Market-Based Management®

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. 

Pause

One of the cool parts of my job is that I get to work with folks who are encountering many of the MBM and Science of Liberty ideas for the first time. Not only is helping people learn awesome, but I often get the "fresh eyes" perspective. For instance, I recently worked on a workshop about the Guiding Principles. Running this workshop causes me to pause and examine each Guiding Principle. Often the questions from workshop participants force me to articulate and assess my assumptions. 

Below is a Guiding Principle. Pause for a second and focus on the text. After the jump, I've put some of the questions that often come up when discussing this Principle. 

Knowledge

Seek and use the best knowledge and proactively share your knowledge while embracing a challenge process. Measure profitability wherever practical. 

Culture Assessment

Bob Sutton's Blog has a post about new employees' potential to see culture for what it is. The post talks about how new comers see the organization in a different way than people who have been there a long time.I wonder if we can find a way to be in a culture, but not completely immersed (or lose the ability to see it for what it is) so we can keep the fresh eyes we need to ask questions and grow. 

Reading this post reminded me of my first few weeks in my current role. I can remember feeling more socially awkward than usual and not understanding what social cues caused the little groups of people to disperse after talking around the coffee machine. It didn't seem to follow the ordinary social rules. The funny part is, these simple situations were sometimes difficult to express and question to others. It was such a part of the day-to-day that people had trouble noticing that it was different. 

So if we eventually become part of organizational culture, how can we step out of our day-to-day to honestly assess the culture of our team or department? How can people who have experience with an organization catch glimpses of an organization with "fresh eyes"? How can we harness the questions of newcomers to assess culture? 

On Interruptions

Here is a video from Big Think (via Life Hacker) about interruptions. I couldn't get the embed to work, so I hope that you take a minute to link over to the video.

I don't disagree that interruptions are productivity killers, but it is a trade off. Interrupting managers are trading off productivity for something else (hopefully different and better productivity). His company's culture is at one extreme: almost zero interruptions and face-to-face interactions. I would love to ask him some questions:

• What does this imply about developing people?
• Do employees get the interactions and mentoring they need to increase their long term value creation potential? 
• Is this more likely to focus employees on short term results only? 
• What about the challenge process?
• Do you ever hire extroverts?

At the root of this is culture. What culture do you want your team or organization to have? What cultural attributes will make a team more productive? What do you think of this video? Do you think he's making a great case? What questions would you ask him?

Sci-Fi and the Human Action Model

Okay, I admit it, I love Science Fiction. I'm more of a Star Wars fan than a Star Trek fan, but we Sci-Fi geeks tend to find one another. So, I knew a fellow who strongly believed that Science Fiction (and Star Trek in particular) helped push technology forward by inspiring scientists to greater and greater things. For instance, he argued that flip phones first appeared on Star Trek (below is a clip if you're not sure what I'm referring to).

However, my friend only pointed out one of three requirements for human action (click here to see the original text). For a human to be moved to action there must be (in no particular order): 

• Uneasiness;
• A vision of a better state; and
• The belief that one's behavior can lead to a better state.

I know I've personally been inspired by Sci-Fi, but have seriously lacked the capability to believe that my behavior could lead to a better state. Yet, I wonder what role Sci-Fi, and dreaming of bigger and better things, plays in advancing technology. What do you think? Does Sci-Fi and storying telling help drive human action? If so, can managers harness this power to inspire employees? 

At about the 55 second mark, Kirk pulls out his flip communicator: 

What is Liberty?

One of my favorite movies is The Princess Bride - and I especially enjoy the character Inigo Montoya, who after listening to his boss Vizzini say the word "inconceivable" for the umpteenth time in reaction to several events, says, "you use that word a lot... I do not think it means what you think it means."

The latest Cato Unbound will be devoted to the meaning of Liberty.  It's a cherished ideal and a word we throw around a lot... and Inigo's lament might apply more often than we'd be comfortable admitting.

So if you're curious, head on over to Cato Unbound and watch the discussion unfold.  The lead essay is by the authors of "A Brief History of Liberty," David Schmidtz and Jason Brennan.  Participants engaged in writing reaction essays and participating in the debate will be Tom Palmer (Atlas Foundation, author of Realizing Freedom), John Christman (Penn State), and Philip Pettit (Princeton).

The Inventor of “Franglais” Dies at 66

Miles Kington, the man who coined the term “Franglais” died at the age off 66 today. Mr. Kington had no official power over language. He could not tell people what to say, yet many people have adopted Franglais. I’m no sophisticate and don’t speak French, but I do mix in French words every once and a while when the 2.5 million words in the English language let me down or are inconvenient. For example, je ne sais quoi? is a lot easier than saying, “there’s just something about that person that I can’t put my finger on—do you know what I mean it’s just the way you know….?” Declaring détente with someone is a perfectly polite way of saying “I want peace with you but you’re still a jerk.” The French have more than returned the favor by adopting such English words as le weekend, le e-mail, and, most recently le rogue trader. However, such adaptations of the English language are not always flattering; I have heard that in France to get an American deal means you got swindled.

Mr. Kington’s death reminds me of Freidrich von Hayek’s description of language as spontaneous order. No one person or committee “invented” language, a lot of different people just kept experimenting with lots of different grunts and gestures, until they all used the same grunts and gestures. Eventually, people began assigning symbols to these grunts and gestures and voila!—written language. Mr. Kington picked up on how people tended to mix the two languages, wrote the phrases down or invented knew ones, and watched and listened as folks either ran with his ideas or rejected them. Franglais is a reminder that language is a product of ordinary people. The people decide what is a word and what isn’t—not the dictionary or the self appointed language police. For example, many people tell me that “incentivize” is not a word (spell check just did), but I think it is a word because a lot of people use and understand it. Rest in peace Mr. Kington, and thank you for your wit and insight into how the world around us really works.

Bah Humbug! Economists Accidentally Ruin Christmas

Ordinarily, there is nothing wrong with honest enquiry into how the world works, and we like to encourage economic thinking. However, every Christmas the same argument is presented that Christmas is “inefficient". The argument goes something like this: Al spends $20 on a fruitcake for Mom. Since Mom only values the fruitcake at $5, and would have instead placed a value of $40 on $20 worth of cosmetics, then Al is out 20 bucks and Mom is missing $35 in consumer surplus. Perhaps it is the thought that counts, but in a nation of 300 million people, the deadweight costs of Christmas gift giving added up to an estimated $4 billion in 2001.  Sentimentality and thought are not taken into account, but the fact remains that gift givers are less likely to fully understand the subjective values of gift recipients.

Of course, folks can overcome this inefficiency by giving cash, but cash can sometimes seem impersonal; and we worry that recipients will not use the money to “treat themselves”. So instead of money, we go to stores and purchase gift cards which, offer more fungibility and say, “hey, I cared enough about you to brave the crowds and go and buy this rather than just cutting you a cheque.” Unfortunately, gift cards present deadweight costs of their own. A percentage of recipients may lose them or fail to use the full amount. Furthermore, the lag between purchase and use is essentially an interest free loan to the issuing retailer.

Although gift cards may lessen the subjective value problem of gift-giving, they do not completely alleviate it. A parent may give a gift card to child for a store the child would not be caught dead in. If Al gives Mom a gift card for Home Depot, and Mom gives Al a gift card for Tiffany’s, then the deadweight loss will be considerable. Fortunately, the rise of internet exchange (via e-bay) has created a secondary market in gift cards. Unfortunately, according to this article, these gift cards tend to fetch 80 percent of their value, which still appears to diminish the gift, despite increasing the consumer surplus for the recipient (they presumably still value the 80 cents in cash more than the gift card dollar). Some gift cards do better than others in both redemption percentage and in the secondary market. Supermarkets enjoy the highest redemption rate (98%), while gift cards for large “big box” retailers sell for about 90 percent of their value on the secondary market. Specialty stores suffered both the lowest redemption rates (85%), and only traded at around 80 cents on the dollar. Lastly, higher denomination gift cards were more likely to find their way onto to secondary market and tended to trade at steeper discounts.

So if you don’t feel like braving the stores and want to spare your friends and loved ones the bother of re-selling their gift cards and suffering dead-weight losses, then there is nothing wrong with gifting a little medium of exchange this holiday season. Please feel free to enclose this post as an explanation for your gift and to highlight the extra 20 percent in consumer surplus included in your gift. However, please note, this advice does not extend to either diamonds or ponies.

Looking for Adventure and Finding Economics

Economics is not a popular topic, and understanding of it is not widespread.  Accordingly, literature, film, music, and popular culture in general are almost completely devoid of solid economic understanding.  Economists usually confound the problem by writing for fellow economists and not the public at large—although the latter trend has been shifting of late.  Indeed the giants of economics (Adam Smith, von Mises, Hayek, etc.) can be almost unreadable—at least on the first try.

With this in mind, I was delighted to find an excellent piece of good economics in an unlikely place.  Being a big history geek with a fondness for swash and buckle, I have been going through Bernard Cornwell’s Sharpe series of books, which are set against the backdrop of the Napoleonic Wars.  The following little speech by Colonel McCandless to Private Sharpe struck me as a succinct and clear summation of the forces behind a prosperous (not to mention livable) society.

Without trade there is no wealth and without wealth there is no society worth having. Without trade, Private Sharpe, we would be nothing but beasts in the mud.  Trade is indeed worth fighting for, though the good Lord knows we don’t appreciate trade much.  We celebrate kings, we honor great men, we admire aristocrats, we applaud actors, we shower gold on portrait painters, and we even sometimes reward soldiers, but we despise merchants.  But Why?  It is the merchant’s wealth that drives the mills, Sharpe, it moves the looms, it keeps the hammers falling, it fills the fleets, its makes the roads, it forges the iron, it grows the wheat, it bakes the bread, and fills the churches and the cottages and the palaces.  Without God and trade we would be nothing.

If only there was more such economic wisdom in literature, film, and the arts.  Of course, it might put me out of a job, but it would be worth it.

The Five Percent Solution

I had always thought that the Dilbert cartoon strip was created from the beginning to make fun of the "cubicle culture" - the modern dysfunctional workplace.  Not according to Scott Adams:

When Dilbert launched in newspapers, the response was underwhelming. In the early years, it wasn’t a workplace strip. It was about Dilbert’s life in general. He just happened to have a job. I was surprised to learn, via my e-mail, that readers loved the relatively rare comics featuring Dilbert in the office. Personally, I didn’t think those were my best work. My ego told me to do it my way. My readers told me I was wrong.

Receiving negative feedback - from the market, customers, bosses, co-workers, employees - is never fun.  But we ignore it at our peril.  Ego can get us into a lot of trouble if we don't manage it.    We can feel threatened when we receive feedback telling us we're not doing as well as we could be... and that causes us to get defensive.

What the hell do readers know? After all, they aren’t syndicated cartoonists, and I was, albeit in only a few dozen newspapers. But this time, fortunately, I ignored my ego, changed the focus of the strip to workplace humor, and it took off.

My grandfather once told me, "if someone calls you a donkey, laugh at them... but if everyone is calling you a donkey, buy a saddle and start selling rides."  In other words - think about what people are telling you and don't ignore reality. 

A colleague once told me that when listening to feedback he assumes 5% of it is true.  This allows him to avoid getting defensive and to start getting curious about which 5% - so he has to consider all of the feedback.  It is good advice that might lead to some rather spectacular breakthroughs in your performance. 

Give it a shot - it worked for Dilbert.