Biz Book Friday

Biz Book Friday — 10 Comments
29
Jun 12

Henry Ford on Startup Ambition: Are you in the 5%?

Every Friday, I share juicy excerpts and commentary from awesome business books. I read ‘em, so you don’t have to. (Just kidding. READ THE BOOKS. LEARNINGS!) That’s why I call it Biz Book Friday.

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Still working my way through my highlights from Henry Ford’s stellar autobiography (or really, autobizography), My Life and Work. (Previous posts are here!)

What’s speaking to me today is the concept of ambition. Or rather, desire and capacity for self-betterment. If there’s one thing I’ve learned from working with others, it’s that our levels of ambition are all so very different.

On advancing employees, Ford wrote:

There is no difficulty in picking out men. They pick themselves out because — although one hears a great deal about the lack of opportunity for advancement — the average workman is more interested in a steady job than he is in advancement.

It’s easy to pat ourselves on the back when we read a passage like this: Hey, I’m gonna do a startup. I’m gonna self-nominate. Hey, Ford says I’m special!

But…

Scarcely more than five percent, of those who work for wages, while they have the desire to receive more money, have also the willingness to accept the additional responsibility and the additional work which goes with the higher places.

Scarcely more than 5%? But… certainly more than 5% of us believe we fall in that group.

Do our actions back that belief up?

Do we actually, on a day-to-day basis, deliberately take on more responsibility? Take risks? Ask for more pay? Make ourselves useful beyond the call of duty? Go further?

Or do we just pat ourselves on the back for being special, and use that as an excuse to not do anything? (We could, after all. We could start at any time.)

But the vast majority of men want to stay put. They want to be led. They want to have everything done for them and to have no responsibility. Therefore, in spite of the great mass of men, the difficulty is not to discover men to advance, but men who are willing to be advanced.

Ford is talking about discrete traits in discrete people: Joe wants to be led, Jo will get out there and kick butt.

In my own life — watching the people I’ve met, the people I’ve worked with, the people I’ve hired — I’ve certainly found this to be true. It’s rare to find a person who will go beyond what’s on the spec sheet.

But I think this applies just as well to internal divisions. We contradict ourselves. We contain multitudes.

Maybe we’re 90% Joe, who just wants to be led. Even in our iconoclastic entrepreneur-worshipping pivot-frenzy, we want to be told what to do. We want somebody to guide us. Then, if we follow the guide — if we follow the nonconformist herd! — we can blame somebody else if it doesn’t work. Plus, of course, we’ve saved ourselves all that pesky higher thinking.

But maybe we’re 10% Jo, who’s willing to take on the extra, the risk, the work, the uncertainty of thinking, doing, reaching for more. The deciding.

Being wholly responsible for making the decisions that could create chaos in our lives.

Well. If we truly want to achieve what we claim we want to achieve, 10% isn’t enough. Jo’s gotta step up and expand her territory.

The accepted theory is that all people are anxious for advancement, and a great many pretty plans have been built up from that. I can only say that we do not find that to be the case.

Henry, I’ve gotta agree with you there. Even for ourselves, we set up plans which require super-human confidence, intensity, commitment, production. Then, naturally, we fail to rise to the occasion, because we’re only human. Then we say “Well, it wasn’t meant to be. I’m not good enough.”

No matter how right they feel, those pretty plans don’t reflect reality.

Maybe the real strategy is to admit that we are 90% Joe and only 10% Jo, and figure out how to work around — or with — that fact. To make it work for us instead of against us. To set up plans which support how we really are, instead of how we think we ought to be. Learning to create durable habits, maybe.

In conclusion? Well, other than “Henry Ford is brilliant and relevant” and “Wow, 5%?” I don’t have one for you. Or me. Yet.

As a parting shot, though, let’s refer to the best dialogue writer ever, Joss Whedon, in the form of Buffy the Vampire Slayer:

Buffy: I’m starting to think this working hard is hard work.
Willow: … isn’t it crazy like that?
Buffy: I thought it was gonna be like in the movies. Y’know, inspirational music, a montage, me sharpening my pencils, me reading, writing, falling asleep on a big pile of books with my glasses all crooked, ’cause in my montage I have glasses. But real life is slow and it’s starting to hurt my occipital lobe.

As in Buffy, so in life.

Biz Book Friday — 4 Comments
15
Jun 12

Henry Ford on Selling Sex & (Not) Listening to Customers

Every Friday, I share juicy excerpts and commentary from awesome business books. I read ‘em, so you don’t have to. (Just kidding. READ THE BOOKS. LEARNINGS!) That’s why I call it Biz Book Friday.

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More Henry. Henry, Henry, Henry. Your autobiography is a page turner.

Two weeks ago, I squee’d all over how awesome Henry Ford’s autobiography is. Last week, I excerpted a hugely powerful section which sadly describes the “startup economy” to a T.

This week we’ll focus on two critical functions of any bootstrapped business:

  • Deciding who to sell to — and how to pitch them
  • Deciding when to listen to customers (and when not to), and how

Do these wrong, and… well… I was going to write a graphic description here of the way your business will die (hint: it involves long, ropy intestines), but let’s just say it’ll be bad.

Who to Sell to — and How to Pitch

Without further ado, the man himself, on how Ford (under his hand) sold cars:

We did not make the pleasure appeal. We never have. In its first advertising we showed that a motor car was a utility. We said: We often hear quoted the old proverb, “Time is money”—and yet how few business and professional men act as if they really believed its truth. Men who are constantly complaining of shortage of time and lamenting the fewness of days in the week—men to whom every five minutes wasted means a dollar thrown away—men to whom five minutes’ delay sometimes means the loss of many dollars—will yet depend on the haphazard, uncomfortable, and limited means of transportation afforded by street cars, etc., when the investment of an exceedingly moderate sum in the purchase of a perfected, efficient, high-grade automobile would cut out anxiety and unpunctuality and provide a luxurious means of travel ever at your beck and call. Always ready, always sure. Built to save you time and consequent money. Built to take you anywhere you want to go and bring you back again on time. Built to add to your reputation for punctuality; to keep your customers good-humoured and in a buying mood. Built for business or pleasure—just as you say. Built also for the good of your health—to carry you “jarlessly” over any kind of half decent roads, to refresh your brain with the luxury of much “out-doorness” and your lungs with the “tonic of tonics”—the right kind of atmosphere. It is your say, too, when it comes to speed. You can—if you choose—loiter lingeringly through shady avenues or you can press down on the foot-lever until all the scenery looks alike to you and you have to keep your eyes skinned to count the milestones as they pass.

(later in the book, but to my mind, the same topic!)

If a device would save in time just 10 percent or increase results 10 percent, then its absence is always a 10 percent tax. If the time of a person is worth fifty cents an hour, a 10 percent saving is worth five cents an hour. If the owner of a skyscraper could increase his income 10 percent, he would willingly pay half the increase just to know how. The reason why he owns a skyscraper is that science has proved that certain materials, used in a given way, can save space and increase rental incomes. A building thirty stories high needs no more ground space than one five stories high. Getting along with the old-style architecture costs the five-story man the income of twenty-five floors. Save ten steps a day for each of twelve thousand employees and you will have saved fifty miles of wasted motion and misspent energy. Those are the principles on which the production of my plant was built up.

This is something I pound into my 30×500 students, over and over: Sell to people you can sell on value. It’s the only sane way for a small company.

And don’t focus on loss aversion. People don’t open their own businesses because they’re afraid of loss. Focus on gains. A gain, in negative form, is a loss (5 stories vs 25)… and it’s a lot easier to sell[1].

(Oh, you’d rather sell to consumers? Well, you might as well shoot yourself. It’ll be more expedient.)

When to Listen to Your Customers… and When Not To

As you might have noticed, this is a topic near and dear to my heart.

The salesmen were insistent on increasing the line. They listened to the 5 percent, the special customers who could say what they wanted, and forgot all about the 95 percent who just bought without making any fuss. No business can improve unless it pays the closest possible attention to complaints and suggestions. If there is any defect in service then that must be instantly and rigorously investigated, but when the suggestion is only as to style, one has to make sure whether it is not merely a personal whim that is being voiced. Salesmen always want to cater to whims instead of acquiring sufficient knowledge of their product to be able to explain to the customer with the whim that what they have will satisfy his every requirement—that is, of course, provided what they have does satisfy these requirements.

Replace “salesmen” with “us” and you have a stunningly accurate description of how most of us instinctually run our own businesses: listening to the 5% who articulate, ignoring the rest. And putting far too much weight on whims.

There’s only one way to practice “listening to customers” and stay sane: learn to separate the wheat from the chaff.

To do that, you have to disengage from natural conversation and look at it from an analytical standpoint. Take the 5,000 ft view.

You need to figure out what’s really important:

  • You need to be able to tell when a person is just talking at you to “express themselves.” There’s a certain kind of person whose complaints are like a spit valve on a clarinet: just a gross side effect of totally normal functioning, signifying nothing.
  • You need to understand that when a person raises a point, they are often covering up their true feelings with it. They bitch about price? That’s not a sign your prices are too high — it’s a sign they are feeling unsure of your value.

But you can’t just “listen,” even in this advanced way.

You also have to get out there, take charge, and learn from people who aren’t talking to you. If you react only to the squeaky 5% — and ignore the majority of fairly happy, quiet customers — you’ll end up with a product that only the 5% want.

It won’t be easy to charge 20x more to make up for it!

[1] NB: Some folks have said to me, “But Amy! We all know people feel loss more accurately than potential gains.” That’s true, and I’m not contradicting it. Here’s what I mean: The number of ways & dollars you can save your customer? Finite and very constrained. The amount you could help them grow? Much less finite. Hence the 5 vs 25 floors — a gain, which can be portrayed as a loss but which isn’t, really — compared to “Save 10% on your server bills.”

Biz Book Friday / Money — 13 Comments
8
Jun 12

Henry Ford on Bootstrapping, Funding, & Going Public

Every Friday, I share juicy excerpts and commentary from awesome business books. I read ‘em, so you don’t have to. (Just kidding. READ THE BOOKS. LEARNINGS!) That’s why I call it Biz Book Friday.

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Last week, I squee’d all over how awesome Henry Ford’s autobiography is. And I offered running commentary to the highlights I had chosen.

This week, I thought I’d let a passage stand without commentary. It doesn’t need it.

Henry Ford on Bootstrapping, Funding, & Going Public:

A few pages, excerpted in order, with only one ramble bit skipped, directly from Henry Ford: My Life and Work…

The most surprising feature of business as it was conducted was the large attention given to finance and the small attention to service. That seemed to me to be reversing the natural process which is that the money should come as the result of work and not before the work…

The automobile business was not on what I would call an honest basis, to say nothing of being, from a manufacturing standpoint, on a scientific basis, but it was no worse than business in general. That was the period, it may be remembered, in which many corporations were being floated and financed. The bankers, who before then had confined themselves to the railroads, got into industry. My idea was then and still is that if a man did his work well, the price he would get for that work, the profits and all financial matters, would care for themselves and that a business ought to start small and build itself up and out of its earnings. If there are no earnings then that is a signal to the owner that he is wasting his time and does not belong in that business. I have never found it necessary to change those ideas, but I discovered that this simple formula of doing good work and getting paid for it was supposed to be slow for modern business. The plan at that time most in favor was to start off with the largest possible capitalization and then sell all the stock and all the bonds that could be sold. Whatever money happened to be left over after all the stock and bond-selling expenses and promoters, charges and all that, went grudgingly into the foundation of the business. A good business was not one that did good work and earned a fair profit. A good business was one that would give the opportunity for the floating of a large amount of stocks and bonds at high prices. It was the stocks and bonds, not the work, that mattered. I could not see how a new business or an old business could be expected to be able to charge into its product a great big bond interest and then sell the product at a fair price. I have never been able to see that.

I have never been able to understand on what theory the original investment of money can be charged against a business. Those men in business who call themselves financiers say that money is “worth” 6 per cent, or 5 per cent, or some other per cent, and that if a business has one hundred thousand dollars invested in it, the man who made the investment is entitled to charge an interest payment on the money, because, if instead of putting that money into the business he had put it into a savings bank or into certain securities, he could have a certain fixed return. Therefore they say that a proper charge against the operating expenses of a business is the interest on this money. This idea is at the root of many business failures and most service failures. Money is not worth a particular amount. As money it is not worth anything, for it will do nothing of itself. The only use of money is to buy tools to work with or the product of tools. Therefore money is worth what it will help you to produce or buy and no more.

If a man thinks that his money will earn 5 per cent, or 6 per cent, he ought to place it where he can get that return, but money placed in a business is not a charge on the business—or, rather, should not be. It ceases to be money and becomes, or should become, an engine of production, and it is therefore worth what it produces—and not a fixed sum according to some scale that has no bearing upon the particular business in which the money has been placed. Any return should come after it has produced, not before.

Business men believed that you could do anything by “financing” it. If it did not go through on the first financing then the idea was to “refinance.” The process of “refinancing” was simply the game of sending good money after bad. In the majority of cases the need of refinancing arises from bad management, and the effect of refinancing is simply to pay the poor managers to keep up their bad management a little longer. It is merely a postponement of the day of judgment. This makeshift of refinancing is a device of speculative financiers. Their money is no good to them unless they can connect it up with a place where real work is being done, and that they cannot do unless, somehow, that place is poorly managed. Thus, the speculative financiers delude themselves that they are putting their money out to use. They are not; they are putting it out to waste.

I determined absolutely that never would I join a company in which finance came before the work or in which bankers or financiers had a part. And further that, if there were no way to get started in the kind of business that I thought could be managed in the interest of the public, then I simply would not get started at all. For my own short experience, together with what I saw going on around me, was quite enough proof that business as a mere money-making game was not worth giving much thought to and was distinctly no place for a man who wanted to accomplish anything. Also it did not seem to me to be the way to make money. I have yet to have it demonstrated that it is the way. For the only foundation of real business is service.

Sounds pretty familiar, doesn’t it?

Except for the interest rates being so high… and the fact that VCs expect 10x return and not 5%, Ford puts his finger right on it and he could be writing today, about what we do.

Either Henry Ford is a time-traveling super startup spy… or nothing ever fucking changes, just every generation believes it came up with something new.

You can guess which scenario I’m putting my money on:

There is no “New New New Economy.” Same shit, different century.

Which is why you should download Henry Ford: My Life and Work now — for free! because it’s so old! — and read the crap out of it.

Biz Book Friday / Hard Work — 4 Comments
1
Jun 12

Henry Ford, the Bootstrapper (Biz Book Friday!)

Hey hey hey, it’s Biz Book Friday! the tradition is coming back.

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Oh, Henry.

Henry Ford was inarguably one of the best entrepreneurs the country (and possibly the world) has ever seen.

To wit, here’s Wikipedia’s stunning intro to Ford’s achievements:

  • His introduction of the Model T automobile revolutionized transportation and American industry.
  • As owner of the Ford Motor Company, he became one of the richest and best-known people in the world.
  • Celebrated as both a technological genius and a folk hero, Ford was the creative force behind an industry of unprecedented size and wealth that in only a few decades permanently changed the economic and social character of the United States.
  • He is credited with “Fordism”: mass production of inexpensive goods coupled with high wages for workers.
  • Ford had a global vision, with consumerism as the key to peace.
  • His intense commitment to systematically lowering costs resulted in many technical and business innovations, including a franchise system that put dealerships throughout most of North America and in major cities on six continents.
  • Ford left most of his vast wealth to the Ford Foundation but arranged for his family to control the company permanently.

(He also had enormous personal flaws, but sadly that’s par for the course for people with outsized impact on the world.)

But what Wikipedia doesn’t mention — and many people don’t know — is this:

  • Ford was the consummate bootstrapper
  • His biography, My Life and Work, is one of the best books on business *ever written

If you know me, you know I love reading old books. There’s nothing quite like viewing the past first-hand, through the lens of the people living in it at the time — people who wrote about their present. When reading new stories about the past, it’s so easy to slip into the habit of judging those ridiculously foresighted people from history, and how could they have ever believed that anyway? Like, duh. Which is kryptonite to learning, because of course, our present will soon be the past, and people will think the same of us. Perspective, and humility, are necessary ingredients to becoming fully human and these days they are in short supply.

Umm, yeah. Old book rant over.

Sooooo… I’d been meaning to read Henry Ford’s autobiography for some time.

If I’d known what an amazing, revelatory page-turner it’d be, though, I wouldn’t have wasted a second more delay.

Banishing the Pleasant Things in Life

Here are a sample of some of my highlighted passages from just the first few chapters:

I think that we have already done too much toward banishing the pleasant things from life by thinking that there is some opposition between living and providing the means of living. We waste so much time and energy that we have little left over in which to enjoy ourselves.

1922 to 2012: 90 years of Americans worshipping overwork. Has it ever been any worse than today?

The Whole Point

Power and machinery, money and goods, are useful only as they set us free to live.

Yes!

Skepticism

I have no quarrel with the general attitude of scoffing at new ideas. It is better to be skeptical of all new ideas and to insist upon being shown rather than to rush around in a continuous brainstorm after every new idea. Skepticism, if by that we mean cautiousness, is the balance wheel of civilization.

Rush around in a continuous brainstorm! The balance wheel of civilization!!

I ask you: what’s not to love about this down home, hard-as-nails pragmatism from a bazillionaire?

Signifying Nothing

We have passed through a period of fireworks of every description, and the making of a great many idealistic maps of progress. We did not get anywhere. It was a convention, not a march. Lovely things were said, but when we got home we found the furnace out.

Here he’s talking about radicals & reactionaries who want to either breakdown the capitalist system completely or freeze it in time, forever, to prevent any possible change whatsoever.

But if you ask me, this sounds a lot like any time we get together with our pals and talk about the amazing startups we’re going to build: Lovely things are said, but when we get home we find the furnace out.

Oooh, burn.

Or not burning, as the case may be.

Who Has Value?

The foundations of society are the men and means to grow things, to make things, and to carry things… Speculation in things already produced — that is not business. It is just more or less respectable graft.

Speculation? More or less respectable graft?

That doesn’t sound like the VC model at all. Not. at. all.

Shame on you for even thinking it.

Business: Like a Chicken

Profiteering is bad for business. The lack of necessity to hustle is bad for business. Business is never as healthy as when, like a chicken, it must do a certain amount of scratching for what it gets.

I want to favorite this so hard, scream it from the rooftops, tattoo it on my left ass cheek. (But not even my ass isn’t big enough for this paragraph. C’est la vie.)

This is one of the biggest reasons I — and, it seems, Ford — believe in self-funding through customer sales. Solve a problem, serve a need, get your just desserts.

Because:

The producer depends for his prosperity upon serving the people. He may get by for a while serving himself, but if he does, it will be purely accidental, and when the people wake up to the fact that they are not being served, the end of that producer is in sight.

And if that producer is divorced from having to please customers, insulated from having to create value and capture that value in the form of customer dollars — able to avoid selling entirely, in fact — you have a venture-backed startup.

Maybe I’m bull-whipping, dog-piling, and fireballing a dead horse here. But if you ask me, this is the heart of the matter.

Anything that gives you the ability to avoid the reality of serving your customers is bad for you and everyone else. If you succeed, then, it will be accidental.

Technofetishism

Rushing into manufacturing without being certain of the product is the unrecognized cause of many business failures. People seem to think that the big thing is the factory or the store or the financial backing or the management. The big thing is the product, and any hurry in getting into fabrication before designs are completed is just so much waste time.

OMG.

Can you believe this book was written nearly 100 years ago?

Henry Ford: Startup Oracle.

The Cutting Edge.

The principal part of a chisel is the cutting edge. If there is a single principle on which our business rests it is that. It makes no difference how finely made a chisel is or what splendid steel it has in it or how well it is forged—if it has no cutting edge it is not a chisel. It is just a piece of metal.

Business, like a chisel, has a distinct purpose.

Peter Drucker famously wrote that “The purpose of a business is to create and keep a customer.”

Henry Ford would say that “The purpose of a business is to serve.” He was a big believer in Service with a capital S — not customer service, but to serve the world, both customers and employees, by excellent products and an excellent working environment, fair wages, and an opportunity to better one’s self.

But if you read TechCrunch, HN, Business Insider, the Wall Street Journal, or the Economist — from anywhere on the low-to-stratospherically-quirked-highbrow spectrum — how often do you find this mentioned? The purpose?

Just this side of never.

It’s all about the handle, the splendid steel, the fine craftsmanship. Never the cutting edge.

Henry Ford: Best Bootstrapper of All Time.

Conclusion… and Next Week!

Now, Henry and I disagree on several points — namely the goal of constant price reduction — but that’s a topic for another Biz Book Friday.

Suffice to say, regarding the autobiography of this prescient business genius:

A++++ Would Read Again.

Bonus: you can get it for your Kindle or iBooks for free, because it’s out of copyright (that’s how old it is!). Download Henry Ford: My Life and Work now, and read the crap out of it.

Seeya next week!

Biz Book Friday / Day to Day — 2 Comments
29
Mar 12

Building Habits: Respect Your Cues, & Listen to Your Organs When They Talk

Here’s that adorable habit loop diagram from The Power of Habit:

Last week, we established that I absolutely suck at habits.

But why?

Well, last week I had a theory: I suck at structure. This is undeniably true. I thought the next logical part of the explanation was:

And cues are what trigger routines. They’re the bottom part of the habit pyramid. And since I don’t have structure, I don’t have cues.

That makes sense, doesn’t it? I don’t brush my teeth because brushing my teeth is a routine waiting on a “Amy Is Going Out” cue, and I don’t always leave my apartment. No “Going Out” cue, no toothbrushing routine. Firm. Logical.

But over the past week, experience has shown me that, oh yes, I have cues. Lots and lots of cues.

And I’m absolutely fantastic at ignoring them.

My mother used to say that a bomb could go off while I was reading and I’d be none the wiser. Well, that’s not as true as it once was. But I do seem to have a remarkable and perverse ability to ignore cues… even the most biologically imperative ones.

Viz: I can’t tell you how many times, over the past week, I’ve caught myself resisting the cue to pee.


Even the Toilet Pictogram People are shocked.

Here I am, a grown woman, in an office full of friends, or in her own apartment — alone, even! my husband’s not even here! — resisting the urge to go to the clean, private, well-stocked, well-lit bathroom.

What the hell? Why!?

Because I’m doing something, natch.

Aside from the overall embarrassment of catching myself doing something so silly, this casts a shadow on my I Just Suck At Structure theory. A shadow in a Dick Tracy hat, who taps the ash off its cigar before asking me…

How can I expect to learn how to use cues to build a demanding new habit like daily exercise if I can’t even be trusted to empty my bladder when it asks me nicely?

Big fat (embarrassing) duh on that one, my friends. (Also, note to self: Shadows are dicks.)

I owe at least 90% [1] of this insight to my friend Colin, who riffed brilliantly on my rambling, incoherent post:

[Example]: if I walk into my room and cringe at the clothes on the floor, I should put some of them away. I don’t have to go on a cleaning spree, but I can at least hang one jacket up.

As for new habits I’m trying to create — I now start thinking about the cues I’ve set up for myself. An excellent example is invoicing. Normally I invoice twice a month, however my current client wants invoices only once a month and on a slightly different date than when I usually send them out. I do have a calendar event set up to remind me to send out invoices, but it’s not on the right dates.

Instead of training myself to take care of invoices promptly, I’m training myself to ignore my invoicing calendar event! That’s no good.

Indeed, Colin, training yourself to ignore cues — like calendar alarms — isn’t merely no good, it’s terrible. It’s a slippery slope that’ll end in tears. Just ask my bladder.

Colin even has a catchy name for his smart new rule, which I stole for this post title: Respect Your Cues. He says, “What that means is that if I encounter a cue — either a new one I’ve consciously chosen, or a natural one that bubbles up from my unconscious — I absolutely should not ignore it.” Hence the “at least hang one jacket up.”

This makes so much sense it hurts. Or maybe it’s not the sense of Colin’s statement that I’m feeling.

Pardon me while I go… somewhere.

[1] The remaining 10% goes partly to my mindfulness in noticing, my absurd willingness to admit it in public, and of course, a small hat tip to the hilarious fact that I am, in fact, a girl who refuses to go pee. Which would be tragic if it wasn’t so funny. I’d like to thank the Academy…

Biz Book Friday / Day to Day — 13 Comments
23
Mar 12

I Can’t Remember to Brush My Teeth… But I Can Run a Business

If you know me, you know I don’t really… do routine. Regular bed time? Ha! Regular wake time? Ha! Making my bed? Going to my office every day? Paying bills which aren’t automated? Regular grocery shopping day? Planning a week in advance? Umm… committing to a weekly blog post on a certain day, say Friday?

Ha ha ha ha. Not my forte.

Sadly, my teeth are just one part-time casualty in a long line of irresponsibilities.

Don’t worry, though. You don’t have to wear a gas mask when we hang out. You’ll never meet me with unbrushed teeth (or hair).

And now, thanks to The Power of Habit, I know why:

A habit isn’t a thing, it’s three things: a cue, a routine, and a reward. And it’s not three things, it’s a loop.

The routine is the practiced set of actions you take — the thing we all call “a habit.” The cue is the trigger on the gun of routine, the thing that says chop chop, brush brush. The reward is the nice thing you get at the end. Behaviorism aside, the human brain really does wire itself up to react to rewards.

Put these 3 things together, in a loop, and run it again & again, and you have the makings of an automatic habit.

Vis a vis toothbrushes, leaving my apartment is the cue. The reward is the opportunity to engage in polite society. The routine is the actual brushing itself, of which, I can assure you, I am capable.

So, aha, there’s the problem: When I stay at home, there’s no cue. “Brush Your teeth” is a subroutine in the “Amy Is Going Out” routine, which has the cue of “Hey, It’s Time To Go.”

If I don’t leave the house, chances are good that I’ll forget to perform the routine. Because I’m not really thinking about it, I’m waiting for the cue to trigger the loop.

Sadly, this problem isn’t limited to my (not so) fresh breath.

The “Amy Is Going Out” habit loop is based on one of a very few cues I have that actually work at all. There are other routines I use very effectively to get creative work done (funnel process, review process, mind mapping, brainstorming, outlining, planning, weighing, analyzing, researching, composting). They help me kick ass.

The thing is, they aren’t hooked explicitly to any cues. I only remember to use them some of the time:

Now, it’s terribly twee to complain about how disorganized and overwhelmed I am, yadda yadda. Obviously I manage to function pretty well. My business is profitable (and growing). I’ve got a great life. My customers are happy.

But, I can’t help but think: How much more profitable could my business be? How much better could my life be? How much happier could I make my customers? If only I could get my shit together a higher percentage of the time.

So, why do I suck so bad at habits? Am I just incorrigibly mercurial? Or lazy?

I’ve wondered this for a while. And til now, this is where my introspection ended.

I knew that I could work predictably inside a structure (“Amy Is Going Out”), but I’ve also always sucked at creating that structure in the first place. Impasse.

This is the most powerful thing I’ve learned from The Power of Habit so far (half-way through):

One paper published by a Duke University researcher in 2006 found that more than 40 percent of the actions people performed each day weren’t actual decisions, but habits.

More than 40% of what we do isn’t due to conscious thought, but habitual. Aka habits:

This is how new habits are created: by putting together a cue, a routine, and a reward, and then cultivating a craving that drives the loop.

And: habits are a skill. (Duh, this part’s obvious.) Not only is deploying a habit a skill, but research has shown that creating habits is a skill, too. And research shows how to go about learning the skill of creating habits. (This part is new!)

Now I’ve got research at my disposal to teach me how I can consciously and systematically set out to whip myself into something more resembling a Human Who Has It Together. How you can, too.

And there’s no good reason it can’t work:

Habits aren’t destiny… habits can be ignored, changed, or replaced.

But the reason the discovery of the habit loop is so important is that it reveals a basic truth: When a habit emerges, the brain stops fully participating in decision making. It stops working so hard, or diverts focus to other tasks. So unless you deliberately fight a habit— unless you find new routines— the pattern will unfold automatically.

So here’s to making what we want unfold automatically, instead of what we don’t want.

Biz Book Friday — 5 Comments
2
Dec 11

Terry Pratchett’s Witches Mean Business — *Your* Business (Biz Book Friday)

Hello, and welcome to yet another Biz Book Friday! This one’s a bit late because I’m feeling under the weather. Hope you enjoy it nonetheless. There are, of course, many more to choose from — on, admittedly, more serious, actionable topics. Today I’m feeling philosophical.

All my favorite authors are dyed-in-the-wool humanists. You get the feeling from their words that they’ve looked at all of humanity… and they’ve seen the punchline. They’re laughing, even while their hearts encompass the whole world.

Terry Pratchett certainly fits that description.

In the Discworld, witches stand for stalwartness, doing what needs to be done, thinking what needs to be thought — and seeing what’s really there.

And so, today’s Biz Book Friday, I present to you excerpts from Wee Free Men, wherein our young hero (a 9-year-old dairy maid named Tiffany Aching) finds herself to be a witch.

But really, the lessons she learns apply to everything.

On the way that the world looks at competent, successful people:

People tended to leave Tiffany alone. There was nothing particularly cruel or unpleasant about this, but the farm was big and everyone had their jobs to do, and she did hers very well and so she became, in a way, invisible.

I truly believe that one of the biggest diseases infecting smart, competent people today is the belief that being smart and competent and good at your job is good enough to get you noticed. That they are, somehow, expecting more — and succumbing to anger & bitterness when more fails to arrive.

On the magical school for witchcraft:

“Can I go there by magic? Does, like, a unicorn turn up to carry me there or something?”

“Why should it? A unicorn is nothing more than a big horse that comes to a point, anyway. Nothing to get so excited about,” said Miss Tick.

I swear this is not wear my slay-the-unicorns ideology comes from… but I wouldn’t mind if it did. (In a way, this awesome series of books is the anti-Harry Potter. I know which I’d read to any innocent, unsuspecting child in my care.)

On the way that life tests you before you’ve got any business being tested:

“The thing about witchcraft,” said Mistress Weatherwax, “is that it’s not like school at all. First you get the test, and then afterward you spend years findin’ out how you passed it. It’s a bit like life in that respect.”

As in life, so in business.

On the necessity of first principles for survival:

The one thing in her bag that might have made anyone suspicious was a very small, grubby booklet entitled An Introduction to Escapology, by the Great Williamson. If one of the risks of your job is being thrown into a pond with your hands tied together, then the ability to swim thirty yards underwater, fully clothed, plus the ability to lurk under the weeds breathing air through a hollow reed, count as nothing if you aren’t also amazingly good with knots.

As in life, so in the marketplace.

On writing benefits into your marketing copy:

THE WONDERS OF PUNCTUATION AND SPELLING:

1. ABSOLUTE CERTAINTY ABOUT THE COMMA!
2. I BEFORE E COMPLETELY SORTED OUT!
3. THE MYSTERY OF THE SEMICOLON REVEALED!!!
4. SEE THE AMPERSAND! (SMALL EXTRA CHARGE)
5. FUN WITH BRACKETS!

Although, if you’re a student of mine, you know that even this enlivening take on grammar doesn’t go far enough.

On (not) giving people what they want:

Footnote on ‘misfortune telling’: Ordinary fortune-tellers tell you what you want to happen; witches tell you what’s going to happen whether you want it to or not. Strangely enough, witches tend to be more accurate but less popular.

The thing about business is that it is, primarily, about business. When you try to sell something people don’t want, well, you’re shit outta luck. That doesn’t mean you should, for example, go tell lies instead of true fortunes. It means that maybe you’re not cut out for the fortune telling business in general.

Til next time!

Read deep and enjoy.

Previous Biz Book Fridays:

Biz Book Friday / Risk — 7 Comments
25
Nov 11

Startups & Risk: Petting Puppies with Peter Drucker

It’s that time again! No, not turkey-stuffing-cranberry-yam-and-marshmallow sandwich time. No, not pepper-spray-your-fellow-Black-Friday-shoppers time. No, silly… it’s Biz Book Friday! Today, a little change of pace: Peter Drucker. And puppies.

Who wants to start a business? You do!

Who wants to pet a puppy?

You do!

So… which puppy do you pet?

Pick a puppy! Aka The Nature of Risk

Well, that depends, I suppose.

Exactly how attached are you to that hand?

Towards a Philosophy of Puppy Stroking

Say you are an indiscriminate puppy pat-er. You see four legs and a tail and you just can’t keep your hands to yourself.

So you walk by the junkyard one day and LOOK! A PUPPY! Your tic kicks in. You slip your fingers through the chain link fence so that you can get your puppy fix. From the 150-pound, slavering, red-eyed menace. Here, boy!

One day, I expect, you will find yourself to be a very excellent one-handed typist.

But what if you practice safe pets?

What if you limit your doggy-stroking adventures to the fluffy pom used for animal therapy visits at the local preschool?

The chances are extremely good that you will die of old age and be buried with a full complement of 10 wiggly little digits.

Puppies are Serious Business™… and risk is a lie

We’re talking about puppies, but we’re really talking about your business. Get it? Whether you call it a “startup” or “small business,” a “lifestyle business” or a “baconbiz” or “my little side gig,” the facts are the facts:

Risk is not risk.

We talk about it like it’s a real, concrete, immutable thing.

But risk is like puppy-petting: it involves choices. You can choose to be smart, and snuggly, or dumb, and finger-less.

I’m not saying that there’s anything wrong with a high-risk venture. But it’s far from the only choice… and what’s more, even things you’d assume are high-risk don’t have to be.

Risk is not absolute. It depends on your choices. Yes, that’s right: you get to choose how much risk to expose yourself to. Amazing!

Fluff Ball Puppy with Top Hat & Monocole

Old school biz peeps know this — startups don’t

Entrepreneurship is “risky” mainly because so few of the so-called entrepreneurs know what they are doing. They lack the methodology. They violate elementary and well-known rules. This is particularly true of high-tech entrepreneurs.

Ahhh, the bitchslap of reality. From the past.

That passage hails from Peter Drucker’s Innovation and Entrepreneurship, published in 1985. Yes, over 26 years ago.

Still true. True-r, even.

Peter Drucker’s got a drum — a true-r drum — and he’s gonna beat it, giving us all a good what-for:

Those entrepreneurs who start out with the idea that they’ll make it big—and in a hurry—can be guaranteed failure. They are almost bound to do the wrong things.

Oh, really, Peter Drucker? Tell us more!

The entrepreneur is therefore well advised to forgo innovations based on bright ideas, however enticing the success stories. After all, somebody wins a jackpot on the Las Vegas slot machines every week, yet the best any one slot-machine player can do is try not lose more than he or she can afford.

We need to systematize, he tells us. (Sound familiar?) We need to base our entrepreneurship off research and analysis and understanding, rather than woo-woo hand-waving and hagiography and awed, prideful worship of the “bright idea.”

And, he says, people get really confused about what high-tech entrepreneurship looks like.

Junkyard Dog Alert: trying to be Fustest with the Mostest?

Drucker describes 4 basic entrepreneurial strategies. One of them is “Fustest with the Mostest,” a humorous dialect misquotation of Confederate Lieutenant General Nathan Bedford Forrest’s strategy of arriving first to battle with the most men and firepower:

In this strategy the entrepreneur aims at leadership, if not at dominance of a new market or a new industry…

That does sound awfully familiar, doesn’t it? It sounds like what everybody and their finger-crunching dog say about how to do a startup:

  1. Shoot for the moon
  2. Get there first
  3. Dominate
  4. Grow big

Being “Fustest with the Mostest” is the approach that many people consider the entrepreneurial strategy par excellence.

This is true.

Indeed, if one were to go by the popular books on entrepreneurs, one would conclude that being “Fustest with the Mostest” is the only entrepreneurial strategy — and a good many entrepreneurs, especially the high-tech ones, seem to be of the same opinion.

Right you are, Mr. Drucker!

They are wrong, however… monocle tweak

What’s that you say? WHAT??

“Fustest with the Mostest” is not even the dominant entrepreneurial strategy, let alone the one with the lowest risk or the highest success ratio. monocle polish On the contrary, of all entrepreneurial strategies it is the greatest gamble.

Oh no! The greatest gamble? I don’t believe it! But it must be true… you have a monocle!

Do go on.

And it is unforgiving, making no allowances for mistakes and permitting no second chance.

Argghghg, why?

“Fustest with the Mostest” is very much like a moon shot: a deviation of a fraction of a minute of the arc and the missile disappears into outer space.

BUT… isn’t that good?

The entrepreneur of so much of the popular literature or of Hollywood movies, the person who suddenly has a “brilliant idea” and rushes off to put it into effect, is not going to succeed with it.

In fact, for this strategy to succeed at all, the innovation must be based on a careful and deliberate attempt to exploit one of the major opportunities for innovation that were discussed in Chapters 3 to 9.

AWWW, NOOOOO, EVERYTHING I KNOW IS WRONG. TELL ME WHAT TO DO, PETER DRUCKER. Just give it to me straight. I can take it. cringe

["Fustest with the Mostest"] will fail because the will is lacking. It will fail because efforts are inadequate. It will fail because, despite successful innovation, not enough resources are deployed, are available, or are being put to work to exploit success, and so on.

While the strategy is indeed highly rewarding when successful, it is much too risky and much too difficult to be used for anything but major innovations, for creating a new political order… or a new approach…

It requires profound analysis and a genuine understanding of the sources of innovation and of their dynamics. It requires an extreme concentration of effort and substantial resources.

In most cases alternative strategies are available and preferable — not primarily because they carry less risk, but because for most innovations the opportunity is not great enough to justify the cost, the effort, and the investment of resources required for the “Fustest with the Mostest” strategy.

NOOOOOOOOOOoooooOooooOoookay.

In conclusion: Peter Fucking Drucker says,

Back away from that junkyard dog

…unless you’ve got a mesh body suit with anti-flammable padding, a cage, a taser, pepper spray, a whip, a lion tamer sidekick, a djinn, and also ovaries of pure tungsten carbide*.

Your entrepreneurial mission, should you choose to accept it: find and snuggle a friendly pom. Mind the top hat.

And: Buy and read Innovation and Entrepreneurship. You’ll have to read it with the eyes of a soloist or tiny team in the 2010s, and interpret what he says to help you with your situation… and you’ll learn a shitload.

Happy petting.

** Tungsten carbide: the hardest metal that isn’t, in fact a diamond. Psh. Everybody knows diamonds aren’t metal.*

Biz Book Friday — 1 Comment
18
Nov 11

Startups are a Boy Band (Biz Book Friday!)

Welcome to Biz Book Fridays! I’ve got a whopper of a biz book habit and I’ll read ‘em so you don’t have to. I bring the juiciest morsels straight to you.

Whoooo! After those 3 straight weeks of pricing, I thought we could ALL do with a little change of pace.

And so this week on Biz Book Friday, we’ve got… well… a book that’s not a biz book at all, and instead an excellent novel: Lost in a Good Book: A Thursday Next Story.

Everything’s a Boy Band

“Remember, Thursday, that scientific thought, indeed, any mode of thought whether it be religious or philosophical or anything else, is just like the fashions that we wear—only much longer-lived. It’s a little like a boy band.”

“Scientific thought a boy band? How do you figure that?”

“Well, every now and then a boy band comes along. We like it, buy the records, posters, parade them on TV, idolize them right up until—”

“—the next boy band?” I suggested.

“Precisely. Aristotle was a boy band. A very good one, but only number six or seven. He was the best boy band until Isaac Newton, but even Newton was transplanted by an even newer boy band. Same haircuts—but different moves.”

“Einstein, right?”

“Right. Do you see what I’m saying?”

“That the way we think is nothing more than a passing fad?”

“Exactly. Hard to visualize a new way of thinking? Try this. Go thirty or forty boy bands past Einstein. Where we would regard Einstein as someone who glimpsed a truth, played one good chord in seven forgettable albums.”

Some things are eternal. Just about everything else changes in cycles.

Some of those cycles are pendulums, swinging back and forth between two extremes. Examples: ornamentation and minimalism in design, or religion and reason. The thing about these cycles is that one actively leads to the other, because it’s a rebellion! Then that rebellion becomes commonplace and then people have to rebel against that.

Others are linear, fad giving away to fad, like in physics. (Can’t imagine us returning to pre-Einsteinian physics, can you?)

Boy Band Denial

If you’ve ever read a history book (or watched The Hitler Channel), you know this is true.

But even so… we never prairedog out of our little holes and go “Gee, this is just a cycle.” Nope. We say, “Aha! This is how things should have been all along. The way they will be. And rightly so!”

And… yet… we know that all those long-dead people in the history books thought exactly the same thing. About everything.

Boy Bands: They’re Everywhere!

In software development and design, we have Agile, scrum, pairing, test-first, test-never, lean, customer development, BDD, tooling, personas, no personas, action theory, beauty is function, ornament is a crime, user experience, user centered, undesign.

In business, we have Taylorism, Fordism, TQM, Six Sigma, follow your passion, dig in the muck for the brass, offshoring, outsourcing, home sourcing, human resources, team building exercises, incentives, no incentives, the customer is always right, the employee is always right, hug your customers, work is play, work is work and if you don’t like it there’s more where you came from, collective bargaining, every man for himself.

And then we have startups. Whether they’re funded big, or funded small, angel, VC, seed, institutional backers, pitch contests, startup weekends, liquidity events, go big or go home, “build stuff people want,” “build software that’ll get college students laid,” analytics for pirates or lead from your heart, Maslow, Mojito Island, founder as hustler, founder as hacker, founder as hagiographical hero, lifestyle business, 4-hour-work-week, sixteen-hour-work-day, IPO track, private sale, and of course, invent-your-own-accounting-standard.

These are all boy bands. All of them. Especially startups.

It’s boy bands all the way down.

History shows us that management theory, software development theory, design theory, and most importantly, startup ideology are all extremely faddish. But we treat each new boy band like they’re handed down On High.*****

And things get bloody dangerous when we confuse the boy bands of today with Mozart.

****** We all know the only boy bands handed down on high were The Beatles and The Dead. Maybe The Scorpions. Nuff said.*

Oh yeah. You want more. You wanna subscribe. Doooo ittttt. And follow me on Twitter while you’re at it.

Biz Book Friday / Pricing — 4 Comments
11
Nov 11

Will Low Prices Help You Sell More? (Biz Book Friday!)

Welcome to Biz Book Fridays! I’ve got a whopper of a biz book habit and I’ll read ‘em so you don’t have to. I bring the juiciest morsels straight to you.

Let’s talk about castles.

What do you need to build a castle?

  1. thick, unscalable walls
  2. places to withdraw your bridge
  3. places to drop hot oil, foul water, alligators, etc.
  4. a moat, for preference, and
  5. turrets, lots and lots of turrets

When it comes to making a product, the recipe is just the same. Only with a product, these fortifications have names like:

  1. positioning
  2. Unique Sales Proposition

And so on. The goal is the same: prevent your competitors from breaching your castle and stealing your serfs.

You know, the stuff that makes you different from the other guys.

Stuff they can’t just copy.

In other words: anything but a low price.

Competing on Price: Fools Only

And so, the clever authors of Pricing with Confidence tell us, Low Price is a Dumb Tactic.

Price competition is a fool’s game because any fool can play it.

Yup, anybody can lower a price. Anybody can compete on price. They don’t have to build a castle first. They also don’t have to face the hot oil and/or angry fishwives.

When you lower your price, you stand out… for a moment.

Tomorrow, somebody else less competent, less skilled, can come in, undercut your price, and steal that positin from you.

There’s no sustained advantage to be had through price competition.

…if you do win the order, your satisfaction is quickly undermined by the sneaking suspicion that what you have won is a Pyrrhic victory (another such victory and we are done for!).

That is the power of pricing: a bad price can transform a victory (woo! all those sales!) into a disaster (zomg, the overheads!).

In fact, the authors of Pricing with Confidence assert,

… weak competitors have an advantage in price competition because they’ve got little to lose and nothing else to leverage.

“Little to lose” and “nothing else to leverage” — not labels you want applied to your business, are they?

Why Price Low in the First Place?

Three reasons:

  1. Fear & ignorance. You’re afraid of asking for money, so you think the thing to do is to ask for only a little. It feels safer.
  2. Everybody else does it. (See below)
  3. You want to grab a bigger slice of the marketshare pie. (See below)

I’ve already written about fear & ignorance a bunch of times. (For newbs who got the fear, the D&D test, cake-and-icing pricing, and when customers bitch.) Read on for more of #2 and #3.

Everybody Does It… Don’t They?

Our clients tell us, “We have no choice but to discount because our competitors are nuts.” In fact, the competitors just look like they are nuts because they have the same addiction. By the way, we always tell our clients, “Your competitors are saying the same thing about you, and for precisely the same reason.”

By now you are shaking your head. Of course, you think. It’s obvious now.

When one competitor cuts its prices, it’s exactly like when a customer says you charge too much. We talked about this last time:

When a customer says, “Your price is too high,” your instinct is to respond to it as if it were really a discussion about price. To keep talking about price.

But that instinct is wrong — wrong when it’s a customer conversation, and wrong when it’s a competitor’s action, too.

It’s not about price — it almost never really is. The trick is to remember that, and not get tricked by your lizard brain into reacting without question.

To Grab a Larger Market Share

So maybe you’re too worldly and cynical to price low out of fear or competition. But you’re still tempted. Your considered, logical reason to price low is: to increase market penetration. (Fuck yeah!)

There’s just one problem with this sexy, aggressive tactic:

Does it work?

That’s a question that rarely gets asked. And, as it turns out, it doesn’t:

Elastic markets are quite responsive to changes in price. Inelastic markets are not. Elasticity research tells us when price decreases are going to bring us more revenue.

Do you know if you’re in an elastic market, or an inelastic market? This is important, because it turns out they behave in completely different ways.

A market is only elastic if a lower price convinces more people, total to buy — from you, or anyone. It doesn’t count if a lower price convinces a person who’s already someone else’s customer to switch to you.

Make sense?

Only price low if there’s a chance to capture sales that would never have otherwise happened, ever.

In fact, because of the effects of derived demand — remember, lower prices don’t increase total demand — penetration pricing is poison if you are competing in a mature market.

I wouldn’t go so far as to say that ebooks, screencasts, and web apps are mature markets just yet. They are still growing, and will continue to grow.

But they are based off mature markets. With ebooks & screencasts, there are direct corollaries to books and video training from before (and simple comparisons to live training as well).

With web-based software, the vast majority of your potential customers have already used or bought web-based software.

For customers who have not yet bought ebooks or subscribed to a web app, the hurdles are not cost or price, but a different way of looking at software & education.

If a person hates the idea of paying monthly for software he could “just buy at CompUSA,” no price will convince him otherwise. If a person thinks it’s morally wrong to pay for one person’s well-orchestrated “bits” instead for a 3lb paper book with 42 authors on the cover, it’s not the price that will sway her bias.

So let other people blaze trails with low prices and unsustainable overhead. And let them suffer the consequences.

What to do? The best response is to skim price for high margins at the top of the market and use a neutral pricing strategy for mainstream and low-end market segments.

Charge a higher price, earn more from fewer customers, and serve those few customers better with your limited resources (e.g. your time). Go for the margins, don’t go for broke.

Be like Apple: with 4% of the mobile phone market, they have nearly 50% of all profits.

That’s a great place to be.

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