Market-Based Management®

Hunches

How do you know when you should listen to a hunch?

I've been trying to work my way through Michael Polanyi's Personal Knowledge. It's a good read, but often makes my brain hurt! Anyway, Polanyi had a very interesting way of thinking about discovery and hunches. I've barely got my mind wrapped around some of his ideas, so consider this a preliminary lesson from Personal Knowledge and conversations about Personal Knowledge with my work colleagues.  

In short, I think we should investigate our hunches when we have personal knowledge about something.  I don't know anything about art, so if I view a work of art and have a hunch that something is fishy about it, it's probably not a good use of my resources to invest in my hunch. However, if you've read the book Blink, the introduction tells a story about a "Statue that Didn't Look Right." The art experts couldn't even articulate why they thought the statue wasn't an original. Those with deep knowledge about art had an instinct that something was wrong with it. In the end, the statue wasn't an original. 

With all that said, principled entrepreneurs don't blindly follow hunches even when they do have deep personal knowledge of the subject. I think personal knowledge increases the likelihood that a hunch is right, but we still have to use economic and critical thinking skills, be disciplined and make sure the risk is appropriate when investigating our hunches.

Friday Links

Thanks to Mike for this cool video about Daniel Pink's work on Drive. I recently read Drive and enjoyed it. 

 LifeHacker has an interesting post about behavior change. I didn't read the original source, but thought it might be interesting for those of you into psychology out there. 

Steve Blank's blog has a post on why "No One Wins in Business Plan Competitions." A different take on a typical business school practice. 

Business Pundit brings us a strange story called "Foxconn Sees 10th Employee Suicide This Year." I don't know if there is a "right" way to respond to such a tragic pattern of behavior within a company... 

I've always been fascinated by the differences in intellectual property laws and norms in different economic sectors and countries. Economix has an interesting post including a clip about "Does Fashion Need Copyright Protection?" There is a phrase in the clip about a "culture of copying," which is an odd way to think about it! 

Here are two just kind of charts: "A Tourist World" and "Top 100 Fun Cities." 

And finally, because the Associates gave me a award called the "Most Likely to Throw A Hayek-Themed Birthday Party," I have to link up Taking Hayek Seriously's post about cheap Hayek books for the Kindle. 

Reviews

Bob Sutton's recent blog post about reviews got me thinking about reviews. Everyone seems to have a take on reviews. Some of us hate reviews. Some of us view them as a necessary tool for growth. I don't know if anyone actually loves reviews? 

At any rate, I ended up talking with my colleague Mandy about reviews, and the conversation took an interesting turn. We ended up talking about how much we've learned from giving reviews. Most of the research and conversation focuses on the people being reviewed, but I had not thought about how putting together and delivering a review is a learning process. Since I'm pressed for time, I need some more time to think through this and put together a more coherent post about that process. 

One topic that often comes up around the time Associates get their reviews is how reviews contribute to culture. Often, there is at least one Associate who claims that confidential feedback for reviews gives folks incentive to not give each other open and honest feedback throughout the year. My response to this is to point out that reviews shouldn't contain surprises. They are a way to see the feedback you've gotten throughout the year in one place and talk about how feedback relates to the Guiding Principles.

What do you think of my response? Most people don't find it very satisfying. How do you see the review process contributing to culture? 

Better Late Than Never

Awhile ago, I asked some questions about management in general and told you I would get back to you in a couple of weeks. Here we are more than a month later, and I'm finally getting back to you. After reading almost the entirety of The Essential Drucker, I've found a few answers.  

I think Drucker views management as a set of tasks. He specifically calls out three fundamental purposes of management: setting the vision of the organization, increasing efficiency and effectiveness of capital (both human and physical), and dealing with "social impacts and social responsibilities" (page 14). Drucker routinely calls management a "liberal art" because managers must draw on a lot of different knowledge and apply it different ways(pages 12-13). In short, I think management is about directing resources and being accountable for those resources. 

On the whole, there were two themes of the book I really liked. First, value is created outside of the firm. He even goes so far at one point to say that there is no such thing as profit centers, but only "effort centers" (page 199). I think this fits Hayek's idea of the structure of production, where value is created when the customer uses the product. Second, Drucker seems to draw a distinction between the manager, the executive and the leader. For all three, it's not about one's position in the organization, but about the behavior of the person. If management is about making decisions about resources, then even individual contributors who don't have direct reports may have to be managers. 

To tie this back to MBM a bit, I think Drucker's definition of management points out why MBM is a useful framework for everyone in an organization, even if one isn't a "manager" of direct reports. Unless someone is micro-managed every moment of the day, he or she will have to make decisions about the resources needed to get the job done. 

Don't feel like reading a big fat book by Drucker? There's a cool set of videos on youtube from TheDruckerSchool. Here's one of them: 

Friday Links

The Taking Hayek Seriously Blog has a repost of a recording of Hayek talking about the Constitution of Liberty from FEE.

Panera opens a pay-what-you-want-restaurant. 

I'm a sucker for tools like this one, which calculates how much biking to work might save you (via Lifehacker). Now if only it had a way to apply opportunity cost to it... 

Economix asks "Is College Overrated?" 

Here's a chart showing underfunded state pensions... it's a little scary. 

Thanks to Maggie for sending me this nice blog post from HBR: You've Made a Mistake, Now what?

Thanks to Ben for sending me this link to "The Critical Role of Guiding Beliefs for Any Organization." 

Customer Focus

While a graduate student, I didn't think too hard about customers. As an economist, I believed the market worked and the customers were just one side of that. They were the people who bought stuff from producers. It was a naive (and not very useful) view of the world. 

Since I've been working at the Foundation, I've been fascinated how nuanced and profound the idea of a customer can be. I would find myself in reading discussions with Associates where they were wrestling with the question of who their customers are. There's always a sense that donors are customers, but there's also discomfort with that as well. I did not have a good answer for them. 

Then, one day a wise man named Paul heard a few of us talking about customers in a non-profit world. He looked a little stunned, and then said, "Read the Principle. Really read it." 

Here's the Foundation's Guiding Principle of Customer Focus: Understand and develop relationships with those who can most effectively advance the Science of Liberty^TM.

It was at that point that my mental model of a customer changed. I'd spent months as a new employee in a non-profit searching for an end user. Meanwhile, my customers were all around me, and I didn't realize it. 

I'm always looking for ways that I can help others learn and internalize the Guiding Principles. Has "really reading" a Guiding Principle helped you? What have you done to help internalize the Guiding Principles?  

Entrepreneurship

Earlier I put out a poll about nature versus nurture when it comes to entrepreneurship, and I didn't put out my own answer. In general, I think we all have our natural inclinations that we can work to improve upon.  I will use the Guiding Principle of Principled Entrepreneurship™ to motivate my more detailed answer: 

Principled Entrepreneurship™ 
Demonstrate the sense of urgency, discipline, accountability, judgment, initiative, economic and critical thinking skills, and the risk-taking mentality necessary to generate the greatest contribution to the company and
society. 

***Warning: This is Ann's take and not representative of research or any official view. I'm putting out specifics in hopes of starting a conversation.***

So, off the cuff, here's my two second take on each attribute. 

Sense of Urgency: This can be cultivated. However, my personal experience has been that there has to be some baseline of nature that is close to the appropriate amount you need for your job. A sense of urgency is not panic, but it's also not a lack of urgency. 

Discipline: I think that discipline is mostly a learned skill, but some of us are more naturally inclined to it than others.  

Accountability: This is a tough one to think about. I keep getting wrapped up on if this is a internal accountability or an external accountability. Does anyone have any thoughts about accountability? 

Judgment: This might be a cop-out, but I put this 50% nurture and 50% nature. I've encountered people who just seem to have good judgement despite little experience. I've know people who've gained judgement over time, and others that despite great learning opportunities, never seem to develop judgement. 

Initiative: I think this follows a basic model of some baseline that we can improve upon.

Economic and critical thinking skills: I firmly believe that if someone is sufficiently intelligent, they can be taught these skills. I don't know exactly what "sufficiently" is, but people are economists every day and can work hard to consciously apply their thinking deliberately. 

Risk-taking mentality: We all have some natural level of risk we are willing to take. When it comes to risk-taking mentality at work, I think it's about attuning our risk-taking to what is appropriate for our team, workplace and job. In this sense, I do think this is a learned skill. Those of us who are naturally inclined to take more risks have to learn how to tone it down. Those of us that tend to be very risk adverse may have to learn to take more risks. 

As I wrote this, it was amazing how interrelated they are. Without discipline, how can one systematically apply their economic thinking? Without initiative, how can people take time to learn economic thinking skills? Can one have a sense of urgency without initiative? Moreover, I'm glad that I have co-workers to help me to be a principled entrepreneur! Let me know what you think in comments. 

Friday Links

The new poverty measures remind me that measuring for measuring sake isn't useful. 

Here's "The World's Safest Table Saw." Whenever I see such amazing innovation, I get all economist-gooey and want to hug the invisible hand. 

I'm a nerd for data, so I give you "Europe: How bad is it?" These graphs give a snapshot of Europe's finances by country. 

The Consumerist brings us "Gold-Dispensing ATM Converts Pesky Cash to 24k Gold Bars." To this day in my life, I have never held pesky cash. If you have pesky cash you would like to get rid of, feel free to give me a call, and I'll help you find a good home for it. 

William Easterly points out a book called "The History of White People." I always love books/articles that point out changes in language. It makes me think of spontaneous order. Easterly's article about the book has a tint of caution against the fatal conceit. He writes that the book is a "Good cautionary tale for being careful and modest when we attempt to talk about ethnicity and development today."

This picture of the oil spill has been making the rounds recently. It gives you a good idea of the size of the problem. 

I'm always looking for good links. If you find something you want to share, feel free to email me at ann.zerkle at cgkfoundation.org.  

Your Brain at Work

I've recently enjoyed reading and suggesting the book Your Brain at Work. I watched this (somewhat long) clip by the author some time ago. I mostly enjoyed it, though I disagree with his point about Maslow about 30 minutes or in or so.Let me know if you want more on that. Enjoy!

A question about entrepreneurship

I often find myself wondering how much of entrepreneurship can be taught. Do some people just have "it" (whatever that means) while others do not? 

Please share your take on this in the poll below. Do you think entrepreneurship is more about nature or nurture?  I ask you to think beyond people who start businesses. Let's use Tony's definition: Entrepreneur: Someone who sees an unmet need, often before customers themselves see it. The entrepreneur discovers a way to profitably meet that need, and organizes the resources and people to deliver the resulting value to customers.

 So, what do you think: