaboration with Stanford and Fred Terman continued, and in 1954 we expanded on the fellowship program and established what became known as the Honors Cooperative Program, which allowed qualified HP engineers to pursue advanced degrees at Stanford. The program made it possible for us to hire top-level young graduates from around the country with the promise that if they came to work for us and we thought it appropriate, they could attend graduate school while on full HP salary. Originally, the company paid part of their tuition as well, and more recently has paid all of their tuition. More than four hundred HP engineers have obtained master’s or doctorate degrees through this program. It has enabled us to hire the top engineering graduates from universities all across the country for a number of years—an important factor in the ultimate success of our company.
    13. As I have said many times, our success depends in large part on giving the responsibility to the level where it can be exercised effectively, usually on the lowest possible level of the organization, the level nearest the customer.
    14. There were about 4,000 people at this facility, and we were the first Americans ever to visit. It was obvious to me that what they were building would be entirely useless in modern-day combat, but I didn’t say anything at the time, except to compliment them on their workmanship.
    15. Bill Hewlett and I were raised during that depression. We had observed its devastating effects on people, including many families and friends who were close to us. My father had been appointed as a bankruptcy referee for the state of Colorado. When I returned to Pueblo during the summers of the 1930s, I often helped my father in looking up the records of those companies that had gone bankrupt. I noted that the banks simply foreclosed on firms that mortgaged their assets and these firms were left with nothing. Those firms that did not borrow money had a difficult time, but they ended up with their assets intact and survived during the depression years that followed. From this experience I decided our company should not incur any long-term debt. For this reason Bill and I determined we would operate the company on a pay-as-you-go basis, financing our growth primarily out of earnings rather than by borrowing money.
    16. Our long-standing policy has been to reinvest most of our profits and to depend on this reinvestment, plus funds from employee stock purchases and other cash flow items, to finance our growth. The stock purchase plan allows employees to apply up to a certain percentage of their salaries to purchase shares of HP stock at a preferential price. The company picks up a portion of the price of the stock. The plan has been in existence since 1959 and has provided us with significant amounts of cash to help finance our growth.
    17. I was convinced we could correct the problem through greater self-discipline. I quickly visited nearly every one of our major divisions, meeting with a host of managers and giving them a lecture that was later characterized by one manager as “Dave’s give-’em-hell talk.”
    18. One of our most important management tasks is maintaining the proper balance between short-term profit performance and investment for future strength and growth.
    19. The pricing of new products is an important and challenging exercise. Often a product will be introduced to the market at a price too low to make an adequate short-term profit. The thinking is that “we’ll get our costs down and that will enable us to make a good profit”— either next month, next quarter, or next year. But that time seldom, if ever, comes. Often pricing also falls prey to the goal of “market share.” Many managers in American industry are caught up with the idea of capturing a larger share of a market, often by undercutting the competition’s prices. In the short term, that often results in an impressive sales volume . . . but at the expense of little or no profit.
    20. What we did decide, however, was that we wanted to direct our efforts toward making important technical contributions to the advancement of science, industry, and human welfare. It was a lofty, ambitious goal. But right from the beginning, Bill and I knew we didn’t want to be a “me-too” company merely copying products already on the market.
    21. A constant flow of good new products is the lifeblood of Hewlett-Packard and essential to our growth. Early on we developed a system for measuring the flow and success of new products.
    22. At HP, as in other technical companies, there is no shortage of ideas. The problem is to select those likely to fill a real need in the marketplace. To warrant serious pursuit an idea must be both practical (the device under consideration must work properly) and useful. Out of those ideas that are practical, a smaller number are useful. To be useful an invention must not only fill a need, it must be an economical and efficient solution to that need. we often used to select projects on the basis of a six-to-one engineering return. That is, the profit we expected to derive over the lifetime of a product should be at least six times greater than the cost of developing the product. Almost without exception, the products that beat the six-to-one ratio by the widest margin were the most innovative.
    23. How do managers provide encouragement and help the inventor retain enthusiasm in the face of such disappointment? HP shows off its first computer in 1967 at the IEEE trade show in New York City. Many HP managers over the years have expressed admiration for the way Bill Hewlett handled these situations. One manager has called it Bill’s “hat-wearing process.” Upon first being approached by a creative inventor with unbridled enthusiasm for a new idea, Bill immediately put on a hat called “enthusiasm.” He would listen, express excitement where appropriate and appreciation in general, while asking a few rather gentle and not too pointed questions. A few days later, he would get back to the inventor wearing a hat called “inquisition.” This was the time for very pointed questions, a thorough probing of the idea, lots of give-and-take. Without a final decision, the session was adjourned. Shortly thereafter, Bill would put on his “decision” hat and meet once again with the inventor. With appropriate logic and sensitivity, judgment was rendered and a decision made about the idea. This process provided the inventor with a sense of satisfaction, even when the decision went against the project—a vitally important outcome for engendering continued enthusiasm and creativity.
    24. In 1994, HP’s sales in computer products, service, and support were almost $20 billion, or about 78 percent of the company’s total business. In 1964, our sales totaled $125 million and were entirely in instruments. Not a penny was from computer sales. This represents a remarkable transformation of our company and its business. It would be nice to claim that we foresaw the profound effect of computers on our business and that we prepared ourselves to take early advantage of the computer age. Unfortunately, the record does not justify such pride. It would be more accurate to say that we were pushed into computers by the revolution that was changing electronics.
    25. Several years later, at a gathering of HP engineers, I presented Chuck with a medal for “extraordinary contempt and defiance beyond the normal call of engineering duty.” So how does a company distinguish between insubordination and entrepreneurship? To this young engineer’s mind the difference lay in the intent. “I wasn’t trying to be defiant or obstreperous. I really just wanted a success for HP,” Chuck said. “It never occurred to me that it might cost me my job.” As a postscript to the story, this same engineer later became director of a department . . . with his reputation as a maverick intact.
    26. The fundamental basis for success in the operation of Hewlett-Packard is the job we do in satisfying the needs of our customers. We encourage every person in our organization to think continually about how his or her activities relate to the central purpose of serving our customers.
    27. Noel, a key member of our top-management team, was a strong advocate for helping the customer, so much so that he wanted our sales engineers to take the customer’s side in any disputes with the company. “We don’t want you blindly agreeing with us,” he’d tell them. “We want you to stick up for the customer. After all, we’re not selling hardware; we’re selling solutions to customer problems.” Noel stressed the importance of customer feedback in helping us design and develop products aimed at real customer needs. He also insisted that our salespeople never speak disparagingly of the competition. This reflected our feeling that competitors should be respected, the type of respect that existed between General Radio and HP when Bill and I were starting out.
    28. “More for less” became the goal for each new LaserJet model. This objective reveals a lesson learned from our experience with calculators. For many years we continued to introduce increasingly sophisticated calculators with greater capabilities at greater cost to consumers. Meanwhile, our competitors were offering basic features at a lower price. For the mass market, basic features were sufficient, and the lower-priced models decreased HP’s calculator market share. The sophisticated HP calculators sold to customers who needed more advanced capabilities—but we lost a large portion of the marketplace. With LaserJet printers, we decided that each revision would offer our customers greater capability at a lower price than its predecessor.
    29. Kenzo Sasaoka, our manager in Japan, and he said that I had shown him the way—that gains in quality come from meticulous attention to detail and every step in the manufacturing process must be done as carefully as possible, not as quickly as possible. This sounds simple, but it is achieved only if everyone in the organization is dedicated to quality.
    30. Especially in a technical business where the rate of progress is rapid, a continuing program of education must be undertaken and maintained.
    31. Another requirement is that a high degree of enthusiasm should be encouraged at all levels; in particular, the people in high management positions must not only be enthusiastic themselves, they must be able to engender enthusiasm among their associates. There can be no place for halfhearted interest or halfhearted effort.
    32. Thus, we made an early and important decision: We did not want to be a “hire and fire”—a company that would seek large, short-term contracts, employ a great many people for the duration of the contract, and at its completion let those people go. This type of operation is often the quickest and most efficient way to get a big job accomplished. But Bill and I didn’t want to operate that way. We wanted to be in business for the long haul, to have a company built around a stable and dedicated workforce. 
    33. Growth also affected the size and nature of company picnics. Bill and I considered picnics an important part of the HP Way, and in the early days we had an annual picnic in the Palo Alto area for all our people and their families. It was a big event, one largely planned and carried out by our employees themselves. The menu consisted of New York steaks, hamburgers, Mexican beans or frijoles, green salad, garlic French bread, and beer. The company bought the food and beer. It became customary for the machine shop people to barbeque the steaks and burgers, with other departments responsible for other parts of the menu. Bill and I and other senior executives served the food, giving us the opportunity to meet all of the employees and their families. In the early 1950s the company bought a parcel of land, called Little Basin, in the redwood country about an hour’s drive from Palo Alto. We converted part of it into a recreation area, large enough to have a picnic with two thousand people or more. We also made it available year around for our employees and their families to go overnight camping. This was such a popular benefit that we decided, later on, to duplicate the idea in other parts of the world where we had concentrations of HP people.
    34. The underlying principle of HP’s personnel policies became the concept of sharing—sharing the responsibilities for defining and meeting goals, sharing in company ownership through stock purchase plans, sharing in profits, sharing the opportunities for personal and professional development, and even sharing the burdens created by occasional downturns in business.
    35. In the United States and many other countries, employees participate in stock purchase plans and in cash profit sharing. U.S. employees with more than six months of service are eligible for profit sharing, and each year receive amounts calculated on the company’s pretax earnings. Over the years this payout has been as high as 9.9 percent and as low as 4.1 percent of base salary. Since the company has always been profitable, the program has continued uninterrupted since we started it in the 1950s.
    36. An important responsibility of managers is the selection and training of their potential successors. Management succession is especially critical at the upper levels of an organization, where a manager may be responsible for a wide scope of complex activities involving the expenditure of many millions of dollars and the efforts of many thousands of people.
    37. I have always felt that the most successful companies have a practice of promoting from within.
    38. Today Hewlett-Packard operates in many different communities throughout the world. We stress to our people that each of these communities must be better for our presence. This means being sensitive to the needs and interests of the community; it means applying the highest standards of honesty and integrity to all our relationships with individuals and groups; it means enhancing and protecting the physical environment and building attractive plants and offices of which the community can be proud; it means contributing talent, energy, time, and financial support to community projects.
    39. It took forty years for the company Bill Hewlett and I started in 1939 to reach one billion dollars in annual sales and a major part of that was from inflation. In the 1994 fiscal year that ended last October, we began the year with twenty billion dollars in worldwide sales and added five billion to that by year’s end. This occurred with essentially no inflation. Other technology companies have shown similar growth. Just as it has in the past, our growth in the future will come from new products. In 1994, we spent two billion dollars in new product development. Beginning in 1939 we generated at least six dollars of profit, spread over five or six years, for every dollar spent on new product development. By new products, I mean products that make real contributions to technology, not products that copy what someone else has done. This must be our standard in the future just as it has been in the past.
  4. Other
    1. I had to work very hard at Latin, but the math and science courses were easy because I already knew about as much as the teachers did. I was elected president of my class all four years.
    1. Bill went to a private elementary school, going to and from on a cable car. He did well with numbers and arithmetic but had great difficulty reading. He was thought to be a slow learner when, in actuality, he was dyslexic. But in those days no one knew what dyslexia was. He continued to have trouble reading and writing, and later on, in lecture classes, he couldn’t write notes fast enough to keep up with the lecturer. So, as is the case with many dyslexics, he learned how to listen, to file thoughts and information in a logical form and have them readily available from memory. “This procedure worked particularly well in learning math and science,” he says.
    2. I learned everything I could about possible causes of failure, and I decided to spend most of my time on the factory floor to make sure every step was done properly. It soon became apparent that the instructions the engineering department gave the factory people were not adequate to ensure that every step would be done properly. I found the factory people eager to do the job right. We worked together to conduct tests and identify every possible cause of failure, and as a result, every tube in that batch of twenty passed its final test without a single failure. That was a very important lesson for me—that personal communication was often necessary to back up written instructions. That was the genesis of what became “management by walking around” at the Hewlett-Packard Company.
    3. These miscellaneous jobs made us more sure of ourselves and our skills. They also revealed something we hadn’t planned but that was of great benefit to our partnership—namely, that our abilities tended to be complementary. Bill was better trained in circuit technology, and I was better trained and more experienced in manufacturing processes. This combination of abilities was particularly useful in designing and manufacturing electronic products.
    4. Another benefit from ranching was my friendship with Bill Hewlett. By running the ranches together—as well as the company—Bill and I developed a unique understanding of each other. This harmony has served us well every single day in running HP.
    5. Shortly after my arrival at the Pentagon, I called on all four of the Joint Chiefs in their offices and told them I wanted to work with them and that I needed their help. Bill and I had a deer hunt every year at our San Felipe ranch southeast of San Jose. He and I brought all the food, and we cooked and served the meals and washed the dishes ourselves with the help of our guests. In the spirit of friendship and collaboration, I invited the Joint Chiefs to join us at the deer hunt in 1969. They came and each got a deer. When it was time to wash the dishes, they rolled up their sleeves and helped us. That hunt helped establish a good rapport with the Joint Chiefs.
    6. Before I went to Washington, even the people who encouraged me to go warned me that a career in business would ill prepare me for the frustrations of government bureaucracy. And they were right.
    7. When i think of the phenomenal growth of the electronics industry over the last fifty years, I realize how fortunate Bill Hewlett and I were to be in on the ground floor. But it reminds me of a story I like to tell on myself. In my sophomore year at Stanford I took a course in American history and had the opportunity to study the westward movement beginning with the early pioneers and continuing throughout the nineteenth century. I remember lamenting that I had been born one hundred years too late, that all the frontiers had been conquered, and that my generation would be deprived of the pioneering opportunities offered our forebears. But in fact, we went on to make breathtaking advances in the twentieth century.

What I got out of it

  1. Some incredible business lessons from one of the original silicon valley companies that started it all

The Life of Elbert H. Gary: A Story of Steel by Ida Tarbell

This book is full of practical wisdom and deserved a longer write up.

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