347-878-3837

Business

Here are articles on Business

Leading Through Chaos, part 3: Seizing Opportunity!

Leading Through Chaos, part 3: Seizing Opportunity!

, , , ,

In part 1 we covered the need for predictability. We took Nassim Nicholas Taleb’s advice in part 2 to cover our worst-case scenarios.

Reader Shari Aaron asked: My business faces short-term disruption. Client budget approvals are very slow, due to so much uncertainty. How do you balance the need to keep your business healthy, when you believe it will come back once we have more clear direction on economics/tariffs, etc.?

We’ve already seen that priority #1 is Don’t Die! But don’t go into survival mode, just yet. Because even in survival mode, you need to keep the tools to rebuild.

You need to grab any upside that comes with turbulence. You can’t use prediction, remember. The rules are changing too fast.

I’ve personally never been good at ambiguity. My mind is orderly. It runs on plans. No plan? No problem. I’ll make a plan to create a plan. Then I’ll follow that. To my mind, it’s plans all the way down.

But when faced with things that can’t be planned, I freeze like a deer in headlights. Cold headlights. Subzero headlights. With a freeze ray. I really freeze.

I’ve always wanted to be able to plan for the unplannable. And after decades of searching, I learned there’s a way.

We have role models right in front of us who operate where the rules are unknown. Where opportunity is all around, and the skill shifts from predicting the future to shaping the future.

As it turns out …

Entrepreneurs Live in Uncertainty

It’s entrepreneurs! They do what we need! When they invent new products or open new markets, they don’t know how it will turn out. The successful ones limit their downside while grabbing opportunity. The very barbell we want!

Even better, we know how to think to do this.

Babson College has been the world’s #1 school in entrepreneurship since 1994. I worked with the President during their strategy redesign, and there learned about Entrepreneurial Thought and Action.

It start with Professor Saras Sarasvathy at the Darden School of Business. She found serial entrepreneurs with multiple successes. All had invented new products and markets. Prediction and planning were impossible.

Successful entrepreneurs limit their downside while grabbing opportunity

She gave them challenges and had them describe their approach to overcoming them. Successful entrepreneurs all used the same mindset. A mindset that captures good luck, while protecting against losses.

She called it “Effectuation,” an easy-to-remember, evocative name that instantly conveys deep meaning. Jk.

For me, it was love at first read (the concept, anyway. The research itself makes a great insomnia cure). It gave a framework! Not as good as a plan, but a way forward. A way to take action when faced with my dread nemesis, The Unknowable.

Acting Under Uncertainty: The Basics of Effectuation

We usually make decisions based on plans. Or the way we think the future will unfold. Effectuation complements that approach.

Where we can’t plan, we can effectuate. When plans work again, we reach for our beloved GANTT chart.

“Effectuation” is for whenever there isn’t a firm roadmap: starting a company, dating, writing a theatrical piece, launching a product, building a gigantic Burning Man art installation, learning a skill, or anywhere else you can think of.

Learn the Effectuation principles and apply them as needed:

Pilot in Plane. Don’t think about the future as something you predict; think of the it as something you shape. You’re not a passenger in the plane, you’re the pilot. You can change where it’s going by taking action. As business scholar Peter Drucker often said, “The best way to predict the future is to create it.”.

Bird in Hand. Textbook business development classes tell us how to make the future happen:

  1. Set an end goal
  2. Build a plan to reach that goal
  3. Raise the money from investors to execute that plan.

But knowing a goal and plan requires prediction. Instead, try doing whatever you can with what you have on hand—from money to hard assets to relationships.

Identify how to invest the fewest resources to get the most learning to direct you towards the right course of action. Invest those. Then use what you learn to decide on another learning cycle or a switch into planning mode.

Crazy quilt. In uncertain times, listen to people who have skin in the game. Everyone has advice, even though they can’t predict any better than you can. Hold their advice lightly … unless they put skin in the game. If they’re committed enough to their ideas to put down money, time, or sacrifice, they’re worth taking seriously.

That doesn’t just mean doing what they say. It’s adding another relationship, another patch, to your quilt of committed stakeholders. The more people have skin in the game, the more you’ll support each other. You’ll all be motivated to roll up your sleeves, get creative, and make the business work together.

Affordable loss. To sleep well at night, never invest more than you can afford to lose. Once again, this addresses the “Don’t die!” barbell.

Every so often, review what you can afford to lose and still sleep at night. How much money? How much reputation? How much time? Then ask, “given what I can afford to lose, what can I do to make as much progress as far as possible?”

Combined with Bird-in-Hand, Affordable loss is how you choose a path forward that keeps you sane while keeping you solvent.

Lemonade. When life gives you lemons, make lemonade. When things don’t go the way you want, always be asking how to turn the new circumstances into advantage.

This is where you find the other half of your barbell, upside! When you are nimble—because you have limited your downside to your affordable loss—you can experiment when opportunity or brilliant ideas come your way.

Remember, everyone else is also without a roadmap and disoriented. So when you see a $100 bill on the sidewalk, grab it! Everyone else might be missing it because they’re too busy trying to figure out why their plans aren’t working.

Effectuation gives you a way to take short steps (the size of your affordable loss), with committed allies (crazy quilt), to direct your resources (pilot in plane, bird in the hand) towards seizing opportunity (lemonade), all while sleeping well at night (affordable loss).

Two colleagues and I trained in Effectuation. We then founded a company and ran it for a year and a half explicitly using effectuation. At its peak, we had a team of 14 people, an alpha-level product, and a total capitalization of less than $5,000.

What we know so far:

If you’re changing how you plan, how you prioritize, and turning planning into learning cycles, you need to change the way you make decisions.

Next time, we’ll look at how your company can make high-quality decisions to go down possibly new, lemonade-covered paths.

Leading Through Chaos, part 3: Seizing Opportunity!

Leading Through Chaos part 2: Don’t Die! (aka Barbells and Risk of Ruin)

, , , ,

I have long planned to buy a new computer in 2026. My current desktop is nearing its end of life, but it still limps along. I’d rather not invest right now; cash is tight, tariffs are high, and my portfolio is down. But supply chain disruptions might mean that prices jump later this year. 

What do I do? 

Do I stick to my original plan? Do I change my priorities and buy now? Do I sit tight and not spend money until I know what’s coming? 

In part 1 of this series, I suggested that Nassim Nicholas Taleb’s “barbell” approach to risk makes sense here. 

As Anti-Fragile made clear, our top priority is protecting against risks that could wipe us out. 

Find What’s Likely to go Wrong (80/20 rule)

We can’t predict business-as-usual, but we can probably predict business as unusual. 

We humans focus on best-case and worst-case scenarios. Right now, the best case is unclear, but the worst case probably isn’t. We often know where things are unstable.

We just need to know which major disasters could reasonably come our way. An asteroid strike? Probably not worth our attention. But a drop in order volume, or a rise in tariffs probably is.

The full risk assessments and risk management efforts I’ve done with clients have often taken one or more days, to be thorough. But things are changing too fast to reconsider everything each time there’s a shift.

Instead, focus your attention and your risk management efforts first and foremost on the things that are easy to identify: the things that could tank you and tank you fast. 

Burning Man’s Risk Management Pays Off

Burning Man is a city that exists for one week each year. It’s built out of experiential art in the Black Rock Desert in Nevada. Most years, it’s hot and dry. But in 2023, it rained. As it happens, the playa dust turns a clay tarpit when wet. It became impossible for people to get it or out. Mud would collect on car wheels and mire the wheels in the ground.

The organizers did their risk management. They had considered this possibility and the Burning Man Organization handled ‘mudpocalypse’ just fine.

A picture of a fantastical Burning Man structure in a dry desert, juxtaposed with a picture of a soggy hippy trudging through the mud after a rainstorm.

Plan for many possible downsides. Identify the government policies, external signals, and actions others could take that could lead to disaster for you. 

For Burning Man, it was rain. For your business, it could be clients leaving you for political reasons.. 

For each scenario, brainstorm:

  1. How to reduce chances of that happening
  2. How to recover if it does happen, and
  3. How you’ll know that scenario is becoming more likely.

Don’t Panic!

I once considered buying a house as an investment. It needed a lot of repairs. About a hundred thousand dollars’ worth. YIKES!

Here was my thinking:

Pros 15 years of slightly better-than-breakeven expenses and rent. Then it becomes a steady income stream. If rents rise with inflation, it could fund part of my retirement.

Cons Guaranteed need to cover mortgage and taxes even if it’s not rented. It puts me in debt for a six figure amount. I’ve never managed contractors. Cost overruns could bankrupt me.

RUN AWAY!

The Cons scared the pants off me. I declined.

After looking up the property’s last assessed value, letting this deal go definitely ranks as one of the five worst decisions of my life.

What I should have done: tease apart different scenarios and consider them individually.

Avoid Risk of Ruin … But Be Smart!

The problem is that I was treating the Cons as if they were guaranteed. And I was treating the upside as if it was highly uncertain. 

In reality, the opposite was more realistic. The upside was near certain, and the downside was only somewhat likely. 

Furthermore, there were many ways to limit the downside losses:

  • Property Damage. Take out insurance.
  • Shoddy repairs. Pay more for a highly reliable contractor. (“More” yes, but in the grand scheme of things, not that much more.)
  • Slow contractors. Structure the renovation to make payments contingent on completion.
  • Too-large an amount to risk. Bring in an experienced real estate investor as a minority (or even majority) partner on the deal.
  • Costs spiral out of control. (The “nuclear option”) Resell the building at below market, a modest loss, if expenses were too great.

When it comes to my new computer, the major downside scenarios are (1) wait and have my current computer fail or become obsolete completely, forcing me to buy at a much higher price if costs rise substantially (2) buy now and having a better model come out later and (3) buy now when the money could be used for other things.

When I listed the downsides individually, it’s pretty clear that the downside of waiting is an interruption to my business and a possible bigger purchase price. The downside of buying now is entirely opportunity cost.

Since I don’t have any opportunities on the table that would be hurt by the purchase, I placed the order while I was writing this essay.

(Yup. I really use risk analysis, myself!)

But this is only one part of the equation, limiting the existential risk. You still need to increase your chances of finding the upside in the chaos. We’ll tackle that in the next newsletter. 

P.S. What are you afraid might happen? Where are your most likely risks? Let me know and I’ll choose a reader scenario to use as an example going forward.

Leading Through Chaos, part 3: Seizing Opportunity!

Leading Through Chaos, part 1: What’s the Root Problem?

, , , ,

The world is pretty crazy right now, and it’s hard to know what to do. About anything. But even wait-and-see is doing something.

Or maybe, we can step up as leaders. Business leaders. And since everything is in flux, not just business, we can also be family leaders. Friend and community leaders.

Leading or not, we need a way to deal with the chaos.

The first step is understanding why chaos is even a problem.

America has decided to step down as a world power. Given our central role in the world’s economy, America shifts, and so does everyone else. Stock markets are dropping. Currencies are fluctuating. We’re talking decades of ripple effects. And that’s just the economy.

We don’t know what the world order will look like five years from now. We don’t know what our lives will look like. But different. Almost certainly, different.

Personally, I’m plenty scared. My whole life has been based on stories about the future:

  • There’s always opportunity available if you decide to grab it.
  • I have control over my future.
  • My later years will be spent with family and friends.
  • Physical health and fitness is possible, if you just put in the work.
  • The world will generally get better over time, leading to more opportunity, health, prosperity, and safety.

In short, I’ve assumed that everything needed for a vital, fulfilling life is available.

Do Lunch or Be Lunch

But there’s the rub. When those assumptions are up-ended, everything else seems in doubt.

  • Will there be opportunity, two years from now? As I write this, GDP forecasts have dropped from +3% to 0% in the last six weeks.

  • Will there be health care, sanitation, food standards, and public health that can help support me in my old age? It’s looking unlikely.

  • Will my country even be conducive to community, mutual support, happiness and love?

We want to know these things so we can plan for them.

My Harvard Business School professor Howard Stevenson changed my thinking more than anyone else. He has a knack for reframing life situations in powerful ways.

In his book Do Lunch or Be Lunch, he suggests that the fundamental human drive isn’t survival, it’s predictability. Predictability is what helps us survive.

We don’t want to Be Lunch; we don’t want to be the hapless victim of the Saber Tooth Tiger.

We want to Do Lunch. We want to be the ones in control. We want to build, plan, and do so we can be the diners, not the meal.

Building and planning means knowing the future. Or at least knowing what the future is likely to be. That’s why science is great. Science tells us how the world works.

When we combine “how the world works” with “what we see, feel, and hear” (also known as data), we can predict future:

There’s a huge tree outside my window. The branches are near the house (observation). Close branches + wind = broken windows (how the world works). Knowing that, I can ask an arborist to trim the tree.

Note to self: Call the arborist. That tree’s getting a little too close.

It’s far from perfect, but it works better than anything else humans have tried.

Risk? Defuse it!

When you “Do Lunch,” that’s risk management. We do it everywhere.

Financial professionals are always looking for ways to get high returns with downside protection—that’s risk management.

Ever hear of a “hedge fund?” They started as funds designed to help investors “hedge their bets” against downturns in other investments.

Households save for a rainy day. Or for college, just in case our kids don’t get a full scholarship (does anywhere even give full scholarships).

We buy life insurance policies for our families, in case we get eaten by a Saber Tooth tiger.

We audition for Broadway, and also learn a marketable skill, just in case we don’t get selected as Elder Price in Book of Mormon. (h/t to my friend Pete, who despite being a “triple threat” singer, dancer, actor, also learned to code.)

We don’t like chaos because it screws up our ability to predict—and thus control—the future.

Change, even good change, can be bad

The ultimate in predictability would be if we could freeze everything the way it is. I watched the 2023 movie Barbie last night.

In it, the character Gloria (delightfully portrayed by America Ferrera) tells Barbie, “That’s life. It’s all change.” (Barbie’s response? “That’s terrifying—I don’t want that!”)

Nevertheless, the world changes. We can adapt to slow change. It gives us time to learn the new rules. Then we make new predictions and new plans.

Fast change is another matter. Too fast and our systems start breaking down without giving us time to learn the new rules.

The fundamental human drive is predictability. — Howard Stevenson (paraphrased)

When change is too fast, we stop investing for the future. Consider college: Who wants to spend four years and thousands to learn advanced skills that might be obsolete in ten years? When college is a path to success, it’s a no-brainer. When the job market changes so fast that college is a six-figure gamble? Not so much.

We can’t plan long-term during unpredictability, so we have to settle for short-term tactics. But that’s dangerous. Because short-term gains often come at the expense of long-term health.

The way to deal with chaos is to find predictability wherever you can.

Start from your bedrock

Find what you can predict and plan for it. Then find other ways to deal with the unpredictable.

If your supply chain is breaking down, or your retirement savings drops by 30%, use risk management for some short-term options. Then learn some new ways to think about strategy under uncertainty. We’ll cover my favorite later in this series.

In the book Anti-Fragile, Nassim Nicholas Taleb lays out a proposal for how we manage risk. It’s a barbell strategy. We deal with the extreme downsides and the extreme upsides.

First and foremost, we arrange our lives to protect against the worst-case scenarios. The risk of ruin. Things there’s no coming back from.

My own retirement strategy started with an investment account that I couldn’t touch until age 59 1/2. It invested in low-risk, long-term, dependably predictable investments. If nothing else worked, it’s protction against ruin.

The second part of Taleb’s strategy is the other end of the barbell: the extreme upsides. Always make sure you have some exposure to the best possible cases.

We’ll cover everything in the next few newsletters — protection from ruin, managing to find upsides through turmoil, and where to lean in as a leader.

But let’s start at the beginning. In the next segment, we’ll look at how to protect yourself against risk of ruin.

Want to tank your profit margin? Just do a successful merger!

, ,

A fable of Maximus Grandeur, CEO of Gaping Maw Co[1].

Think you understand “synergies”? Think again. Most people don’t. Synergies can happen. The boost revenues and profits, but tank profit margin. In fact, math often guarantees it. Here’s an example.

In the Beginning

Consider two standalone companies. Milk Co and Ice Cream Co.

  • Milk Co makes $9 million profit on revenues of $300 million. That’s 3% profit.
  • Ice Cream Co makes $2.5 million on $50 million. That’s 5% profit.
  • Gaping Maw Co is a large food company that makes $80 million on $1 billion in revenues. That’s 8% profit margin.

Enter Maximus Grandeur, Gaping Maw Co’s new CEO. He’s been feeling inadequate in the bedroom, so in a misplaced attempt to shore up his self-esteem and fool himself into believing that he has agency in life, he buys the two companies to feel big and powerful. Publicly, he talks about “synergy.”

Just the Math, Ma’am

The acquisitions happen. He makes no other changes.

Maximus just screwed Gaping Maw’s profit margin. The new profit margin is (all numbers in millions):

($9 milk + $2.5 ice cream + $80 legacy)/($300 milk + $50 ice cream + $1000 legacy) = 6.78%, down from 8%

Let that sink in: for purely mathematical reasons, having nothing to do with actual business operations or performance, consolidating two businesses under an umbrella business mathematically decreased the umbrella company’s profit margins.

BUT WAIT! What about synergy? That was Maximus’s publicly-stated reason for suggesting the acquisition.

The Synergy is Real

The Maximus synergy is for Ice Cream Co to buy all their milk from Milk Co instead of other suppliers. He proclaims this brilliant strategy in the annual report, to rescue the profit margin. He implements.

The new, synergy picture is this: $10 million of purchases that Ice Cream Co would have spent with other milk companies now goes to Milk Co, which will make its normal 3% profit on all those tasty new purchases. Everything else remains the same:

  • Milk Co makes $9.3 million profit on revenues of $310 million. That’s 3% profit.
  • Ice Cream Co still makes $2.5 million profit on $50 million. That’s still 5% profit.
  • Gaping Maw Co’s legacy businesses still make $80mm on $1Bn, for 8% profit.

Considered individually, each division is doing as well or better than before the merger.

Each division is doing just peachy. In fact, Milk Co is doing better in terms of absolute sales and absolute profit. That means that Gaping Maw has $10 million more in revenues, and $300K more in profit. Each division is as healthy as ever!! Healthier, even!!

Sounds like a win, right? Wrong.

But Synergy Makes Everything Worse

Because now Gaping Maw Co’s profit margin is (all numbers in millions):

($9.3 + $2.5 + $80) / ($310 + $50 + $1000) = 6.75%

Synergies were realized, and it made the profit margin even worse.

Yes, you read that correctly. The synergies were realized, and it pushed the profit margin lower[2]! From 6.78% to 6.75%.

As a conglomerate, the profit margin has gone down, even as the absolute dollar amount of profits has gone up.

Here’s How to Think About It

Here’s why: intuitively, business units with lower profitability than the overall company drag down the overall profitability margin. The more revenues come from low-profitability businesses, the more overall profitability sinks, even though the business is doing better.

It’s also possible to acquire a high-profitability business that boosts overall profitability while absolute revenue/profit numbers may decline. It’s the math; it’s not about how efficient or well-run the business is.

But all the market cares about is profit margin of the overall company. So your stock price will tank, the CEO will get fired, and Maximus will take his golden parachute (equivalent to the last ten years’ profits of all three companies combined) and retire.

BUSINESS MORAL: Know the math before you acquire or “synergize.” Know the absolute numbers and the margin numbers. Assume investors will only pay attention to overall profit margin, which means they might push you to do dumb things to maximize that number. Don’t listen. If you’re going to do dumb things, at least do your own dumb things.

PERSONAL MORAL for Maximus: If your sex life is unsatisfying, maybe you’re spending too much time at the office. Regardless, don’t take out your frustrations on innocent companies that are doing just fine.

  1. This article is emphatically not about CVS, even though it was inspired by reading that CVS is going to axe 2,900 jobs and possibly split up their insurance and pharmacy businesses to "improve financial performance. ↩︎

  2. The real problem here is that we demand steady or growing profits when viewed as a percentage return. It is beyond the scope of a simple essay to give this topic the treatment it deserves. ↩︎

3 Keys to Effective Communication

, ,

Beginnings matter. Whether you’re an executive communicating a leadership message, a team leader building morale, or a solopreneur bringing your self to market, you’ve got something important to say. But. If you’ve got a great product/message/idea but can’t communicate it clearly, you’ve lost before you even get started. A decade’s worth of writing Get-it-Done Guy scripts taught me some things about clear writing.

This week I’ve seen a resume, an investor pitch deck, and an article that were full of great information. All three were presented in ways that would cause eyes to glaze over, because they were nothing but a mass of details.

The opening sentence and framing are the key to effective communication:

  1. Know what you want to communicate. Can’t write it in a single sentence? You either don’t have the sentence yet, or you’re trying to do too much.
  2. Start with a big picture statement that makes someone want to read more. Show your audience why it’s relevant. If you’re writing for multiple audiences, this can be the hardest thing to write, since you’re motivating multiple audiences who may have different, competing agendas.
  3. Eliminate jargon and acronyms. If your big picture statement is “Our ACRS system is adding an unprecedented 240 basis points to our operating earnings,” and your audience doesn’t know what ACRS is, what a basis point is, or what operating earnings are, then you’ve lost them before you’ve begun.

It only took a few sentences, applying these tips, to make all three pieces of writing much more engaging.

AI is Computerized Theft. Today, it’s Zoom

AI is Computerized Theft. Today, it’s Zoom

, ,

Zoom, the video conference company, just updated their Terms of Service. Section 10.4 lets them use your meeting content to train machine learning and AI models.

  • They could use this to duplicate your expertise, if you deliver your expertise via Zoom.
  • This could put you in violation of the law if you’re in a privacy-regulated profession.
  • Zoom says they’ll asked for consent first, but they don’t say how. It could be as deceptive as “You must click Accept on our updated terms.”
  • I’m looking for privacy-protecting alternatives to recommend.

The background.

Does Machine Learning really duplicate expertise? Yes.Machine learning is the new hot topic in Silicon Valley. It is a statistical analysis method that uses large data sets to create computer programs that can predict things. For example, medical diagnosis systems would be given a huge number of medical cases. Each would be given the symptoms, the eventual diagnosis, and whether that diagnosis was correct.

With enough data, the system would be able to diagnose as well as (or better than) any of the doctors who provided the training data.

Getting enough high-quality data is the key to building a model that works.

Cloud services are using user data to create and “steal” those users’ product. Adobe has released truly astonishing new capabilities in their image processing program Photoshop. The latest Photoshop can fill in blank spaces in images, as if by magic.

How did the AI get that ability? By training on images that graphic designers had stored in the Adobe Cloud over the last decade.

The Terms of Service did say, buried somewhere in several dozens or hundreds of pages of legalese, that data stored in the Adobe Cloud could be used for the creation of new products and services.

I think it’s highly unlikely that (a) users knew that clause was there, (b) users understood the implications of letting Adobe train an AI on their images (implications that Adobe can now duplicate their work) (c) users thought that a cloud service, which is usually a storage product, would be used to train an AI for delivery in a separate product.

Is this theft? Legally, probably not. But morally and ethically, I use a different test: if the users of Adobe Cloud had been told “we will use any image you store with us to train an AI to be able to generate similar images without paying photographers or designers royalties of any sort,” I’m fairly sure most people would have opted out. They probably would have said “You mean you want to steal my images and design style? Hard pass.”

This is playing out right now in Hollywood. The actors’ and writers’ strike shows that when people understand that they’re being asked to give away their creative work for free, they refuse. The actors and writers are simply asking for protection against exactly this sort of AI duplication of their work and likeness.

Does one person’s data really matter? If Zoom is collecting data on billions of meetings, do my meetings really make that much difference in their machine learning models?

No. And Yes. If (as has happened) a bank accidentally charges 100,000 accounts an incorrect $10 fee, does that matter? $10 is unlikely to bankrupt anyone. But the bank just walked away with a million dollars. I think we would all call that theft.

AI companies are doing the same thing now, only with expertise rather than money.

How this affects you.

Legal effects. If you’re a doctor, trainer, consultant, therapist, lawyer, or anyone who delivers your product or service via Zoom, this means that your private conversations may be used to train a machine learning model.

Depending on your profession, there may be legal implications for you if this happens.

Ethical effects. If Zoom then releases that machine learning model in some form (or even just uses it internally), that model might produce output that is similar to the conversations you’ve had. It may use slightly different words, or omit proper names, but it may summarize your conversations or convey the gist of them. Depending on the summary, it might give enough hints that a reader could deduce the actual details.

Competitive effects. If you make your money from your advice giving, the model that Zoom builds might be used, as Adobe’s was, to produce a product that directly competes with you in the marketplace. Why hire an interior decorator when Zoom will let you pay $50 to work with an AI that’s been trained on a few hundred thousand conversations that real interior decorators had with their clients.

What to do next.

If you think there may be legal implications with your conversations being recorded by Zoom, check with your lawyer. Point them to sections 10,2, 10,3, and 10,4 of the Terms of Service. Also, the privacy policy.

If you’re concerned about your conversations being used to put you out of business, stop using Zoom and refuse to deliver your services over anyone else’s Zoom account (they may have given consent for their account to be used for training data).

Be vigilant. These clauses are becoming more and more common with cloud services. When you use any new high tech product, search “Terms of Service” pages for the phrases “Machine Learning” and “AI” and “artificial intelligence” and see what rights you’re giving up to your own work product.

(Cars are now a high-tech product, by the way. Pay particular attention to whether the car company can monitor and record everything you do and say inside your car. Some car companies have you grant that right as a condition of buying the car.)

Stay safe out there. Because now, it’s your very own productivity tools that are trying to take you down.

How to Live Your Values (no, you don’t really care)

How to Live Your Values (no, you don’t really care)

, , ,

“Hello, valued customer, your call is very important to us. Now please wait 15 minutes because we don’t want to spend the money to staff our phone lines.”

There was an actual human being who decided to record that message. That actual human being may really have believed that they valued customers. I fervently hope I’m not that person.

Your are your values

Values are an interesting thing. We all have them. They drive our behavior. They determine who we hang out with. They determine our decisions. And when we’re giving our TED talk, we even talk about our values. We list them. We point to their worldly goodness. “Family is what matters most.” Everyone nods. We think we live our values.

Except.

The values we proclaim—the ones in our TED talk—may have no relationship to the values we live by. Most of us assume that our lived values correspond to our proclaimed values. Most of us are wrong.

This matters because our lived values are the ones people will judge us by. They’re the values that will determine our reputation and “personal brand.” Those, in turn, will determine who wants to do business with us, who wants to hang out with us, and much of the quality of our emotional lives. The continual neglect of our teenagers’ science fair competitions are what they remember, not the world “family matters most.”

This also matters because presumably we actually want to be living our espoused values! What if we talk about integrity, and really want to be surrounded by people with integrity? What if we talk about respect, and really want to respect people and be respected by them? How can we make this happen?

Know What You Value (and thus, Who You Really Are)

First, list your proclaimed values. This will be easy, because they’re the ones you proclaim. Simply answer the question “what do you value?” off the top of your head. You’ll get the list. Watch your TED talk. You did a great job of listing them there. “I value truth, constructive disagreement, and following through on promises.”

Next, identify where those values drive your behavior. For each of your values, think about the kinds of decisions and tradeoffs where those values would show up. If you value truth, where would that manifest? Perhaps in giving feedback when someone asks if they’ve done a good job. Or when they ask if their current outfit is flattering.

If you value constructive disagreement, that would manifest in conversations with your spouse where you have differing opinions about something important. When it comes to following through on promises, you would look at things you’ve promised, and when (or if) you delivered on those promises.

Lastly, take a hard look at your lived values. Go through the scenarios you identified and notice what you actually did in those situations. Did you give honest feedback, or did you say the easy thing that wouldn’t rock the boat? Did you cave in to your spouse, because it was easier than asserting your own opinion. Do you have excuses at the ready, to show why it was actually reasonable to break all those promises?

This is very hard, because you will find that your lived values don’t match up perfectly to your proclaimed values. Indeed, some people may find that their lived values are the opposite of their proclaimed values. It is far more comforting to live in ignorance, than face the reality that the person who most betrays your values is you.

Now Change: Start Living Your Values

Once you know where the gaps are, you know where to change your behavior. Next time you’re in the situations you identified, consciously behave according to your proclaimed values, instead of your lived values.

This will feel wrong and unnatural! You’ve spent your lifetime deciding to reduce staffing in a call center so you boost profits. Now, you’re making a decision to spend more money to provide better customer service. If that decision felt natural, you would already behave that way. Expect yourself to resist, push back, and generally try to maintain the status quo.

It’s helpful to enlist trusted friends and colleagues in helping me change. You can ask your teenagers, “I want to do a better job of putting family Please tell me when I’m falling down.” They’re teenagers. They’ll tell you. You can ask your work colleagues, “I want to do a better job of living our values of customers-first. Please help me make decisions that reflect that.” You’ll be surprised. If you are sincere in your request, and you act on their feedback, people will be happy to help.

Values are the core of our identity. Our proclaimed values represent the ideal we wish to be. Our lived values represent the person we are. By bringing the two together, you’ll be taking control of both who you genuinely develop to be, and others will come to see you as that same (hopefully awesome) person.

What is market size?

,

I’m a judge for Mass Challenge, as well as the Harvard Business School competition, and I’ve noticed that many entrepreneurs don’t know what market size means. Let me call out two of the most common mistakes, which can be the difference between recognizing a real opportunity and fooling yourself into believing something is an opportunity when it isn’t.

When a potential investor (including you, investing your time and career!) asks the size of your market, they’re asking how much money is out there (or how many customers) that could conceivable be spent on your company.

Market Size Isn’t Demographics

“The market for our new deodorant is anyone over the age of 12.” Actually, it isn’t. That’s way too general. Your market is defined at least in part by who you can reach. Your accessible market is what matters. You can’t reach everyone over the age of 12. “The market for our new deodorant is teenage girls between 14 and 18.” That is a much more realistic assessment and probably much more reachable through advertising in an identifiable set of magazines, TV ad spots, etc.

Market Size Isn’t Your Customer’s Revenues

The other big mistake entrepreneurs make is giving the market size as the total market revenues of all possible customers. “We sell hand sanitizers to media companies. Combined media revenues were $100 billion last year.” That’s a slippery evasion, because no media company will spend all their income on hand sanitizers. The market is not total revenues of all possible customers, but total amount all possible customers are likely to spend on your product. “Media companies spent $100 million on hand sanitizer last year, so that’s our market size.”

Market Size is the Potential Revenues You Can Reach

“The market for our internet-enabled back scratchers is middle-age men who feel the need for meaning in their lives. There are 50 million of them in my country, and at $19.95 (+ shipping and handling) that’s a billion dollar market.” Yes, except there’s no way to reach all 50 million of those customers. If there were a mailing list of all 50 million, you could do it. And you can certainly try your best to cover every possible advertising and media outlet that reaches middle-age men. But at the end of the day, only people you can reach with your message are potential customers.

An acquaintance of mine is developing a product for online gamers who make a living by livestreaming their games. That’s an addressable market, because there are forums, awards, conventions, podcasts, and an entire media ecosystem that pretty much every live streamer follows.

To put it all together:

When you’re evaluating the potential of an opportunity, be careful to ask how much money could reasonably come your way from the customers you’re explicitly able to reach. That is a much better number to use for market size.

LinkedIn etiquette: If you must cold call (don’t), at least do it well.

LinkedIn etiquette: If you must cold call (don’t), at least do it well.

,

Someone buried under marketing email

LinkedIn is an amazing resource! Use it to find people who are selling what you want. Use it to offer or find jobs. But don’t use it for outbound sales.

It’s been open season for people spamming my inbox with unsolicited sales pitches. While I’m sometimes open to sales pitches, not on LinkedIn. It’s a platform where we go to showcase ourselves to anyone interested in what we have to offer. No one goes there to be sold to; everyone goes there to sell.

This is a really great system! If someone wants an executive coach, they search for “executive coach.” Then they reach out. Everyone wins: the customer finds a coach, and the coach deals only with prospects who are already a good match.

Outbound cold emails ruin all that. People reach out with a generic form-letter pitch. “Hi! Buy my product.” The worst thing about these form letters is that they’re so obviously form letters. I’ve even had people ask what I do. What I do? WHAT I DO? Other than pages of description, links to videos, a website with 400 articles on it, and two books, that question betrays the person as a rank amateur.

Think about it. This is LinkedIn! There are pages of information right there. All it takes is a single click, then some reading. And they choose to send a one-size-fits-all form letter. The message is loud and clear: “I don’t bother to put a modicum of thought into my approach.” If they can’t be bothered to read your profile before spamming you, what does that say about the kind of work they’re likely to do?

If that’s you, and you use LinkedIn for outbound marketing (please don’t), customize your pitch. Not by inserting some cut-and-pasted text (“I read your article [ARTICLE_TITLE] today”). Read your prospect’s profile. Read anything they’ve written. Then think. Then, and only then, write:

I read your article “What Koalas Can Teach Us About Community.” Your Eucalyptus-leaf-Like-button insight was brilliant!

… Now when you segue into your pitch, you can make it personal, so in the event they are open to inbound sales, at the very least you’ll stand out from the crowd.

If you don’t use LinkedIn for outbound marketing (good for you!), but you’re on the receiving end of those who do…

Feel free to steal this canned response

Hi,

LinkedIn is primarily a platform for people to inform the world about what they do, so they can accept inbound inquiries. People also use it to list and answer job ads. But no one comes here to be marketed to.

If you are interested in hiring me or my services, let’s set up a time to talk. If, however, you want to pitch me your services in a form-letter cold call, I’m the wrong person for you. 

By the way, a word of free coaching: on LinkedIn, you can find out a tremendous amount about someone with a single click. That means letters make you look *especially* bad. A form letter screams “I don’t bother to do my homework.” That’s not a good look, especially if you want someone to hire you.

If you’re going to pitch someone (please don’t) on LinkedIn, five minutes of homework and a minute of customization, will give you a much better chance of coming across in a way that would engender a real response.

I hope you enjoyed this automated response. It attempted to give a clear answer and an example of the kind of coaching advice I give. It’s a sign of the times that this particular coaching advice is so widely needed that a form letter works, but … there you have it.

Enjoy!

Update: In a hilarious bout of complete hypocrisy, I might start doing some mass outreach on LinkedIn. Given COVID levels, I’m still not comfortable going to indoor conferences, which makes it very difficult to do propecting.

The Business of a Magician

, , ,

All businesses share the same underlying foundation: a flow of money in and out. The money in has to cover the costs of the money out. It has to pay for the production of your product or service, and have enough left over to fund growth and expansion for the future. This is the basic equation whether you’re Amazon or General Electric or Tesla. Some businesses aren’t profitable (Tesla, as of when I’m writing this), but they still get money in. Their money comes from investors, in the form of loans or equity investment.

Some simple back-of-the-envelope calculations can help you understand a business. It’s most obvious in a small business. Say, a one-man business. Magician Evan Northrup and I sat down to talk about his business and how it works. He graciously allowed me to share the video. In the first half, we walk through the basic numbers of the business. In the second half, we ask how to make his product stand out from his competition.