I’m not sure if Howard Marks is a better writer or investor. His memos are eloquently written and more importantly, have stood the test of time. I read this book towards the end of 2022, after the market mania of 2021, and whilst I was experiencing my first downturn as a professional investor. I’ve found his commentary on market cycles and human psychology – which was written many years ago – to be incredibly apt. My notes:
Why Study Cycles
The Nature of Cycles
The Pendulum of Investor Psychology
The Cycle in Attitudes Toward Risk
The Credit Cycle
The Real Estate Cycle
Putting It All Together
The Cycle in Success
This is a timeless classic. It’s a short and powerful read, so I highly recommend reading the book itself (and not my notes). In it, Viktor Frankl recounts his experiences as a prisoner in Nazi concentration camps. His psychotherapeutic method – which involves identifying a purpose in life and deeply imagining that outcome – has become a well-studied branch of science.
I disagree with many of the points that Frankl makes but here are my raw notes:
This book was ok. I wouldn’t go out of my way to recommend it to others. My raw notes below:
Building a Cohesive leadership team
This is a book everyone should read. At the end of the day, we’re all seeking long-term happiness, so it only makes sense to educate ourselves. Here are my raw notes:
This book is part history and part science, interwoven with a profound personal journey that Pollan undertakes as he delves into the world of psychedelics.
We learn about the history of psychedelics, starting with their use by indigenous peoples for spiritual and healing purposes. We then explore the counterculture movement in the 1960s and are introduced to some of the scientific work done by pioneers such as Albert Hoffman and Timothy Leary, prior to the government’s crack down on their use.
My key takeaways:
Concepts to explore further:
Venture Deals often comes recommended as one of the most practical reads for newly minted VCs, and for Founders looking to raise money. It covers all the key terms that come into play during the fundraising process. Here are some of my quick takeaways:
The first thing to do when entering the market is to figure out why you want to raise capital, and if your business is venture-backable. If you do decide to raise VC funding, it’s important to figure out how much you want to raise and how this gets you to your next milestone. Feld and Mendelson recommend having a specific number, instead of a range.
If a VC passes on your business, always try and get feedback. If you are lucky enough to receive a term sheet, make sure you do references on the VC. Many people liken the Founder / VC relationship to a marriage. However, with marriages, divorce is always an option, even if it’s an ugly one. The Founder / VC relationship is more like having a child. Once you take money from a VC, it’s very hard to get rid of them. You’ll be in the trenches working on your company for the next 5+ years, regardless of how much you like the VC. The best references will come from their portfolio companies that have been through tough times.
In terms of the term sheet, the two primary things to focus on are economics and control. Let’s dive into both.
Economics of the Term Sheet
Control Terms of the Term Sheet
Other Terms of the Term Sheet
Other Things to Keep in Mind
As someone who is hoping to learn more about climate change (and become more immersed in climate tech), this book provided a nice lay of the land.
The fundamental driver of climate change is greenhouse gas emissions. Greenhouse gasses trap heat in the atmosphere and too much of them is a problem. They are measured as carbon dioxide equivalents (CO2e) and include carbon dioxide, methane, nitrous oxide, and more. In the pre-industrial era, we had 283ppm CO2e. We are now at 500ppm. To prevent a climate catastrophe, we need to bring this under 430ppm.
Doerr breaks this book out into 10 chapters, each with its own Objectives and Key Results. The topline objective of the book is to reach net-zero emissions by 2050, and get halfway there by 2030. The current drivers of greenhouse gas emissions are energy (41%), industry (20%), agriculture (15%), transport (14%) and nature (10%).
To save me some time, the OKRs are below. Apologies in advance for the poor image quality. You can read about them in more depth at the Speed and Scale website. I’ve also left some of my own notes below.
Having read Annie Duke’s first book Thinking in Bets, I found How to Decide to be a nice refresher, but also a little repetitive. I think my summary of Thinking in Bets covers the most important topics, so this synopsis will be short and bulleted.
I found this book sitting on an old bookshelf when visiting my parents and decided it might be a nice little throwback. It turned out to be a great read, and apparently Steve Jobs greatly admired Akio Morita and the Sony team.
I got lazy with taking notes for this one, so check out this review written by Vindu Vikash that does a great job of covering the book :)
This book had been recommended to me a few times and ended up being a pretty interesting read. Epstein starts off by slamming the 10- hour rule, where we are all made to believe that success requires highly specialized training in a specific domain. The premise of the book however is that foregoing a head start, to develop personal and professional range is often worth it.
The Cult of The Head Start: Epstein talks about kind vs. wicked learning environments. A chess game, with defined rules and immediate feedback is a kind environment. A wicked learning environment is the opposite, where some information is hidden and feedback is delayed. Domains that involve human behavior and where patterns do not clearly repeat are wicked learning environments. In these areas, repetition does not cause mastery. Creative achievers tend to have broad interests, rather than obsessively focusing on a narrow topic.
How The Wicked World Was Made: In the modern world, the more constrained and repetitive a challenge, the more likely it will be automated, whilst great rewards will accrue to those who can take conceptual knowledge from one problem or domain and apply it in an entirely new one. The more contexts in which something is learned, the more the learner can create abstract models. As a result, they become better at applying their knowledge in a situation they’ve never seen before, which is the essence of creativity.
Learning, Fast and Slow: Learning with hints produces better early practice results, but results in worse lasting learning. Knowledge with enduring utility must be composed of mental schemes that can be matched to new problems. This is often done by learning without frequent hints, which is not the way most early education programs are set up.
Thinking Outside Experience: Wide range analogical thinking provides a breeding ground for creative problem-solving. This skill is developed through having varied experiences and working in a team with diverse backgrounds.
The Trouble With Too much Grit: In the wide world of work, finding a goal with high quality in the first place is the greater challenge. Persistence for the sake of persistence can get in the way.
Flirting With Your Possible Selves: Maximize match quality throughout life by sampling activities. Sample social groups, contexts, jobs, and careers and then reflect and adjust accordingly. I think some people do this very well, and others do it very poorly. Many people get stuck in the same job or with the same group of friends. It’s not necessarily a bad thing, but trying new activities can lead to a better life.
The Outsider Advantage: A key to creative problem solving is tapping outsiders who use different approaches. In doing so, the “home field” for the problem does not end up constraining the solution. Basically, when you’re stuck with a problem, having people who can provide a new perspective is often very valuable. This is why many employers love new grads and interns.
Lateral Thinking with Withered Technology: A T-shaped person has breadth and depth. An I-shaped person only has depth. It’s better to be a T-shaped person because the T-people can easily go to the I-people to create the trunk for the T. In uncertain or wicked environments, breadth of experience is invaluable.
Fooled by Expertise: Too much depth in a specific domain puts blinkers on and can prevent you from seeing other solutions. This is highly related to the previously mentioned Outsider Advantage.
Deliberate Amateurs: Exploring fields outside your immediate work can broaden thinking and allow you to find solutions in ways that others wouldn’t. Gaining knowledge from disparate domains where you are not an expert may seem useless, but it is often what can lead to differentiated thinking. Mental meandering and personal experimentation are a source of power, and head starts are often overrated.
Funnily enough, I found this book through one of those Twitter threads that goes like: I just turned 24!! What’s one piece of advice you have for someone my age? It’s not the type of book I would normally read, but I had a long flight ahead of me and was in the mood for something different. I found the book to be interesting and a little tension-inducing, despite me generally agreeing with most of the principles put forward.
Jay starts by saying that 80% of life’s most defining moments occur by age 35. To a great extent, our lives are dictated by far-reaching twenty-something moments we may not realize are happening at all.
Part 1: Work
In the early innings of your career, focus on building identity capital by doing interesting things. These experiences will help you get to the next piece of capital and so on, leading you to where you want to be. She also talks about weak vs. strong ties. Spending time exclusively with strong ties can limit who and what we know, how we talk, and ultimately how we think. Weak ties can provide access to something fresh, as they frequently introduce new ways of thinking. Weak ties are like bridges you can’t see all the way across, so there’s no telling where they might lead.
Part 2: Love
Marriage is one of the most defining moments because so much is wrapped up in it. People have a tendency to put off thinking about marriage in their 20s, until they turn 30 and a switch flips. As a 20-something, the choices you make regarding your family will define the decades ahead. Jay talks about the cohabitation effect, an interesting phenomenon where couples who live together prior to marriage are less satisfied with their marriages and are more likely to divorce than couples who do not. This definitely goes against conventional wisdom, but I do also think it is very circumstantial.
Jay also talks about dating down / working down - these people typically have unedited stories about themselves from their teenage years that do not reflect who they are today. One reason this happens is that the brain of a 20-year-old is still developing and is often underdeveloped in the forward-thinking aspect. This leads to people undervaluing themselves in the present. The 20-something brain is also highly primed to learn new things. Our personalities also change more during the 20-something years than at any other time in our life.
The topic of kids is also discussed. As a 24-year-old, I thought this would be completely irrelevant but Jay makes some interesting points. Fertility drops sharply in the 30s, so don’t put off thinking and planning for kids. By the time you start, it may be too late. Related to this, Jay warns 20-somethings to not let present bias overcome them. Identify things you want in your 30s and 40s, and work backward from this.
Finally, there are two quotes from the book that particularly resonated with me:
Peak performance in tennis, or anything else for that matter, requires mastery of the mind. That’s a lesson that Timothy Gallwey has been teaching his tennis pupils for years.
Any sort of competition has two components:
To conquer the Inner Game, we must look a little deeper. In each of us exists two different selves, Self 1 and Self 2. Self 1 is your conscious mind and Self 2 is your subconscious. The key to peak performance rests in improving the relationship between Self 1 and Self 2.
The modus operandi of Self 1 is to doubt Self 2, despite Self 2 embodying the potential you have developed through years of practice, learning, etc. Quieting Self 1 involves slowing the mind - thinking, calculating, judging, worrying, and fearing less. We must learn to see our experience without judgment, and instead, we must see what is happening instead.
To do this, we must learn to trust Self 2. In the context of sport, this means not taking for granted the automatic processes that take place within our bodies. Acknowledge the miracle that these functions exist, and remember that experience precedes technical knowledge. People don’t become experts at tennis (or many other things for that matter) by simply reading technical instructions. They have to lift up that racket and practice.
Learning and watching from pros is a powerful technique, but don’t assume that how the pro swings is how you should be swinging. Use these outside models to aid your learning, but remember that natural learning comes from the inside out.
To sum up, the usual way of learning is as follows:
Gallwey instead suggests, we learn as follows:
Focus is effortless and relaxed - it is the act of keeping the mind present. You can do this by picking one thing to focus one, and sticking with it. The only way of building this muscle of presentness is to practice.
As I’ve grown in my career, I’ve come to realize that goal setting is tricky but crucial for success. I’ve always enjoyed hearing John Doerr speak and was excited to dive into this.
The simple premise of this book is that ideas are easy, execution is everything. To execute well, a collaborative goal-setting protocol such as OKRs can work magic. OKRs are split into an objective (what is to be achieved) and key results (the metrics we need to hit in order to get to the objective). Good key results (KRs) are specific and time-bound, aggressive yet realistic.
Doerr introduces 4 OKR superpowers: focus, align, track, and stretch.
Focus and Commit to Priorities: First, set the appropriate cadence for your OKR cycle. Doerr recommends dual tracking, with quarterly OKRs (for shorter-term goals) and annual OKRs (keyed to longer-term strategies) deployed in parallel. Start by rolling out OKRs to upper management first, and ensure they commit to this process publicly. Designate an OKR shepherd to make sure that every individual devotes time each cycle to choosing what matters most.
Commit to 3 to 5 top objectives per cycle. Too many OKRs dilute and scatter people’s efforts. Choose OKRs with the most leverage. For each objective, settle on no more than five measurable, unambiguous, time-bound key results. By definition, completion of all key results equates to the attainment of the objective. To safeguard quality, you can pair key results to measure effect and counter-effect, i.e. for Accounts Payable, pair payments processed with the number of errors found.
Align and Connect for Teamwork: The express route to operating excellence is lined with transparent, public goals, on up to the CEO. Use all-hands meetings to explain why an OKR is important, and keep repeating this message. When deploying cascaded OKRs, with objectives driven from the top, welcome give-and-take on key results from frontline contributors. Innovation dwells less at a company’s center than at its edges.
Encourage a healthy proportion of bottom-up OKRs - it should be roughly half. An optimal OKR system frees contributors to set at least some of their own objectives and most or all of their key results. Smash department silos by connecting teams with horizontally shared OKRs. Cross-functional operations enable quick and coordinated decisions, the basis for seizing a competitive advantage. Make all lateral, cross-functional dependencies explicit. When an OKR is revised or dropped, see to it that all stakeholders know about it.
Finally, remember that frontline and offshore employees thrive when they can see how their work aligns to the company’s overall goals.
Track for Accountability: To build a culture of accountability, install continuous reassessment and honest and objective grading - and start at the top. When leaders openly admit their missteps, contributors feel freer to take healthy risks.
Motivate contributors less with extrinsic rewards and more with open, tangible measures of their achievement. To keep OKRs timely and relevant, have the designated shepherd ride herd over regular check-ins and progress updates. Frequent check-ins enable teams and individuals to course-correct with agility, or to fail fast.
Sustain high-performance by encouraging weekly 1-1 OKR meetings between contributors and managers, plus monthly departmental meetings. As conditions change, feel free to revise, add, or delete OKRs as appropriate - even mid-cycle. At the cycle’s end, use OKR grades plus subjective self-assessments to evaluate performance.
Before pushing into the next cycle, take a moment to reflect upon and savor what you’ve accomplished in the last one. To keep OKRs up-to-date and on-point, invest in a dedicated, automated, cloud-based platform. Public, collaborative, real-time goal-setting systems work best.
Stretch for Amazing: At the beginning of each cycle, distinguish between goals that must be attained 100 percent (committed OKRs) and aspirational OKRs. Setting ambitious goals stimulates problem-solving and spurs people to greater achievement. Just don’t set the bar so high that an OKR is obviously unrealistic as that will impact morale.
To get leaps in productivity or innovation, follow Google’s “Gospel of 10x” and replace incremental OKRs with exponential ones. That’s how industries get disrupted.
Doerr wraps up by discussing the new world of work.
Continuous Performance Management: To address issues before they become problems and give struggling contributors the support they need, move from annual performance management to continuous performance management.
Divorce forward-looking OKRs from backward-looking annual reviews. Equating goal attainment to bonus checks will invite sandbagging and risk-averse behavior. Replace competitive ratings with transparent, strength-based, multidimensional criteria for performance evaluations. Beyond just numbers, consider a contributor’s team play, communication, and ambition in goal setting. Rely on intrinsic motivations - purposeful work and opportunities for growth - over financial incentives. They’re far more powerful.
To power positive business results, implement ongoing CFRs (conversations, feedback, and recognition) in concert with structured goal setting. Transparent OKRs make coaching more concrete and useful. In performance-driving conversations between managers and contributors, allow the contributor to set the agenda. The manager’s role is to learn and coach. Make performance feedback two-way, ad hoc and multidirectional, unconstrained by the org chart.
Employ peer recognition to enhance employee engagement and performance. For maximum impact, recognition should be frequent, specific, highly visible, and tied to top-line OKRs.
The Importance of Culture: Align top-line OKRs with an organization’s mission, vision, and North Star values. To develop a high motivation culture, balance OKR “catalysts”, actions that support the work, with CFR “nourishers”, acts of interpersonal support, or even random acts of kindness. Use OKRs to promote transparency, clarity, purpose, and big-picture orientation.
If done well, OKRs should build positivity, enthusiasm, stretch thinking, and daily improvement.
This is an interesting read from David Brooks, where he shares his views on life. He basically says life has two mountains. The 1st mountain has goals that culture endorses, such as traditional success, to be well thought off, and to experience personal happiness. It’s the normal stuff we desire: a nice home, a nice family, nice vacations, good food, etc.
Some people get to the top of this first mountain and find it suprisingly unsatisfying. Others get knocked off on their way up, by some failure or personal hardship. These people are down in the valley of bewilderment or suffering. Some of these people stop here, remaining unhappy. Others are made larger by the suffering and stage 2 small rebellions, against their ego ideal and against mainstream culture. Here, they find the second mountain, the more generous and satisfying phase of life.
In the first mountain, the ultimate appeal is to yourself. It’s about building up your ego, it’s about acquisition and elitism. In the second mountain, the ultimate appeal is to something outside yourself. It’s about shedding your ego and focusing on how you can contribute.
One thing Brooks says that particularly stood out to me is that a life of ease is not the pathway to growth and happiness. On the contrary, a life of ease is how you get stuck and confused in life.
Brooks then walks through some of the life stages that many of us experience. It starts off as a student when life is station to station. Then, from the most structured and supervised childhood in human history, you get spit out after graduation into the least structured young adulthood in human history. Many of these graduates pursue an aesthetic life - one full of experiences but without direction. These people often end up in the ditch, a place with too much freedom but no commitments to anything.
Some emerging adults are pragmatists. They typically went to competitive schools and have been high achievers. They flock to prestigious jobs in order to keep the existential anxiety about what to do with their lives carefully suppressed. Many of these people experience acedia: the quieting of passions, the living of a life that doesn’t arouse strong passions and therefore instills a sluggishness of the soul. These people, the insecure overachievers, never fully will anything and therefore, they are never fully satisfied. Whilst their brains are moving and their bank accounts are rising, their hearts and souls are never fully engaged.
As the Bible says, what does it profit a man to sell his soul if others are selling theirs and getting more for it?
He then touches on The Valley. Before people go into the valley: they first deny there’s anything wrong with their life, then they intensify efforts to follow the failing plan, then they try to treat themselves with a new thrill (affairs, drinking, drugs). Only when this fails, do they admit the need to change.
The valley is where you shed the old self so the new self can emerge. It’s a 3 step process, from suffering to wisdom to service. Being in the valley helps people to realize that the things they thought were most important - achievements, affirmation, intelligence - are actually less important, and the things that were undervalued - heart and soul - are actually the most important. It is often hardship that reveals the heart and soul.
The second mountain is about making commitments, tying oneself down, and giving yourself away. Brooks says we make 4 major commitments in our lives: to a vocation, to a spouse and family, to a philosophy / faith, and to a community. A thick life is defined by commitments and obligations. Commitments give us our identity, a sense of purpose. They allow us to move to a higher level of freedom: freedom from → freedom to. They build our moral characters.
The biggest of these commitments is to a spouse. Brooks says that who you marry is the most important decision in life, as it is the foundation of happiness or misery. Marriage is the sort of thing where it’s safer to go all in, and it’s dangerous to go in half-hearted. At the end, when done well, you see people enjoying the deepest steady joy you can find on this Earth.
Interestingly, Brooks notes that every relationship has a central disagreement. It can be moral or philosophical but the most troublesome ones are superficial but devastating. They are typically to do with punctuality, money, neatness, etc. Brooks also offers some very practical advice, warning readers to take a step back and make an appraisal when making a marriage decision. The decision should be looked at through a psychological, emotional, and moral lens.
Next, there is a fairly extensive section on faith and community, with Brooks spending quite a lot of time on religion. This section didn’t resonate with me as strongly but there was one part that stuck out. Brooks points out that in India, people experience everyday reality not just in the normal dimension but also in a spiritual dimension - almost like a vertical axis. Everything you do can take you up this axis towards purity, or down towards pollution.
Closely linked to faith is community. A healthy community is a thick system of relationships. In our modern world however, many roles that used to be done by the community have migrated to the marketplace or the state, i.e., for mental health you see a therapist, for physical health you go to a hospital, for education you go to school. Whilst these systems are effective in processing large numbers of people, they are depersonalizing, and lead to fragile individuals.
To build community, you must start with a commitment, and then an understanding that you have to fix your neighborhood as a whole, without just focusing on specific individuals. The next stage is to find a method for gathering. Next is to tell the common story, uniting people over a commonality.
To sum up:
Originally published in 1983, this book has grown to become a staple in the world of management books. Many of the examples provided allude to physical manufacturing processes (as was the way in the 80s), but their lessons can be applied to our tech-centric world of today.
The central principle of this book is that the output of a manager is the output of his organization. More strictly, a manager’s output is equal to the output of his organization plus the output of the neighboring organizations under his/her influence. For a manager to improve their output, they should focus on high leverage processes, which often come in the form of automation and work simplification. Because a manager’s work is never done, their time is best spent in areas where leverage is the greatest.
Leverage can be achieved in 3 ways:
Managers can increase leverage through delegation. To delegate something, both parties must share a common information base and set of operational ideas or notions on how to go about solving problems. Time management techniques can also be used to increase leverage. Techniques for this include batching similar tasks together, using your calendar as a forecasting tool, having a “raw inventory” of things that need to be done that aren’t time sensitive.
As a rule of thumb, a manager whose work is largely supervisory should have 6 to 8 subordinates where a half-day per week is allocated to each one.
Meetings: Next, Grove touches on meetings, which he considers to be the medium through which managerial work is performed. There are two types of meetings:
Specific forms of meetings that should be held include:
Decision Making: For decision making, an ideal model is free discussion → clear decisions → full support (if wrong, loop back to free discussion). In decision-making meetings, peer group syndrome typically takes place. This is when peers tend to look for a more senior manager even if they are not most competent to take over and shape a meeting. Ultimately, you must strive for an output. Help questions to do so include: what decision needs to be made, by when, who will decide, who will be consulted on, who will ratify / veto the decision, and who will need to be informed.
Planning: Today’s action for tomorrow’s output. Start by assessing current demand, then assess your present status, then figure out how to close the gap. This planning process is about what you have to do today to solve (or avoid) tomorrow’s problems.
Hybrid Organizations: Grove observes that as companies grow, they often take on the form of a hybrid organization. This involves having a mix between centralization and decentralization, with Business Units and Functional Units.
To make a hybrid organization work, you typically need people assigned to a manager within their business unit, and also within a functional group. One manager likely has the technical expertise required for the role, and the other likely oversees their day-to-day performance.
Sports Analogy: Managers need to elicit peak individual performance from their team. If an individual isn’t doing their job, it’s either because they can’t or they won’t. As a result, a manager has 2 tools: training and motivation.
He then references Maslow’s hierarchy of needs to explain how we behave at work. Put simply, needs lead people to have drives, which cause motivation. Therefore, to keep someone motivated, keep some needs unsatisfied at all times. Self-actualization is the highest of Maslow’s needs and is the only one that doesn’t extinguish. People in this category can be competence-driven or achievement-driven. Both types will spontaneously test the outer limits of their abilities.
But when the need to stretch is not spontaneous, management needs to foster it. This can be done by focusing on output and creating objectives with a 50/50 chance of failure. For some people, money only motivates until needs are satisfied. For others (in the self-actualization category), money as a measure of achievement will motivate without limit.
Having competition or a scoreboard also elicits motivations. Turn your workplace into a playing field and turn your subordinates into athletes.
Task Relevant Maturity (TRM): As the TRM of a subordinate increases, your management style should evolve from being structured and task-oriented to being less involved and establishing objectives that are monitored for.
Performance Reviews: The fundamental purpose of a performance review is to improve a subordinate’s performance. Start by assessing their skill level and identifying their motivation. The assessment should be delivered following the 3 L’s method:
It’s also best to give written reviews prior to the face to face meeting.
Other Tidbits: Two important tasks that all managers will face are interviewing and talking a valuable employee out of quitting. Both are important and an appropriate amount of time should be spent on them. To talk someone out of quitting, you must ultimately do whatever it takes to make them feel valued.
Finally, Grove touches on training. He views this as one of the most critical roles for a manager. Insufficiently trained employees produce inefficiencies, excess costs and unhappy customers. As such, training is one of the highest leverage activities a manager can perform. It should be a continual process, and not a one-time event.
I decided to read this book because one of my personal heroes, Bill Gurley, had recommended it. It’s somewhat of a dense read but has valuable takeaways. The central principle of the book can be seen in the image below. These are the 5 forces that drive industry competition. Here’s what each of them means.
Threat of New Entrants: This threat is governed by barriers to entry coupled with the reaction from existing competitors that an entrant can expect. Sources of barriers to entry include economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale, and government policy.
Expected retaliation from existing competitors also influences the threat of entry. Intense rivalry amongst firms can be the result of many factors such as numerous or equally balanced competitors, slow industry growth, lack of differentiation, high strategic stakes, and high exit barriers.
Threat of Substitutes: All firms in an industry are competing in a broad sense with industries producing substitute products. Substitutes that deserve the most attention:
Bargaining Power of Buyers: Buyers force down prices, bargain for high quality / more service, and can play competitors against each other.
A buyer group is powerful if: it is concentrated or purchases large volumes relative to seller sales, the products it purchases are a significant percentage of its costs, it faces few switching costs, it earns low profits, if it poses a credible threat of backward integration, or if the buyer has full information.
Bargaining Power of Suppliers: Suppliers can threaten to raise prices or reduce the quality of the goods / services they provide. A supplier group is powerful if: it is dominated by a few companies and is more concentrated than the industry it sells to, it has product differentiation, the industry is not an important customer of the supplier group, the supplier’s product is an essential input, the supplier poses the threat of forward integration. Labor is a supplier as well and can be a threat if it is scarce or highly organized.
Generic Competitive Strategies: There are 3 generic strategies to outperforming:
The important thing is to pick a strategy and not get stuck in the middle.
A Framework for Competitive Analysis: In conducting a competitive analysis, components of competitors to assess include future goals, current strategy, assumptions, and capabilities. You want to study existing and potential competitors.
Next, let’s study how a competitor might respond:
In most industries, firms are mutually dependent, i.e. firm A’s move affects firm B. The goal is to outperform your competitors without having them retaliate or engage in warfare. Start by looking for moves that improve your performance without impacting the performance of significant competitors. When making a threatening move, you want to predict and influence retaliation.
Market Signals: A market signal is any action by a competitor that provides a direct or indirect indication of its intentions, motives, goals, or internal situation. Signals can be truthful indicators or bluffs.
Forms of market signals include: prior announcements of moves, announcements of results or actions after the fact, public discussions of the industry, and explanations of moves / tactics.
Strategy Towards Buyers and Suppliers: There are 4 primary criteria to assess when selecting buyers:
You want to seek out and sell to the most favorable buyers. Criteria to assess in regards to the purchasing strategic include:
Structural Analysis Within Industries: When doing this, there are many dimensions to consider including specializtion, brand identification, channel selection, product quality, technological leadership, cost position, and many more.
Step 1 is to categorize all significant competitors against the dimensions that are most relevant, and then bucket the companies into strategic groups. Given this, the underlying determinants of a firms profitability will be common industry characteristics, characteristics of the strategic group, and the firms position within its strategic group.
Industry Evolution: Start by asking how industry trends affect each one of the 5 forces. Examples of evolutionary processes include long run changes in growth, changes in buyer segments served, accumulation of experience, product and marketing innovations, entries and exits, etc. Big firms will often leave it to smaller firms to develop a market and prove that significant demand exists before they enter.
Competitive Strategy in Fragmented Industries: Causes of industry fragmentation include low overall entry barriers, absence of economies of scale, and a strong need for creative content.
To overcome fragmentation, you want to create economies of scale, standardize diverse market needs, make acquisitions to reach a critical mass, and recognize industry trends early. To formulate a strategy for doing this:
Competitive Strategy in Emerging Industries: Structural factors of emerging industries include technological uncertainty, strategic uncertainty, and first-time buyers. The industry development is typically constrained by the inability to obtain resources, the absence of product standardization, customer confusion, and the response of threatened entities.
Transition to Industry Maturity: Indicators of maturity include slowing growth (which means more competition for market share), increase selling to experienced repeat buyers, and competition that is more cost and service-oriented.
Implications of maturity can include scaled-down expectations for financial performance, more discipline, and more attention on the human dimension of the firm.
Competitive Strategy in Declining Industries: A declining industry is one where there is a sustained decline in sales. This decline can be the result of tech innovation, changing demographics, or a shift in needs.
Strategic alternatives in this situation include seeking market leadership, creating a niche position, harvesting (i.e. controlled disinvestment), and divesting quickly. The image below presents a framework for deciding which one of these strategies to pick.
Competition in Global Industries: Strategies to choose from in a global industry include broad line global competition, global focus in a particular segment, national focus, or a protected niche (i.e., protected by governmental restraints). Trends affecting global competition include differences amongst countries, industrial policy, the free flow of technology, and the emergence of new large-scale markets.
Strategic Analysis of Vertical Integration (VI): VI is the combination of technologically distinct product, distribution, selling and / or other economic processes within a firm. Benefits of VI can include better economics, a tap into technology, assurance of supply / demand, ability to offset bargaining power and input cost distortions, an enhanced ability to differentiate, and elevated entry barriers.
Strategic costs can include the costs of overcoming mobility barriers, increased operating leverage, higher exit barriers, and the need for capital investment. There are also two forms of VI that a firm can consider:
Capacity Extensions (CE): When contemplating CE, two expectations are crucial: future demand competitor behavior. Keep in mind that companies often have a tendency towards overbuilding, especially in commodity businesses.
Entry Into New Businesses: Characteristics of good industries to enter include the industry being in disequilibrium, slow or ineffectual retaliation from incumbents expected, the firm has lower entry costs than others, the firm has a unique ability to influence industry structure, or positive effects on existing businesses. You can enter a new business in two ways:
For anyone looking to learn SEO, there’s no better way to get started than by simply experimenting with your own website. If you’re looking to learn some of the basics, this book provides a solid introduction. Note that SEO is always changing, so take everything here with a grain of salt.
SEO, or Search Engine Optimization basically refers to the way in which websites / online content is found and listed among a search engine’s unpaid or organic results. Jantsch and Singleton provide 3 stages in the SEO lifecycle:
Some general rules / tidbits about SEO:
Content marketing is probably the most crucial aspect of SEO. Some notes:
An important aspect of your content strategy is keyword discovery:
In terms of the structure of your website:
More specifically on some technical aspects of SEO / website design:
Going back to content:
Some final pointers:
Good to Great is widely considered to be one of the classic reads in management theory. In the book, Collins and his research team take on the task of identifying the factors that allow companies to make the transition from good to great. “Great” is defined according to a number of metrics, such as stock performance exceeding market averages by several orders of magnitude over a sustained period.
His findings are nicely summarized in the book with each chapter presenting its own lesson. Here are those lessons.
Chapter 1: Good is the Enemy of Great
Good is the enemy of great, and that is why we have so little that becomes great. This chapter lays out the process Collins used in selecting the companies that served as the basis of the study. The most important factor was a period of sustained success that far outpaced the market or industry average.
The companies chosen were Abbott, Fannie Mae, Circuit City, Gillette, Kimberly Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens and Wells Fargo. Yes, this book is old.
Chapter 2: Level 5 Leadership
Every good to great company had Level 5 (L5) leadership during the pivotal transition years. L5 leaders embody a mix of personal humility and professional will. They are ambitious first and foremost for the company, not themselves. They set up their successors for even greater success in the next generation. L4 leaders often set up their successors for failure.
L5 leaders display a compelling modesty and are understated. They are fanatically driven, infected with an incurable need to produce sustained results. L5 leaders attribute success to factors other than themselves. When things go wrong however, they take full responsibility. Most leaders tend to do the opposite. 10 of 11 good-to-great CEOs came from inside the company.
Chapter 3: First Who...Then What
Good to Great leaders began the transformation by first getting the right people on the bus (and the wrong people off the bus) and then figuring out where to drive it. The key point here is that who questions come before what questions - before vision, before strategy, before organization structure, before tactics. First who, then what - as a rigorous discipline, consistently applied.
3 practical decisions for being rigorous in people decisions:
Good to great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions regardless of parochial interests. They also found no systematic pattern linking executive compensation to the shift from good to great.
Chapter 4: Confront the Brutal Facts
All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality. When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. A primary task here is creating a culture where people have the opportunity to be heard. Creating a climate where the truth is heard involves:
A key psychology for leading from good to great is the Stockdale Paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties AND at the same time confront the most brutal facts of your current reality.
Chapter 5: The Hedgehog Concept
Going from good-to-great requires an understanding of the hedgehog concept.
The key is to understand what your organization can be the best in the world at, and equally important, what it cannot be the best at. To get insight into the drivers of your economic engine, search for the one metric that has the single greatest impact.
Chapter 6: A Culture of Discipline
Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles. A culture of discipline requires duality. It requires people who adhere to a consistent system; yet, on the other hand, it gives people freedom and responsibility within the framework of that system.
The single most important form of discipline for sustained results is fanatical adherence to the Hedgehog Concept and the willingness to shun opportunities that fall outside the three circles.
Chapter 7: Technology Accelerators
Good-to-great organizations think differently about technology and technological change than mediocre ones. They avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.
If the technology fits directly with your Hedgehog Concept, then you need to become a pioneer in the application of that technology. If not, then you can settle for parity or ignore it entirely. The good-to-great companies used technology as an accelerator of momentum, not a creator of it.
Chapter 8: The Flywheel and the Doom Loop
Good-to-great transformations often look like dramatic, revolutionary events to those observing from the outside, but they feel like organic, cumulative processes to people on the inside. No matter how dramatic, the good-to-great transformations never happened in one fell swoop. Sustainable transformation follows a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.
Chapter 9: From Good to Great to Built to Last
The final chapters draws a connection to Collins’ previous work, Built to Last. This book presented the findings of a study into the factors that determined whether a new company would survive in the long-term.
Collins suggests that companies need a set of core values in order to achieve long-term, sustainable success. They need to exist for a higher purpose than simply profit generation. This purpose does not have to be narrowly defined - even if the shared values that compel the company toward success are as open-ended as being the best at what they do and achieving excellence consistently, that may be sufficient as long as the team members are equally dedicated to the same set of values.
Crossing the Chasm is widely referenced as a must-read in the field of digital marketing. The book is premised on the following observation – the point of greatest peril in the development of a high tech market is making the transition from an early market dominated by a few visionary customers, to a mainstream market dominated by a large block of customers who are predominantly pragmatist in orientation.
Geoffrey Moore introduces the concept of the technology adoption lifecycle (image below). Markets have a number of distinct customer types, including:
The underlying thesis with these various customer types is that tech is absorbed into any given community in stages, corresponding to the psychological and social profiles of various segments in that community.
The high-tech marketing model suggests that you work the curve from left to right, using each captured group as a reference base for launching marketing into the next group. The key is to make this process as smooth as possible.
However, as you can see in the image above, there is a crack in the bell curve between the early adopters and the early majority. This is because early adopters do not make good references for the early majority. As a result, when marketing to the early majority, you are operating without a reference or support base in a market that is highly reference and support oriented. This is problematic because part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions.
One of the key lessons here is that the longer your product is in the market, the more important the service element is to the customer. To achieve this, you must design out as much as possible that the service demands, and ensure that the services yields an improved user experience.
To cross the chasm, you want to start by targeting a very specific niche market where you can dominate from the outset. From here, drive competitors out of that market niche, and then use it as a base for broader operations. The key is an abundance of support into a confined market niche. Put differently, you want to focus on a highly specific goal that is both readily achievable, and also capable of being directly leveraged into long-term success. Targeting a specific niche leads to word-of-mouth leverage, and also makes it easier to achieve market leadership. You want to start with a strategic market that, by virtue of its other connections, provides a strong entry point into one or more adjacent segments.
Figuring out which niche market to target is a high risk, low data decision. The rule of thumb is that you want to pick a market that is big enough to matter, small enough to lead, and a good fit with your crown jewels.
Once you have selected a market, you want to surround your core product with a whole product that solves for the targets customers problems from end to end. Design the whole product by working backwards from the target customers use case.
Moving to competition – you want to define the battle. Pragmatist customers insist on seeing viable competition. Alongside the technology adoption lifecycle, the nature of competition will change dramatically. Initially, competition comes from alternative modes of operation, i.e., inertia. In the pragmatist domain, competition is defined by comparative evaluations of products and vendors within a common category.
In some cases, you may have to “create” your competition, by positioning your product within a buying category that has some established credibility with pragmatist buyers. To appeal to their values, use the competitive positioning compass (image below).
Use 2 competitors to create competition – a market alternative and a product alternative. Market alternatives call out the budget and thus the market category, whilst product alternatives call out the differentiation you offer.
The final stage is launching the invasion. The goal here is to set pricing at the market leader price point, thereby reinforcing your claims to market leadership. You must also build disproportionally high rewards for the channel into the price margin.
If successful, you will be in a position to leave the chasm behind. The post-chasm enterprise is bound by the commitments made by the pre-chasm enterprise. The best solution is to avoid making the wrong kind of commitments during the pre-chasm period. Obviously, this won’t always be practical. And finally, the purpose of the post-chasm enterprise is to make money. Until breakeven cash flow is achieved, nothing is secure.
This is one of the most tactical books I have read, and is a must-read for any entrepreneurs / CEOs looking for advice on running a company.
As the name suggests, Elad Gil recommends using this handbook as a reference guide, meaning that it is something that you consistently return to as various questions arise. This makes it hard to summarize, but here are some things that stood out to me.
Marc Andreessen on Post-Product Market Fit (PMF)
Once you reach PMF, the next steps are:
Product defensibility is desirable but tough – very few companies are able to truly build this. As a result, distribution moats are super important because whoever owns distribution, owns the market.
Chapter 1: Role of the CEO
CEOs have many responsibilities, tactical and strategic. Some tactical duties that are under-discussed are:
Claire Johnson (Stripe COO) recommends that founders / senior leadership write a guide about their working style (i.e., “Working with Sid"). Companies / teams should also have a long-term charter (why do we exist?) and a short-term plan (what are we going to do?).
Chapter 2: Managing the Board
The first step is choosing the right VC partner. Gil says that he would accept a lower valuation to work with a VC / Board Member that he really likes.
Independent Board Members are one of the most important hires a company will make. Treat this like any hire, and write a job spec. Include experience (operational, market, functional), their prior involvement with other high growth companies (optimally as a founder), raw intelligence, business and strategic sensibility, entrepreneur-friendly orientation, and the respect they have from investors / VCs. Once you have this, agree on the spec with your investors, create a list of potential hires, spend time getting to know them, check for personal rapport and attitude, align on vision, and conduct reference checks.
In terms of running board meetings, send out the board deck / materials 48-72 hours before the meeting. Call Board Members in advance for a 30-60 minute 1:1 meeting (if >3 non-founder members). Plan a board dinner the night before, or a lunch / dinner right after. A general agenda can include a big picture summary, review of key metrics, any follow-up items, and a discussion of 2-3 strategic topics.
Chapter 3: Recruiting, Hiring, and Managing Talent
Some recruiting best practices:
For employee onboarding, send a welcome letter and a welcome package, have a buddy system, give them real ownership, and set goals.
Chapter 4: Building the Executive Team
When hiring execs, look at people whose experience / background makes them a good hire for the next 12-18 months. Traits to look for include functional area expertise and ability to build / manage a team in that area, collegiality, communication skills, owner mentality, and smarts / strategic thinking skills.
Once you define the role, meet with people who do it well. On reference checks, ask: if this person joined my company, would you join?
Keith Rabois says that the people who are thriving at any level tend to have people approaching their desks all the time. This is one thing to be aware of. In terms of senior vs. junior hires, it is ok to hire juniors in areas where it is clearly visible if something is working. For any area where it is hard to understand things quickly and easily, hire senior people.
Chapter 5: Organization Structure and Hypergrowth
As you grow rapidly, your company will take on many different forms. There is no right answer for org structure as it is very company-dependent. Some things to be aware of:
To build a strong culture, you must have strong hiring filters in place. Beyond this, emphasize your values on a daily basis and reward people based on not just performance, but also culture. Get rid of bad culture fits quickly.
Chapter 6: Marketing and PR
The various marketing and PR functions include growth marketing, product marketing, brand marketing, PR, and communication.
Ultimately, authentic communication is key. Never lie and be transparent. Alignment between PR and founders is crucial in making this happen.
Chapter 7: Product Management
Great PM organizations set product vision and road maps, establish goals and strategies, and drive execution on each product through its life cycle. Some characteristics of great PMs:
Key PM processes to develop are product requirements document (PRD) templates and product roadmaps, product reviews, launch processes and calendars, and retrospectives.
Chapter 8: Financing and Valuation
Markets are so dynamic that a lot of this advice will be in flux. There are many types of late-stage investors including traditional VC, growth funds, hedge funds, private equity, strategics, etc.
Importantly, don’t over-optimize valuation as follow on fundraises will become hard, the investor mix may shift, and internal pressure to hit a target valuation can cause bad behavior.
Secondary sales typically happen around the $500M to $1B valuation.
Benefits of going public include: easier employee hiring, M&A currency, new capital sources for the company, ability to partner or sell at scale, and fiscal / business discipline.
Cons of going public include: a larger and more complex Board, financial and other controls that need to be put in place, and the employee mix is likely to shift.
Chapter 9: M&A
Most companies wait too long to use their stock as currency. The 3 types of acquisitions for a high-growth company are team buy, product buy, and strategic buy.
It’s important to have an M&A roadmap in place, developed with feedback from key hiring managers, product & engineering leads, and the executive team.
Valuation factors to consider are: the target’s cash position, desperation of founders / management, competitive dynamics, if the acquisition is defensive, and how unique the target is.
Finally, remember that all negotiations are about relative leverage (or perceived leverage).
This book is partially about Jeff Bezos’ life, and partially a collection of all his letters to Amazon shareholders.
About his life – his mother had him at age 17, he grew up in Houston and Miami, studied engineering at Princeton, and then started his career at D.E. Shaw. After coming across a stat that said the internet was growing at 2300% per year, he left his job in order to start an online retail store for books. This reminds me of Andy Rachleff’s quote about being in good markets.
To make the decision to leave D.E. Shaw, he used what he calls a regret minimization framework. Basically, you ask yourself how you feel at age 80 when you think back to a decision.
In addition to Amazon, he is also involved with Blue Origin and the Washington Post. The top 5 lessons from this book according to Isaacson are:
Part 1: The Shareholder Letters
Here’s a summary of my takeaway from almost every year’s letter:
Part 2: Life and Work
My takeaways / quotes:
I thoroughly enjoyed this book and am excited by the benefits it may bring. Here’s what it’s about.
The premise of this book is simple and something I’m sure everyone can relate to: our irresistible attraction to our screens is resulting in a loss of autonomy when deciding how to spend our time.
In regaining autonomy, minor hacks will not get to the root of the problem. The apps and content we have access to are like slot machines in our pocket – they are simply too addictive. The 2 ingredients that make a technology able to cultivate unhealthy use are:
To overcome this, you need a full-fledged philosophy of technology use, i.e. digital minimalism. With digital minimalism, you focus your time on a small number of carefully selected and optimized activities that strongly support things you value, and then happily miss out on everything else.
This contrasts with the maximalist approach most of us employ, where any potential for benefit is enough to start using a technology. Minimalists don’t mind missing out on small things. What worries them much more is diminishing the large things they already know for sure make a good life good.
Principles of Digital Minimalism
The Digital Declutter
This is a rapid transformation executed with conviction. It is a 3 step process:
All humans benefit from regular doses of solitude. Solitude is not about physical separation. It is a subjective state in which your mind is free from input from other minds. Solitude requires you to move past reacting to information created by other people, and instead focus on your own thoughts and experiences.
Regular doses of solitude, mixed with our default mode of sociality are necessary to flourish as a human being. Solitude leads to new ideas or understandings of the self and counterintuitively, can lead to closeness to others.
With smartphones always offering a quick glance, it is possible in today’s world to completely banish solitude from your life. This is referred to as solitude deprivation – a state in which you spend close to zero time alone with your thoughts and free from input from other minds. The effects of solitude deprivation are particularly pronounced in those born after 1995, who entered their pre-teen years with constant access to technology. The result is the worst mental health crisis ever seen.
Some simple practices to avoid solitude deprivation:
Human beings are social animals. Research has shown that when given downtime, our brains default to thinking about our social life. Social media is dangerous because the more time you use it to interact with your network, the less time you devote to offline communication. Digital communication tools have a way of forcing a trade-off between conversation and connection. To overcome this, you must reform your relationship with technology to allow for more analog communication. Cal recommends:
Potentially first identified by Aristotle, a life well lived requires activities that serve no other purpose than the satisfaction that the activity itself generates, i.e. high-quality leisure.
To be successful with digital minimalism, you must renovate what you do with your free time. You must cultivate high-quality leisure before culling your worst digital habits. Leisure lessons:
The goal of this is to escape passive interaction with your screen as being the primary pleasure, with a state where leisure time is filled with better pursuits, many of which exist in the physical world. Practices to implement this:
At the end of the day, it is important to recognize that doing nothing is overrated. Decompression sessions have their place but their rewards are muted as they tend to devolve toward low-quality activities.
The attention economy is the business sector that makes money by gathering consumer’s attention and then repackaging and selling it to advertisers. Practices to escape the attention-engineered services that come with digital technology include:
Ultimately, the result of digital technology is a society left reeling by unintended consequences. In this consumerist age, we eagerly signed up for what Silicon Valley was selling us, but soon realized that in doing so, we were accidentally degrading our humanity.
One way to reach harmony with technology is through digital minimalism – the concept of using technology to support things you deeply value, and not as a source of value itself. Remember, the key to sustained success is accepting that it’s not really about technology, but it is instead about the quality of your life.
Henry Ford was born in 1863 on a farm in Dearborn, Michigan. From a young age, he exhibited an interest in mechanics. He was a tinkerer, and by the age of 13, had put together a watch that could keep time.
His greatest interest lay in making machines that would travel the roads and in 1892, he built his first motor car. His autobiography is full of wisdom and advice, on business and on life. I’ve captured some of those points below:
Advice on Business
Advice on Life (Quotes)
I started reading this book without many expectations and was appreciative of the change of pace that it offered. This summary (also below) does a better job than me of explaining the story.
Siddhartha, novel by Hermann Hesse based on the early life of Buddha, published in German in 1922. It was inspired by the author’s visit to India before World War I.
The theme of the novel is the search for self-realization by a young Brahman, Siddhartha. Realizing the contradictions between reality and what he has been taught, he abandons his comfortable life to wander. His goal is to find the serenity that will enable him to defeat fear and to experience with equanimity the contrasts of life, including joy and sorrow, life and death. Asceticism, including fasting, does not prove satisfying, nor do wealth, sensuality, and the attentions of a lovely courtesan. Despairing of finding fulfillment, he goes to the river and there learns simply to listen. He discovers within himself a spirit of love and learns to accept human separateness. In the end, Siddhartha grasps the wholeness of life and achieves a state of bliss and highest wisdom.
After reading about the way Tony Hsieh developed the culture at Zappos, I wanted to delve further into the subject of culture building. Netflix is well known for its culture and in this book, Reed Hastings and Erin Meyer provide a ten-step framework for building a culture of freedom and responsibility within a company.
Step 1. First Build-Up Talent Density: A Great Workplace is Stunning Colleagues
For context, Netflix launched in May 1998 as the first online DVD rental store. After a tough period in 2001, they had to make layoffs. This experience taught them that that talent density (talent per person) is crucial to performance and culture, because performance is contagious. Even one underperformer on a rockstar team can bring down the overall contribution of a team. Leaders should look to hire stunning colleagues, who are able to accomplish significant amounts of work.
Step 2. Increase Candor: Say What You Really Think (with Positive Intent)
Once you have a team of high performers, the next step in optimizing performance is to have frequent and candid feedback. This can exponentially magnify the speed and effectiveness of a team. To set the stage for candor, build feedback into regular meetings. Coach employees to give and receive feedback effectively using the 4A guidelines:
Leaders should set the stage by soliciting feedback frequently and making sure to get rid of jerks as the culture of candor is being instilled.
Step 3A. Now Begin Removing Controls: Remove Vacation Policy
The value of creative work should not be measured by time. To this extent, seek to remove vacation policy. In doing so, managers must set the context – copious discussion should take place setting the scene for how each team and employee should approach vacation.
Step 3B. Continue Removing Controls: Remove Travel and Expense Approvals
Travel & expense policies are the next to go. Set context as these are being removed. Some controls will be needed to prevent abuse, so finance will need to audit a portion of receipts annually. If people abuse the system, fire them and speak about it openly.
Some expenses may increase with freedom, but the costs from overspending are not nearly as high as the gains that freedom provides. The freedom also allows for quick decisions to be made, which can provide the company with a competitive advantage.
Netflix’s Expense Motto: Act in Netflix’s Best Interest.
Step 4. Fortify Talent Density: Pay Top of Personal Market
Divide the workforce into creative and operational employees, and pay creative workers top of market. In some cases, this may mean hiring one exceptional individual instead of 10 adequate people. Also, don’t pay performance-based bonuses – put that money directly into salaries instead.
To make sure you are paying top of market, teach people to get to know their own worth. This might even mean that they should speak with recruiters or interview at other companies. Adjust salaries accordingly to always be paying top dollar.
Step 5. Pump Up Candor: Open the Books
To instigate a culture of transparency and candor, it is important for leadership to consider the symbolic messages they are sending. Examples of bad messages include closed offices and locked spaces. On the financial side, open up the books, teach employees to read the P&L, and share strategic information.
When making decisions that affect employee wellbeing (reorgs, layoffs) – open up to the workforce early. This might cause some anxiety, but the trust built will outweigh the disadvantages.
Follow this general guideline for transparency: if the information is about something that happened at work, choose transparency and speak candidly. If it is about someone’s personal life, it is not your place to share.
For leaders – as long as you’ve shown yourself to be competent, talk openly about your own mistakes and encourage others to do the same. This will build trust, goodwill and result in innovation.
Step 6. Now Release More Controls: No Decision-Making Approvals Needed
“Don’t seek to please your boss. Seek to do what is best for the company.”
With high talent density, ownership of critical, big-ticket items should be dispersed across the workforce at all different levels, not allocated according to hierarchical status.
Tell new employees that they have a handful of metaphorical chips that they can make bets with. Some gambles will succeed, others won’t. Performance will be judged on the collective outcome of these bets, not on the results from one instance. To help people make good bets, encourage them to farm for dissent, socialize their ideas, and for big bets – run some tests.
When a bet fails, employees should sunshine it openly by summing up the situation and presenting key learnings.
Step 7. Max Up Talent Density: The Keeper Test
Reed has an interesting take on this. He says that a family is about staying together regardless of performance and that a high talent density work environment is not a family. For a high-performance group, a professional sports team is a better metaphor than family. You want commitment and camaraderie whilst making sure the best player is manning each post.
For managers to be in touch with performance, use the Keeper Test: “Which of my people, if they told me they were leaving for a similar job at another company, would I fight hard to keep?”
For reviews, avoid stack ranking systems as they can create internal competition. If an employee is not performing, do not waste time by putting them on a Performance Improvement Plan (PIP). Give them a generous severance package instead.
To prevent employees from feeling fearful, encourage them to use the Keeper Test prompt with their managers: “How hard would you work to change my mind if I was thinking of leaving?”
Step 8. Max Up Candor: A Circle of Feedback
Performance reviews are not the best mechanism for a candid work environment – feedback usually goes only one way (down) and comes from only one person (the boss). Written 360 reviews are good, but don’t anonymize them or make them numeric. This increases transparency without creating competition. Also, don’t link results to raises / promotions.
Live 360 dinners are the most effective. Use several hours away from the office and give clear instructions. This includes using the 4A guidelines, and using the “Stop, Start, Continue” method. Feedback should be 25% positive and 75% developmental.
Step 9. Eliminate Most Controls: Leading with Context, not Control
In order to lead with context, you need high talent density and your goal needs to be innovation, not error prevention. You also need to be in a loosely coupled system. A loosely coupled organization should resemble a tree, not a pyramid. The boss is at the roots holding up the trunk of senior managers who support the outer branches where decisions are made.
If you have these, instead of telling people what to do, get in lockstep alignment by providing and debating all the context needed for them to make good decisions. When someone does something dumb, don’t blame them. Ask yourself what context you failed to set. When your people are moving the team in the desired direction by using the information they have received from you, to make great decisions – you know you are successfully leading with context.
Step 10. Bring It All To The World
If you are at the envious stage of expanding globally, map out your corporate culture and compare it to the culture of the countries you are expanding into.
In less direct countries, implement more formal feedback mechanisms and put feedback on meeting agendas more frequently, because informal exchanges will happen less often. With more direct cultures, talk about cultural differences openly so that feedback is understood as intended.
Make “Adaptability” the 5th “A” of the candor model – as both sides must work together to understand how candor can be brought to life.