The challenge of course is not just to recognise it, and distinguish the authentic from the ersatz.
It’s to form a clear idea of what you mean by authenticity. Because in modern business and professional parlance, it’s become a bit of a chameleon.
The challenge of course is not just to recognise it, and distinguish the authentic from the ersatz.
It’s to form a clear idea of what you mean by authenticity. Because in modern business and professional parlance, it’s become a bit of a chameleon.
There is one idea that can increase your effectiveness exponentially. And that’s not a boast: it’s mathematically precise. It’s the concept of marginal gains.
Sometimes a big idea seems new, because lots of people are talking about it. But in fact, this one is a very old idea. Everyone is talking about marginal gains because this old idea has had one more recent and stunning demonstration.
What makes the idea of Marginal Gains so interesting to us, is the way it ties together a number of other big ideas.
Chip and Dan Heath have a writing style that turns important ideas into simple formulations, and illustrates them with compelling case studies. Their three books (to date) are all best-sellers and each is well-worth reading for any manager, professional, or entrepreneur.
Of the three, the first is not only the one that made their name, but the one that, for me, has the stickiest ideas: Made to Stick.
Chip Heath is a graduate of Texas A&M University where he studied Industrial Engineering. He went on to do a PhD in psychology at Stanford University. He is there today, as Professor of Organisational Behaviour at the Graduate School of Business, having also held academic posts at The University of Chicago Graduate School of Business (1991 to 97) and the Fuqua School of Business at Duke University (1997-2000).
Dan Heath has a BA from the University of Texas at Austin and an MBA from Harvard Business School. He has been a researcher for the Harvard Business School and also co-founded an innovative academic publisher, Thinkwell, whch provides school level textbooks. He now works at Duke University, as a Senior Fellow at The Center for the Advancement of Social Entrepreneurship (CASE), where he also founded the Change Academy.
Chip and Dan Heath have written three books together:
Each of them describes a series of steps for being effective in doing something – communicating ideas, making change, and taking decisions. I strongly recommend you to read these books – I have gained a lot from each of them. Here, all I’ll do is summarise the main content.
Why is it that some ideas circulate easily? People like to share them and, when they do, the ideas are memorable, compelling and soon become pervasive. They seem to be almost made to stick.
If we can understand the answer, perhaps we can also make our own ideas sticky. This is the substance of the Heath’s ideas, which they present in a handy acronym: SUCCESs.
Simple: We need to simplify our ideas by whittling away every superfluous detail to find their core, which we can then communicate to others.
Unexpected: One way to get attention is with surprise, and then we can hold that attention by stimulating curiosity.
Concrete: Real stories and examples make our ideas solid. Abstract theory is the enemy of engagement with your ideas.
Credible: People need to believe your idea for it to stick, which means giving them examples they can relate to, demonstrating your authority, and providing ways they can access proof for themselves.
Emotional: We make choices and remember ideas, when they trigger powerful emotions, so you need to demonstrate what’s in it for your audience, in terms of self-interest and emotional payback.
Stories: We are story-telling creatures, and we use stories to guide us in how to respond to situations. They make things real and inspire us.
One of the key roles for managers is to make changes in our organisations. But it is fiendishly difficult. The Heaths argue that the reason is a conflict that’s built into our brains, between our rational mind and our emotional mind. This idea will be familiar to readers of Daniel Kahneman’s Thinking: Fast and Slow.
The Heaths use the metaphor of an elephant and its rider. The elephant is the powerful emotional aspect of our brain, which can easily take us where it’s going anyway, while the rider is our rational side that needs to motivate the elephant to go in the right direction. They offer a three way prescription to:
Direct the Rider
Here, we have to find out what works and repeat it, discover specific steps that will get people where you need them to go, and create a direction to go and a reason to go there.
Motivate the Elephant
We don’t do things because we know they are right, we do them because they feel right. So we need to appeal to people’s emotions as well as their reason. We also need to make change easy, by presenting small, simple steps. Finally, they advocate instilling a growth mindset.
Shape the Path
Change people’s environment to shift behaviours and make the changes feel easier. Then turn the new behaviours into habits, by making repetition easy. Finally, use successes to spread the ideas and engage others.
Back to Kahneman! Our decisions are disrupted by an array of biases and irrationalities. We jump to conclusions and then become overconfident that we’re right. We look for confirming evidence and disregard other information that conflicts with our prejudices. We’re distracted by emotions – which make emotionally resonant ideas sticky.
In short, we’re rubbish at making good decisions!
And knowing it doesn’t help, ‘any more than knowing that we are nearsighted helps us to see’, say the Heaths. But luckily they also give us a four-step framework to help us make better decisions: WRAP.
Widen Your Options
Yes or no, this or that, big or small. Narrow choices make bad decisions, so the first step is to explore a wider space of options. And the book shows you how.
Reality-test Your Assumptions
Stop trying to show you’re right and start trying to prove you’re wrong. Only if you fail, then you can start to be confident in your assumptions.
Attain Distance Before Deciding
Shift your perspective in time, place or emotion. How will this decision look in five years, what do people do somewhere different, what would you tell your friend to do?
Prepare to be Wrong
Overconfidence hides the flaws in your thinking, so look for the things that can go wrong and find ways to alert yourself when events mean you need to shift decision.
What? You want more of a summary than summarising three chunky books in a thousand words. Just go out and read them!
By the way, there are lots of great resources linked to their books, on the Heath Brothers website.
Napoleon Hill has a lot to answer for. As if the 1980s’ and 1990s’ surge in the self-help book market wasn’t enough, you can now hardly move around the internet without the offer of a get rich quick scheme or the opportunity to build an amazing lifestyle with barely four hours of work a week. That isn’t to say, that Hill was the first into the market, but he was, perhaps, the first and most important contributor to our literature on personal success.
Napoleon Hill was born into a fairly impoverished Virginia family, in 1883. He was 10 when his mother died, and quickly became something of a local menace, roaming the locality with a six-shooter, trying to emulate his then hero Jesse James. It was his stepmother who pointed him in a new direction. He was to find new heroes in America’s great industrialists, and to learn that the typewriter is mightier than the handgun.
At 15, he started a journalistic career, writing articles for local papers, which led, in 1908, to his first big interview, with ageing steel magnate Andrew Carnegie. Over a couple of days, Carnegie shared his philosophy on how he became successful, while Hill sat rapt. At the end, so the mythology goes, Carnegie challenges Hill: if Hill would dedicate himself, unpaid, to researching a philosophy of success, Carnegie would get him started with letters of introduction. Hill accepted and got a personal introduction to Henry Ford. This led to further introductions that allowed Hill to interview such ‘great men’ as Alexander Graham Bell, Woodrow Wilson, Thomas Edison, and Elmer Gates.
In a short biography, we don’t have time to detail the many achievements and setbacks that Hill encountered in his life, including his work as PR advisor to US President Woodrow Wilson. But lasting success appeared to have arrived when, in 1928, Hill was able to publish his eight-volume analysis of everything he had learned on the quest Carnegie had set him. With the proceeds of The Law of Success, Hill bought an impressive new family home. Sadly, another reversal came in 1929, when the Wall Street crash took book sales with it. The Hills were destitute.
There followed a series of ventures and adventures in a colourful life that saw Hill working for another US President, FD Roosevelt (and, it is claimed, penning the famous ‘we have nothing to fear but fear itself’ line), launching several magazines (that all folded in a variety of circumstances) and surviving, by pure good fortune, an attempted assassination attempt by prohibition era gangsters.
But let’s cut to the chase. In another attempt to revive his fortunes, Hill re-wrote and shortened his Law of Success ideas into a new book. Hill did this at the prompting of his second wife, who also suggested the (early 2000s -sounding) title ‘The Thirteen Steps to Riches’. His publisher rejected this with a suggestion of his own – which was mercifully abandoned. The book we now know of as Think and Grow Rich, was very nearly titled: ‘Use Your Noodle to Win More Boodle’.
More good fortune and ill were to follow, as were more magazines and more books. Perhaps the most significant of these reads a little like a summing up. Teaming up with businessman W Clement Stone from the early 1950s, the two men taught his philosophy of personal achievement. In 1960, they co-wrote Success Through a Positive Mental Attitude. More books were to follow – including some finished and published posthumously.
In 1970, Napoleon Hill died. He had arguably achieved even more than his mentor. Whilst Hill was never remotely as rich as Carnegie, it is Hill’s book that is constantly re-issued and labelled as a classic.
At different times, Hill appears to have had a different ‘secret’ in mind. There are a thousand self-help volumes that repeat much of what Hill has said, but often, he did say it first. He has also spawned an industry of internet memes – lush pictures with Napoleon Hill quotes attached. Among my favourites are:
and, of course, the most famous may well be
But there is more to Hill than pithy quotes. In his evocation of ‘brain capital’ in Think and Grow Rich, Hill arguably foresaw the growth of Charles Handy’s Triple-i Company.
It is also important to acknowledge that Hill’s philosophy (like many of the men he interviewed) was rooted in an early twentieth century Judeo-Christian tradition of hard work, male dominance, and biblical foundation. Some of his writing may seem ahead of its time, but other aspects are very definitely of the past. His focus on a will to succeed (compare this to Nietzsche’s ‘will to power’) as a transmutation of male sexual energy reads as nothing more than bizarre to a modern reader.
But his concept of a group of intelligent, challenging individuals surrounding you as a means of accessing knowledge and wisdom, which he called a Master Mind, is probably the origin of modern Mastermind groups, which doubtless are responsible for much business success today.
In Think and Grow Rich, Hill alludes to his secret of success, without making it explicit. Most people therefore infer it to be some variant of a passionate, almost ungovernable urge to succeed. This is certainly a theme that recurs. It is also worth mentioning that Hill defined wealth far more widely than financial success, but as the quality of your friendships, the harmony of your family life (coming from a man twice divorced), and good working relationships. This last point is vital.
In the Law of Success – actually, 16 lessons – he argues that:
Only by working harmoniously in co-operation with other individuals or groups of individuals and thus creating value and benefit for them will one create sustainable achievement for oneself.’
This is a variant, of course, on the oft-cited and truly multi-cultural Golden rule: that you should treat others as you would wish them to treat you.
But it was in the 1950s and with the publication of Success through a Positive Mental Attitude that Hill described his settled opinion. People who succeed tend to be those who view setbacks as nothing more than a step on the road to success. A positive mental attitude, which finds its modern form in Positive Psychology, Learned Optimism, and a Growth Mindset is Hill’s final secret to success. And it seems a fitting one. Because few people in our Great Thinkers and Doers series have suffered so many setbacks, and mounted as many comebacks as Hill. His final success serves as one data point in the anecdotal confirmation of Hill’s self-help secret.
Liz Wiseman is a former senior executive at the Oracle Corporation, where she ran their Oracle University. There, she became interested in leadership development and has, since leaving and setting up her own business, taken up a research-based approach. Her research into why some leaders seem to get the best from the people around them, while others equally shut down contributions, led to the powerful idea of Multipliers and Diminishers, and two best-selling books.
Liz Wiseman was born and grew up in the San Francisco Bay area. She attended Brigham Young University, studying Business Management and getting her bachelors degree in 1986, followed by a master’s degree in Organizational Behaviour, in 1988. From there, she joined Oracle, where she stayed for 17 years, becoming a Vice President with responsibility for leading the Oracle University.
Wiseman left Oracle in 2005, to found her own leadership consulting business. She is currently president of The Wiseman Group (formerly known as Mindshare Learning). She cites CK Prahalad as her career mentor.
She has written three books, most notably Multipliers: How the Best Leaders Make Everyone Smarter (2010 – with Greg McKeown), which was followed in 2013 by The Multiplier Effect: Tapping the Genius Inside Our Schools. Her most recent book, Rookie Smarts: Why Learning Beats Knowing in the New Game of Work (2014), introduces another interesting new idea about leadership.
Wiseman’s big idea, which she researched with British consultant Greg McKeown, is that some leaders seem to get vastly more from the people around them than others. She calls them Multipliers. She made this observation while at Oracle and then researched just what it is that they do differently from otherwise equally intelligent leaders, who seem to suppress the contributions of others. She calls those Diminishers.
Multipliers are able to access the intelligence of the people around them and somehow grow that intellect, making them feel (and maybe become) smarter still. They ask questions and make challenges in much the same way as Bernard Bass referred to in one of his four dimensions of Transformational Leadership: Intellectual Stimulation. They seem to see more capabilities than other leaders and therefore make bigger asks of people.
By multiplying the intelligence of your people, Multipliers have a disproportionately positive effect on your business. They can harness under-utilised capacity of busy but bored people, by expecting more and giving them the opportunity to deliver it.
Wiseman identifies five characteristics of Multipliers, and six skills that allow those characteristics to blossom.
This is almost the definition of a Multiplier. They seek out and attract people with ideas and talent, and draw their genius from them.
They create the kinds of environments that free people up to do their best work and contribute their most innovative and critical thinking.
They are able to define a challenge or opportunity and set people the responsibility to excel themselves and meet it. This way, they get the very best from their people.
They can drive sound decision-making by creating rigorous evaluation and thorough debate. They encourage people to apply all their intellect fearlessly by caring more about the quality of discussion, than about personal gain or loss – we all win when we make a good choice together.
They invest in other people’s development and growth, and allow people to feel ownership for their careers and the results they achieve.
The six skills that Wiseman teaches are:
It is worth briefly discussing Wiseman’s other big idea, captured in her 2014 book, Rookie Smarts: Why Learning Beats Knowing in the New Game of Work. Even more so than her Multiplier Effect, this reminds us powerfully of the work of Carol Dweck on Growth Mindset.
The idea behind Rookie Smarts is simple: new people in an organisation bring a freshness and energy with them. They question the absurd and want to change things because , as an outsider, they have no allegiance to the ways of the past.
Long-serving leaders, on the other hand, easily get trapped into a mindset of ‘that’s the way we do things around here’ , and consequently lose their passion for change and drive to innovate.
What Wiseman advocates is that we ignite our curiosity, fire-up our energy, and become Perpetual Rookies. She says that:
‘Learning beats knowing’
and in so doing, she echoes precisely the principle of the Growth Mindset.
The 2-minute intro…
And a longer 16 minute talk…
Possibly the first business book I read as a new publication was an innovative take on project management. The book had a charismatic style, much like that of its author. Its title is emblematic of the focus of Eddie Obeng’s career.
Eddie Obeng was born in Ghana in 1959, and grew up in Britain, attending a boarding school in Surrey. He earned a BSc in Chemical and Biochemical Engineering at University College London in 1980, and stayed on to take a PhD in Biochemical Engineering.
From there, he went to work as a scientist at Shell from 1983-5 and then to March as a consultant. During his time there, he took an MBA at the Cass Business School. This allowed him to move to the Ashridge Business School in 1987, first as an Assistant Director of Studies, and then, from 1990, as an Executive Director.
In 1994, he left to found Pentacle, an independent business school, which he still runs actively. He is also a visiting professor at Henley Business School and was awarded the prestigious Sir Monty Finniston Award by the Association for Project Management, in 2011, for his contributions to the study and practice of project management.
Obeng is the author of many books, most of which are self-published or out of print. However, All Change!: The Project Leader’s Secret Handbook (1995) is still available and I highly recommend it
At the core of Obeng’s thinking is change. He has articulated this simply, by comparing the ‘old world’ with the ‘new world’.
We learn faster than our environment changes, so our learning equips us well, to cope. Stores of knowledge and experience are applicable and the learned thrive. We can build stores of best practice and we can afford long cycle times in developing new products and services.
Our environment changes faster than we can learn, so our knowledge and experience are always out of date. Constant learning and adaptation is our only way of maintaining success. We need to find ways to develop and test new ideas rapidly and be prepared to honour ‘smart failure’.
Does this remind you of the Growth Mindset ideas of Carol Dweck? It does me.
Consequently, Obeng’s teaching is based around five disciplines we need if we are to succeed in the New World:
All of this tracks back well to the central idea that attracted me to Obeng’s writing in the mid-1990s: that there are different sorts of change, which require different styles of leadership and different balances of capabilities and styles among team members.
These he describes as:
Goals and objectives of the change are clear, but you’ll need to figure out how to achieve them. You will need to think carefully about your resources, lead with confidence and commitment, and sell the benefits effectively. You need to stack your team with problem solvers and sleeves-rolled-up doers.
Neither where you are likely to end up, nor the route you will take are clear. You need to move forward carefully and deliberately, one step at a time. You’ll also need to constantly reassure team members with praise for their contributions. You’ll need plenty of problem solvers and also caring people who can create strong team cohesion in the face of uncertainty.
You understand the processes of change, but are open to discovering where the changes will take you. Consequently, professionalism and expertise are your your tools to ensure that the outcome will be right for your organisation. You need plenty of experts around you, who can follow processes correctly and innovate when needed.
The clearest form of change is where the end result is evident and the means to get there are familiar. Excellence will come from precision and accuracy so it is vital to avoid the threat of complacency. As well as knowledge and skill, your team needs people who can monitor, review, and evaluate well.
This framework is now familiar to many project managers. We often learn project management as if every project is like Painting by Numbers, but it isn’t. My experience was very much with Going on a Quest projects, for example. The rise in Agile Project Management, from the mid-1990s is very much a response to this dynamic – particularly to Making a Movie and Walking in a Fog type projects.
Obeng’s charismatic style is not to everyone’s taste (see the video below), but his ideas are often stimulating and easy to grasp. At their best, they are also valuable aids to thinking about the world of work in the twenty first century.
If business strategy is the search for competitive advantage, then the Journal of Business Strategy would seemed to have endorsed one strategy above all others. In naming Peter Senge as their ‘Strategist of the Century’ they implicitly set his concept of The Learning Organisation on a strategic pedestal. Indeed, they described Senge as someone who ‘had the greatest impact on the way we conduct business today’.
Peter Senge was born in California, in 1947. He attended his local university, Stanford, where he earned a BS in Engineering. He moved to MIT where he studied Social Systems Modelling for his MS, followed by a move to the MIT Sloan School of Management in 1970, where he gained a PhD in management that he completed in 1978. He stayed on, continuing his research into how we learn, within organisations.
His research culminated in his best-selling synthesis of these ideas, ‘The Fifth Discipline: The art and practice of the learning organization‘. This book has been rated by Harvard Business Review as one of the seminal management books.
His subsequent work has built on this theme:
The learning organisation is one that encourages continued learning for both groups and individuals, as a source of competitive advantage. People at all levels from shop floor to senior management will be continually developing their skill levels, knowledge and experience. It is like building an institutional ‘growth mindset’ by increasing the creative capacity.
When Senge published The Fifth Discipline in 1990, the ideas were not new. Indeed, Senge acknowledges his debts, especially to Chris Argyris, and his 1978 book ‘On Organizational Learning‘; and to Arie de Geus. The term “Learning Organization’, which Senge has made his own, was coined in 1987 by Bob Garratt, in his book ‘The Learning Organization and the Need for Directors Who Think‘.
In The Fifth Discipline, Senge describes five core components of personal development. This book is often viewed as highly theoretical, so his follow-up Fifth Discipline Fieldbook set out practical answers to the questions he received about ‘how’ to implement these ideas.
The five means of development, that create a Learning Organization, are:
One facet of emotional intelligence is motivation, and this is front and centre of the work of another psychologist. Angela Lee Duckworth’s research interest is competencies other than general intelligence that predict academic and professional achievement. And she has been putting the spotlight on two of them: self-control and perseverance.
Angela Lee was born in 1970, and grew up in New Jersey. She was the third child of immigrants from China, who had fled the cultural revolution. The parents were exceptionally results-oriented, leading to three children who have all excelled. However, as the third child, Duckworth recalls feeling a sense of benign neglect, as her parents focused their attention on her older siblings.
She was exceptionally bright and worked hard, entering Harvard and graduating in neuro-biology in 1992. Two years later, she took up a scholarship to study neuroscience at the University of Oxford, leaving with an MSc in 1996.
From there, she joined consulting firm McKinsey and Company (where she met her husband, Jason Duckworth). Promised opportunities to do pro bono work, but being allocated work in the pharmaceuticals sector, Duckworth left and started teaching, first in New York. During this time, she started paying attention to why some children succeeded and others failed.
She joined a doctoral program at the University of Pennsylvania, in the Positive Psychology Center, under the leadership of Martin Seligman, who supervised her study. She was awarded her PhD in 2006 and took up an academic post there. She is now a Professor of Psychology and leads the Duckworth Lab, which focuses on two traits that predict achievement: grit and self-control.
Duckworth’s work shows that two traits predict success in life:
These two are different. Grit equips you to pursue especially challenging aims over long periods; years or even decades. Self-control operates at a short timescale in the battle against distractions and temptations – willpower, if you like.
Duckworth’s research shows that the two are related, but not totally correlated. People who are gritty tend to be more self-controlled, but the correlation is not total: some people have masses of grit but little self-control, while some exceptionally self-controlling people are not especially gritty. Her team has developed non-commercial scales that measure each.
Duckworth’s research has found that, when they strip out the effects of intelligence, grit and self-control predict objectively measured success outcomes. They have used contexts as diverse as children’s spelling competitions, military officer training, and general high school graduation results.
Because of the importance of these factors, therefore, Duckworth has introduced them into the routines for her family: husband and two daughters. Academically, her team is researching ways to instil self-control and grit into children. She has shown that children can learn and practise strategies to build grit and self-control.
In a recent Pocketblog, we looked at the work of Carol Dweck, on Growth Mindset. Duckworth sees Dweck as a role model and is collaborating with her because she has found that children who have more of a growth mindset tend to be grittier. Once again, there isn’t a perfect correlation, but enough to suggest that one of the things that makes you gritty is a growth mindset: the attitude ‘I can get better if I try harder’. This should help you to be tenacious, determined, and hard-working: gritty.
Angela Duckworth’s 6 minute talk on Grit is one of my favourites and has over 6 million views. She is also working on a book, Grit: The Power of Passion and Perseverance due for publication in early 2016.
I have to declare an interest: I love the product that Jane ni Dhulchaointigh invented. It’s fabulous.
There are some things that most of us have around the house. We can’t imagine not having them, yet they were invented in our lifetime, or that of our parents: cellotape, duct tape, blu-tak, superglue, velcro, post its. The next generation will almost certainly include in that list one more: Sugru. That’s what Jane ni Dhulchaointigh invented.
Jane ni Dhulchaointigh (pronounced Jane nee Gull-queen-tig) grew up in Eire, in Kilkenny and studied fine art. She then did a master’s degree in design at the Royal College of Art, graduating in 2004. It was there that, in 2003, she first discovered the material that was, through much research and development, to become Sugru.
She presented a prototype of the material – along with sketchbooks full of uses for it – as her final year project. I don’t know how well it was marked, but she passed and, more important, visitors to the degree show wanted to know how much it cost, and where they could buy it.
ni Dhulchaointigh knew she was onto something.
Now Sugru is a rapidly growing brand that delights its customers and has a loyal following of makers, creators and hackers (in the sense of bodgers trying to make things better) around the world.
Sugru is a relatively new business and ni Dhulchaointigh is not a highly public figure (see the depth of the biography I have managed to assemble!) But from what I have read of her story, there are five valuable lessons for entrepreneurs, business people, and managers in general.
If you want to know more of the story of the creation and development of Sugru, the best place to look is on the company website. I have drawn these lessons from various interviews published on the web.
Or: ‘It’s only chemistry’. Jane ni Dhulchaointigh is a designer and sculptor by training and inclination. Creating a new silicone based product and getting it right requires a lot of chemistry. With her business partner, they hired two experienced (then recently retired) silicone chemists, but I like her attitude. Over the years of development, she was determined to learn, so she could contribute to, question, and understand the science. This puts me in mind of the Growth Mindset ideas of Carol Dweck, which this blog covered a couple of months ago.
Once Jane ni Dhulchaointigh had the idea for what use to put Sugru to, she was away. In guiding the chemists, she had a clear vision of what her end product needed to be like. She describes it with five words: colour, pleasure, safe, stick, magic. I’ve used Sugru and that’s five ticks. Which brings us to…
The development process for the final product took many years. Jane ni Dhulchaointigh says she is glad it did. It meant that the product was good, and that she and her team understood it thoroughly. This was no rush job. But the question remained how to get it to market. For this, she is indebted to the advice of a friend. When she failed to secure big funding from a major corporate, she followed the advice and decided to…
Her first commercial batch of Sugru got coverage in Wired, Boing Boing, and the Daily Telegraph, who all gave it rave reviews. She sold out of the 1,000 packs online in 6 hours.
Nothing about Jane ni Dhulchaointigh strikes me as a compulsive risk taker, but she describes the whole development process as a series of risks. By taking a cautious, careful approach to risks, and holding tight to a clear vision she believes in, ni Dhulchaointigh has made those risks pay.
There are a few videos of Jane ni Dhulchaointigh speaking about Sugru’s creation story. Ths is my favourite.
Fun fact for the pub quiz: Sugru is an Anglicised spelling of Irish word Sugradh, meaning ‘play’.
At the start of every year, many thousands (possibly millions, globally) of people look forward to some New Year reading, from the richest writer in the world. Don’t rack your brains for a best-selling multi-billionnaire novelist though: the writer is Warren Buffett, the Oracle of Omaha*.
Warren Buffett was born in 1930, in Omaha, Nebraska. By the age of six, he was trading in soft drinks and dreaming of becoming rich. When he was 12, his father won a seat in Congress and the family moved to Washington DC, where Buffett took on five paper rounds a day and earned the equivalent of a full time wage. He saved his money and, at 14 invested it in farmland in Nebraska, which he then rented out.
His academic career started at 17, at Wharton, but he quickly left, in search of a more practical and less theoretical education. He found it at Columbia Business School, where one of the leading thinkers in investing, Ben Graham, lectured. Graham’s ideas had a profound effect on Buffett’s investment strategies from then until now, focusing as they did on underlying value in all of its aspects.
Let’s skip lightly over the stellar performance of Buffett Partnership, Ltd – his stock investment business that managed other people’s funds, which ran from the mid 1950s to 1969. He closed it down to focus on investing through Berkshire Hathaway. At first it was a textile business that Buffett acquired in 1965. It eventually closed all its mills in 1985, but by then it was the core of a diverse portfolio of businesses. Its shareholders profit from massive stock performance that frequently outstrips industry averages by a wide margin, generated by Buffett’s choice of outright acquisitions and stock purchases.
Once a year, at the start of the year, Buffett writes a long letter to his shareholders. It explains carefully Buffett’s assessment of the year past and the future of the business. It combines folksy humour, wry metaphor, and deep insight. It is widely read not just by investors and analysts, for whom it is a professional interest, but by folk like me, who see it as a fascinating exercise in communication, combined with a source of interesting insight.
There are very many websites and articles purporting to extract lessons from one of the world’s most successful and penetrating business minds. What a surprise! But I am determined to add another, because I won’t be thinking about investing; that’s not my thing. Instead, I am going to focus on what I think day-to-day managers and business leaders can learn about doing your job well.
Buffett likes investing in simple businesses that he can fully understand. As a manager, keep it simple and don’t take on something you don’t understand. So, if you need to take on something you don’t understand, then make it your urgent business to understand it.
They all amount to the same thing. Buffett puts an astronomical premium on these. As well as his annual letter, Buffett issues a biennial memo to the CEOs of the businesses Berkshire Hathaway owns, his ‘all stars’. These are not published but frequently leak onto the web. Here are two extracts from the most recent (December 2014), which clearly makes his point.
The top priority — trumping everything else, including profits — is that all of us continue to guard Berkshire’s reputation… As I’ve said in these memos for more than 25 years: “We can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.”
Sometimes your associates will say “Everybody else is doing it.” This rationale is almost always a bad one if it is the main justification for a business action. It is totally unacceptable when evaluating a moral decision.
This is Buffett’s approach and it applies to any manager who appoints supervisors, or any leader who appoints managers. Experience matters – look for evidence. When you get the right person, trust them enough to give them the autonomy that will allow them to add to your leadership, rather than be subordinate to it.
This one is simple: Buffett rejects all judgements based on gender, race, or age. So too should you. The person that has the skills and energy to excel in a role is the person for the job.
Trust the numbers too. Do everything you can to understand the nature of cognitive bias. Study the facts and work hard to eliminate any other influence over your choices. You will get things wrong, just as Buffett has done on many occasions. But each time he does, he analyses it and discusses it in clear objective tones without a trace of blame for anything other than his failings in judgement. He takes away the lessons and uses them.
Buffett rejects knee-jerk reactions to headlines and focuses on the big picture underneath them. When he is ready he makes decisions rapidly, but he won’t be hustled.
The only memo to his all stars that is on the Berkshire Hathaway website is also the most astonishing piece of business communication I have seen. Two things strike me as remarkable. The steadying calm and confidence with which it is written, and the remarkable strength that a business would need to have for its CEO to be able to say the things he does. It is a short note, so to reproduce anything valuable from it would doubtless be morally a breach of copyright even if it stayed on the right side of the law, so do have a look at it. The context may be obvious when I tell you the memo was issued on 26 September, 2001. The message from Warren Buffett is on the Berkshire Hathaway site.
Warren Buffett and his business partner, Berkshire Hathaway Vice-Chairman Charlie Munger, both set aside large chunks of their working day to read. They read all sorts of stuff and the breadth and depth of their reading gives them both profound understanding and a wide context. This commitment to learning is what you need if you are to grow in wisdom and make sound decisions more often.
There isn’t much to say about this but to note that the big picture is all very well and an appealing target for leaders’ attention, but the details are often where the differences get made. The skill, of course, is to figure out which details (see paragraph above for the best technique).
In Buffett’s case, deciding how to invest Berkshire Hathaway’s assets is the strategic role he fills. Everything else – and in particular the operation of the Berkshire Hathaway businesses, he delegates completely. While he makes himself available to his All Stars for a conversation 24 hours a day if they need it, he does not require them to communicate with him more than once every two years. At that time, each is required to put one name in a sealed envelope and send it to him. This name is that of the most suitable successor, should the business CEO be suddenly unable to fulfil their role.
Right, that’s me done, I’m off to do the ironing. ‘Delegate it’ you say. ‘Indeed’, says my wife!
* Although Buffett is also known as the Sage of Omaha and the Wizard of Omaha, Oracle is the term he himself favours.