How to put your money where your mouth is

You’ve heard the cliche.

We all have.

But you don’t know what it means until you feel it.

I’ve only experienced it a few times, but I’ve put my money where my mouth is twice in the past year.

First, I’ve bought 14 copies of Eric Greitens’ remarkable book Resilience. Twelve were gifts to people who would appreciate the message–or who needed the message. In that experience, I realized a feeling of power and generosity that literally made me dizzy. And it paid off.

One person who received a gift-book hosted a dinner party exclusively to discuss a key point of Greitens’ work: the morality of results vs. the morality of intentions.

Can you imagine a stronger endorsement of a book than to host a party to talk about it?

Second, after spending two weeks studying and practicing Running Lean and the Lean Stack by Ash Maurya, I offered several trusted colleagues a free copy of the book. Immediately they either took the offer or bought the book themselves.

The lesson: when you put our money where your mouth is, so will others.

Ideas spread when people repeat them. But they spread faster and deeper when people invest in them.

If you believe in something, spend a little money. Buying someone a book that inspires you is a pretty cheap way to put your money where your mouth is.

Your Non-Compete Contract Destroys Innovation

Imagine this.

You have an idea that might be with tens of millions of dollars to your company. You devise a simple, low-fidelity test that you execute yourself. The test indicates you may be on to something.

So you write up a pitch and present it to your management. They agree it’s a great idea. But they don’t want to move on it. “We have other priorities.” Your idea, which passed at least one viability test, is dead. Forever.

And there’s nothing you can do about it.

Who’s Idea Is It?

In a normal world, you would be free to develop this idea yourself. But not in most states or most companies. But in the bizarro world of 21st century America, businesses increasingly use onerous non-compete contracts that claim perpetual ownership of an employee’s ideas for the life of the employee–and beyond. While these clauses may not stand up to judicial scrutiny, employers bet that most former employees lack the financial resources for a protracted court battle over intellectual property.

In most cases, if your management decides not to pursue a great idea, the idea dies. At least, it dies until a competitor or start-up hatches the same idea.

Perverse Incentives

What makes innovation-killing contracts worse is the incentives they create. Businesses hate the unknown. I’ve said that most business executives would rather know for certain their company is dying than take a chance on making billions. That’s an exaggeration, of course, but only slightly.

A new idea always presents risk and chance. To bear fruit, ideas require time, money, and patience. Great, transformative ideas can upset a company’s culture. The future under a brilliant new idea might be brighter, but it’s also less certain. And today’s senior executive hates uncertainty more than he hates total failure.

If the employee with the idea were free to leave and develop the idea on his own, the employer would have an incentive to develop the idea itself. But when the company owns every employee’s every thought, it’s actually less risky to simply kill all the ideas.

The problem is, of course, one company can’t kill the ideas of other companies or entrepreneurs. The idea-killing contract works only in the short run.

Studies Show Non-Competes Kill Innovation

A literature review of studies on non-compete contracts shows nearly universal agreement that states with strong non-compete laws drive innovators out, eventually destroying their states’ economies.

MIT researchers Matt Marx, Jasjit Singh, and Lee Fleming concluded:

Non-compete enforcement drives away inventors with greater human and social capital, while retaining those who are less productive and less connected (2010).

In my state of Missouri, the brain-drain, followed by a job drain, is obvious. Over the past 30 years, St. Louis lost half its Fortune 500 headquarters. Moreover, Missouri and St. Louis have dramatically in almost every major economic measure. Out of the 50 states, Missouri ranks:

  • 44th in private-sector job growth
  • 47th in GDP growth
  • 46th in personal income growth

Missouri’s legislature and courts strongly enforce innovation-killing non-compete contracts. One legislator told me, “if you don’t like it, you should move to California,” a state that prohibits non-compete contracts and refuses to enforce contracts of other states.

Missourians can blame non-competes for part of its economic decline. Alex Tabborock writes:

Non competes benefit firms but harm industries by reducing innovation . . . Firms who come to Silicon Valley know that they cannot use NCA to protect their innovations but they come anyway because the opportunity to learn from other people exceeds the costs of other people learning from you. Thus, worker mobility and the inability to protect IP by restricting mobility is bad for an individual firm but good for the industry as a whole, good for innovation, good for workers and good for consumers.

Missouri needs to attract innovators who create businesses. Its established firms need smart workers who bring forward great new ideas for growth. Telling innovators to move to California will only accelerate our state’s rapid economic decline.

Keeping Mum

To protect ideas, employees under onerous contracts keep their best ideas to themselves.

“I will not say a word to anyone about my best ideas, and I work only on my own personal computer,” said one innovator who’s seen his ideas killed by management.

“I won’t work here forever, and I want the freedom to breathe life into my ideas once I’ve moved on.”

Asked if he would present his ideas to management if he were not under the non-compete, he said, “in a heartbeat. I don’t care so much about the money or even the credit. I just don’t want to see someone else implement this before we do.”

States Should Protect Businesses From Themselves

Business executives will almost always trade long-term viability for short-term gains. So long as the firm is the only party damaged by myopic management, so be it. But onerous non-competes hurt people and regions, not just short-sighted companies.

If states like Missouri want to get off their economic backs, legislatures need to pare back non-compete laws that encourage domestic companies to thwart innovation.

In addition to California and Michigan, Massachusetts, Rhode Island, and Washington state are considering banning non-compete employment contracts. According to Forbes, the motivation behind banning non-competes is two-fold: 1) to encourage innovation and invention, and 2) to increase competition for talent.

Missouri and other states that have traditionally supported onerous non-compete contracts, will find themselves falling further and faster unless they make talent more mobile.

Why Corporations Have No Leaders

I left the Navy in December 1994. Twenty-one years later I finally figured out why there are so few real leaders in corporate America.

I was brushing my teeth. I was thinking about a lot of things: work, clients, the economy, the lies companies tell the world and the lies the world asks companies to tell it.

And it it hit me.

There’s one reason why corporate America has few leaders. It was so simple and obvious that anyone could missed it.

Managing up.

That’s it.

From high school through MBA programs, we teach people to manage up. But the military teaches how to lead. Managing up isn’t leadership, it’s kissing ass.

Military leaders write letters home to wives, husbands, kids, and parents. In good times, those letters home tell of a service member’s achievements. In bad times, they tell of the service member’s last full measure of devotion.

We don’t make business leaders write letters to families when management’s failure costs a loved one his job. But we should.

When a company loses an account and the staff gets laid off, the CEO should write a letter to the family of the employee laid off explaining how management failed.

When a plant closes down because management failed to adapt to changing markets, every family affected should receive a letter, written and signed by the CEO, explaining the CEO’s errors that led to the shutdown.

If America is to remain an economic leader, its corporations must replace bureaucratic manager with real leaders. And real leaders in business treat the loss of employment as seriously as military leaders treat the loss of life.

The Rush to Global Is Over. What’s Next?

For most of my adult life, the globalization of everything was taken for granted.

We talked of “world economy,” localization, internationalization (aka I18N), and globalization. Indeed, almost every RFP for the last 20 years has asked about internationalization and localization and multiple currencies.

Yet, beginning in about 1997, a lone voice warned us that the march toward globalization would someday reverse.

In The Fourth Turning, historians Neil Howe and William Strauss forecast a reverse in global trade:

the economy will have changed fundamentally. Compared to today, it will be less globally dependent, with smaller cross-border trade and capital flows.

Heresy! But there’s more. From The Fourth Turning:

America will become more isolationist than today in its unwillingness to coordinate its affairs with other countries but less isolationist in its insistence that vital national interests not be compromised. The Crisis mood will dim expectations that multilateral diplomacy and expanding global democracy can keep the world out of trouble.

But look what’s happening:

“With global economic integration seemingly in reverse, at least for the moment, many economists and trade experts are beginning to talk about a new era of deglobalization, during which countries turn inward.”

For most of the past 20 years trade has raced ahead of global economic growth, usually at about double its pace. GDP grew by 3.5% in 2006, the last healthy, pre-crisis year, and trade at 8%. This was, it seemed, a golden ratchet binding the planet ever closer. But the most recent 24 months show something that looks an awful lot like a trade shock. It isn’t just that trade is no longer doubling — it’s slowing. In some crucial areas trade growth has slipped below GDP growth — and this year, globally we’ll be below the 20-year average rate of trade growth yet again. Figures on investment in assets held overseas, probably the best indicator of enthusiasm for globalism, are drifting down toward 40%, from more than 50% in 2008. The move is serious enough that economists have begun to ask: Is globalization running backward?

Howe and Strauss would answer “yes.”

Crisis eras, which occur about every 80 to 100 years and last about 15 to 20 years, see a shift from global to local. We entered a Crisis era with the fall of Lehman Brothers in 2008.

Question: Suppose the reverse of globalism continues–let’s call it ‘localism’ for now. How will localism affect your company’s investments? Will you continue to invest in globalization, or will you shift investments to shore up your local markets?

There’s Nothing Wrong With Being a Vendor

What’s wrong with being a vendor?

Sometime during my working life every business that sells to other businesses decided they wanted to be partners, not vendors.

Being in partnership with the companies you sell to is a great idea. Partners exert much greater influence than vendors. They also stand to reap great rewards.

What partners incur that vendor do not is risk. Shared risk.

Vendors get paid for specified services and deliverables. Period. “You want five generators? They’ll be there on the 16th. Two million dollars.”

Partners get paid based on the the success of the project. If the project fails, the partners all suffer. If the project meets expectations, partners all profit. If the project goes parabolic, partners rake in windfalls.

Partnership is risky. Partners do work that might end up being free. They provoke their partners. They bet their reputation and their future revenue on their expertise. Partners take a stand.

Vendors take orders.

There’s nothing wrong with being a vendor, and there’s nothing wrong with being a partner. But it’s wrong to call yourself a partner and preach partnership if you’re not willing share the risk.

By the same token it’s wrong to demand vendors take on risks of partnership if you’re not willing to share the profits as you would in a partnership.

Call yourself what you are, and be proud.

Image credits: NY Post

I Wish Drucker Never Said It

Who doesn’t have a dozen favorite Drucker quotes?

“Drucker” is, of course, Peter Drucker the legendary management guru who lives on in quotes.

And that’s the problem.

A lot of business people know all the great Drucker quotes, but they’ve never read the books. Or they read the books years ago and forgot the points, remembering only the quotes.

What’s worse, people actually run companies and departments and government agencies by Drucker quotes. Not Drucker concepts, which work, but Drucker quotes—misremembered, out of context, and incomplete.

If Drucker had known how some of his quotes would be abused, even reversed to defend bad management, he would have never said them.

For the sake of American business, I propose we banish one famous Drucker quote from the language and from the practice of management.

“What gets measured gets managed.”

This is the most evil and destructive Drucker quote of all time. I hear it at least once a month, usually to justify elimination of tasks that cannot easily be measured using the kinds of simple yardsticks executives fancy. Ya know, unmeasurable work like ingenuity, coaching, innovation, creativity, and, Drucker’s favorite, imagination.

Yet, Drucker’s own work, if anyone bothered to read the books, counters the popular misunderstanding of the quote. For example, Drucker’s praise of knowledge workers includes this caveat:

Working on the right things is what makes knowledge work effective. This is not capable of being measured by any of the yardsticks for manual work.


Moreover, because knowledge work cannot be measured the way manual work can, one cannot tell a knowledge worker in a few simple words whether he is doing the right job and how well he is doing it.

How often do executives push down responsibility for profits to the lowest levels of the company? And each time, these executives use Drucker’s bastardized quote to justify the proliferation of P&L down to call center reps. Again, if these executives bothered to read Drucker, they would quickly learn how wrong they are:

He saw to it that the yardsticks throughout the system by which managers and their operations were judged, measured service fulfillment rather than profit performance. Managers are responsible for service results. It is then the job of top management to organize and finance the company so as to make the best service also result in optimal financial rewards.

And the effective executive, as Drucker called them, are diligent about what to measure:

The automobile companies measured only by the conventional averages of number of accidents per passenger mile or per car. Had they gone out and looked, they would have seen the need to measure also the severity of bodily injuries resulting from accidents. And this would soon have highlighted the need to supplement their safety campaigns by measures aimed at making the accident less dangerous; that is, by automotive design.
Finding the appropriate measurement is thus not a mathematical exercise. It is a risk-taking judgment.

But finding the appropriate measurement is hard work, so most executives simply tell the lowest-level employee to make more money and cut costs.

Yes, the world would be better off if Drucker had never said “what gets measured gets managed.” He must have assumed that the people who read it, executives, would execute the idea in the context of Drucker’s entire work. But executives do not. Instead, they use the quote to defend bad decisions—decisions often in direct violation of Drucker’s philosophy.

The good news: Drucker never said it.

Those who apochriphally attribute the quote to Drucker might actually be referring to William Thomson, Lord Kelvin: “If you can not measure it, you can not improve it.”

Even better news: the original quote, by V. F. Ridgway, was not recommendation of measurement, but a warning against the practice. From The Guardian in 2008:

The full proposition is: ‘What gets measured gets managed – even when it’s pointless to measure and manage it, and even if it harms the purpose of the organisation to do so.’

Got that, American business executives? Be very, very careful what you measure and what importance you place on the numbers. As Ridgway explains in his paper, “Dysfunctional Consequences of Performance Management” (pdf available here, and I highly recommend it):

Quantitative measures of performance are tools, and are undoubtedly useful. But research indicates that indiscriminate use and undue confidence and reliance in them result from insufficient knowledge of the full effects and consequences. Judicious use of a tool requires awareness of possible side effects and reactions. Otherwise, indiscriminate use may result in side effects and reactions outweighing the benefits, as was the case when penicillin was first hailed as a wonder drug. The cure is sometimes worse than the disease.

Being a Drucker fan, I’m happy to learn and pass along the fact that Peter Drucker never said the thing I wish Drucker never said.

Now, if business executives would unlearn it, we’d all be better off.

(Note: All Drucker quotes are taken from his book, The Effective Executive. Read it.)

These 9 Principles Will Help You Avoid Lenovo’s Error

Slate calls the Lenovo hack one of the worst customer betrayals ever.

The PC manufacturer Lenovo sold hackers the keys to your checking account for a few dollars. Put another way. Lenovo installed code that effectively disabled every form of security, anti-virus, or encryption you could possible put on your computer. Lenovo installed this malware on every computer it produced for several years.

And they did it for a little profit.

I’m sure Lenovo’s marketing collateral talks about its customers and how much customers matter. It’s all lies, like the lies so many companies print in marketing collateral and annual reports and CEO speeches. The only thing Lenovo cares about is taking money from customers. If the customer dies, so what? There’s another one born every minute.

Lenovo’s Not Alone

I overheard a business conversation a few weeks ago that went something like this:

Employee: I’m just looking out for my customer’s best interest.

Boss: Well, I’d hope you’re looking out for our best interest.

In one sentence, that boss obliterated any hope of customer-centricity in her company. She exposed herself as liar for all the times she stood on a stage and talked about how much she cares about her customers.

Like Lenovo, this boss’s concern for customers begins and ends with her customer’s money. Once she’s taken a customer’s money, the customer can go to hell.

Putting your company’s profit interests above the well-being of your customers will lead you to decisions like Lenovo’s. You’ll eventually give hackers the keys to customers’ checking accounts for a share of the ill-gotten gains.

You are too good a person to fall into that trap. But how do you avoid it?

9 Principles to Avoid Evil and Promote Purpose

If you want to avoid doing evil, here are eight principles your company should live by. Most of these principles are not mine. I got them from smart people like Derek Sivers and Peter Drucker. And I admit that I do not always live by these principles. I try to, but it isn’t easy.

  1. “Never forget that everything you do is for your customers. Make every decision—even decisions about whether to expand the business, raise money, or promote someone—according to what’s best for your customers.” – Derek Sivers
  2. There is only one valid definition of business purpose: to create a customer. . . . It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods. . . . The customer is the foundation of a business and keeps it in existence.” – Peter Drucker
  3. “Operate like you don’t want the money—people will be happy to pay you.”—Derek Sivers
  4. “Don’t punish everyone for one person’s mistake.”  —Derek Sivers
  5. Be crystal clear about everything you say or write. Avoid jargon, buzzwords, and clichés. Practice using real words like Project Change Agreement and Statement of Work. Identify precisely the things you reference. Don’t assume “SOW” means the same the thing to you as it does to the person who hears you say it, especially if you’re talking to a hog farmer.
  6. Know what the customer wants or needs. What the customer wants to buy might be different from what you think you’re selling.
  7. Eliminate every possible task. Eliminate before optimizing or you’ll end up doing the wrong thing faster.
  8. Customers pay you to get things done, not for the time it takes you to do them. If a new web page is worth $50,000, it doesn’t matter to the customer whether it takes you one hour or 1,000 hours to build it.
  9. Understand that urgent matters are not necessarily important. Champions do the important stuff. Plenty of also-rans scramble over the urgent.

If profit is your only purpose, you might augh at these nine principles. But it won’t be so funny when the press calls your company “the next Lenovo.”

How to Handle Critics Like Don Draper

“A critic is someone who enters the battlefield after the war is over and shoots the wounded.”

― Murray Kempton

Ever been tempted to respond to your critics? To explain yourself? To educate the public on the real story, the thorny details your critic left out?

I know how tempting response can be. We want to set the record straight, clear our good name, put them in their place. Calling it “vengeance” would be to sell short almighty truth!

But no one ever listens to the respondent. I know Voltaire (or somebody like him) said a charge unanswered is charged agreed to (or something like that).

I say a charge ignored is charge unworthy of our attention.

If it makes you feel any better, Don Draper agrees with me. And this clip from the AMC original series Mad Men empowers us with the perfect attitude toward critics.

“I don’t think about you at all.” Brilliant.

In the series, Ginsberg, the critic, ends up in an insane asylum.

So here’s to you, oh critic of the Internets as you point out my many obvious flaws: I don’t think about you at all, but I’m flattered by all the attention.

Are You The Best Person For The Job?

Your 22-year-old daughter asks you where she should take her car to get the brakes fixed.

If you’re a father or mother, you probably just felt your pulse quicken. Your eyes opened a bit wider. Those are natural physiological responses to danger, and bad brakes in your daughter’s car are certainly a threat.

How do you go about answering her?

You know she doesn’t have much disposable income. She’s been working part-time since graduating college in May. You also know she doesn’t know much about cars or service stations. You’ve always handled that for her.

Now, she’s a grown-up and wants to take control of her life. But she wants your advice because she trusts you.

Do you tell her to save money by taking it to a guy who does brake jobs and lawn mower repair on the side? Or do you give her the number to the best shop in the area, which is a little expensive, but has a reputation as the best in the business?

Even if you have to help her out financially, you insist she takes her car to the best garage in town, don’t you?

Next question: when a client asks you if you’d like to bid on a project that’s a little outside your typical work, do you hold yourself to the same standard as you hold your mechanic?

In other words, if you know you’re the equivalent of the guy who does brake jobs on the side, would you recommend yourself to a valued client?

In business, it’s tempting to chase every dollar. It’s also tempting to believe you can do anything. So when a client asks about some new business, it’s tempting jump at the chance and hope you can pull it off. Protect yourself with contract language. Manage the client’s expectations.

What if that client was your daughter’s company? What if she were the manager responsible for this major purchase?

If your company isn’t the best in the business of what your daughter needs, would you risk your reputation and her career just to get this deal?

I’ve adopted a new standard when considering requests from clients: “Am I the best person in the world to deliver this project for this company?”

If the answer is “no,” then thank the client for considering your firm and offer to help them select the best. At least let them know you don’t think you’re the best company for this particular work. Let them know you’d love to work with them on the project, but advise your client that you’ll need their close support and maybe a little patience. “If that scares you, I’ll help you find a better supplier.”

If you feel it’s too hard to walk away from the money, pretend the client is your son or daughter and ask again. Unless you’re a psychopath, you’ll do the right thing.


P.S. If you find yourself consistently sending business elsewhere, maybe it’s time you improved your product and services. You’ve got to be the best in the world at something.

All Sucks That Ends Sucky

Shakespeare was sort of right. All’s well that ends well.

But the opposite is true, too. If the ending sucks, it all sucked.

At least, that’s how everyone will remember it. Sucky.

Remember this rule when you’re putting together a presentation, a pitch, or a meeting with a client. The whole event, minute by minute, needs to be good and attention-worthy. But you MUST stick the landing if you want to be remembered well.

It’s called the Peak-End Rule, and, as far as I know, Nobel laureate Daniel Kahneman invented it. Well, he didn’t invent it–it’s evolutionary. Kahneman named it. Kahneman also gave a great example, which I’ll recount best I can.

Better yet, I’ll just copy and past it from his book, Thinking, Fast and SlowSpeaking of a friend, Kahneman writes:

He told of listening raptly to a long symphony on a disc that was scratched near the end, producing a shocking sound, and he reported that the bad ending “ruined the whole experience.” But the experience was not actually ruined, only the memory of it. The experiencing self had had an experience that was almost entirely good, and the bad end could not undo it, because it had already happened. My questioner had assigned the entire episode a failing grade because it had ended very badly, but that grade effectively ignored 40 minutes of musical bliss. Does the actual experience count for nothing?

How often we ignore this basic fact. How often assume that we’ll be graded on the whole of our performance when, in fact, the final few seconds of our show will determine how the audience remembers the experience.

Fair? Hell no!  But it’s the way people are wired.

I’ll be honest: I screw this up all the time. I don’t put enough effort into sticking the landing. I usually start of strong. That’s important, because you don’t want to lose the audience or your prospect early. And the middle parts are good. But I don’t always put hard effort into a killer close.

Here’s a formula for changing all that.

  1. Before you plan anything, decide how you want the audience to feel when they leave.

  2. Think of experiences that left you feeling that way. Do you want your audience scared? How does Stephen King drive people to sleep with the lights on? Want them to leave curious? How does Malcolm Gladwell drive people to dig deeper and deeper into arcane subjects? Want them to leave laughing? How did George Carlin use callbacks to close leave his audiences in stitches?

  3. Plot the emotional rollarcoaster that will end with that emotion. It’s very difficult (and risky) to jolt your audience from passive relaxation to sheer, heart-stopping terror in one second. Whatever your closing emotion and intensity might be, you need lead the audience there. If you want to end with curiosity and intensity of 8 on a 10 scale, you need to start them at about 3 and build up over a few minutes.

By now, you’re probably convinced that you gotta leave ’em laughing. Or feeling something. Writing a good closing line isn’t enough, so pay attention to number 3.

Have you ever been in a bad mood and had someone try to cheer you up? Does it work? No. When someone tries to be all giggly at you, you just add that person to the list of things pissing you off.

So you can’t have a static close. Well, you can, but you need to read the audiences mood before you deliver it. If you’re shooting for laughing with an intensity of 8 and the audience’s mood is angry with an intensity of 10, you need bring down their intensity (try self-deprecation), then shift the mood (try a story with a happy ending), then start building up to your ROFLOL climax.

And if all else fails, offer to buy everybody a new car. It works for Oprah.