In my last post, I mentioned Hedge Fund giant Ray Dalio's intolerance of "badness" . It really does seem that it takes an intolerance of problems to build a truly great organization. Here is an article about commodity giant Glencore, which makes the same point. A key quote: "Those stresses are in part explained by a culture in which blunders are not tolerated.". Link posted at The Reformed Broker.
This is Post 5 in my series on Success and Convexity. For our non-mathematical purposes, we’ll define positive convexity as opening the door to many good things while limiting the access of many bad things.
What then is negative convexity in the world of personal success and achievement? It's negative luck. It is opening the door to many bad things. Maybe not even consciously opening the door, but just leaving the door open, or even forgetting to close it. If you do this in your house, it’s not that you know something bad will come in, it’s that you don’t have any good idea what may come in. You are giving unrestricted access to negative possibilities.
Our goal should be, for the most part, to restrict access to “the unknown bad things” that can happen. We only want things to get “out of control” on the good side of things. We want to get into a line of work with an unlimited upside; around friends with drive, courage, vision and good hygiene. We want to make sure we wander into bookstores and libraries and classrooms and not wander into bars and crack houses and , hopefully, as few greasy burger joints as we can manage.
Here are some examples of negative convexity. Often these actions turn out badly because they “open the door” to unknown bad things.
Giving your opinion
Sad to say, no one wants to hear your opinion. And the louder your opinion, the less someone wants to hear it. Furthermore, down the road, that person may retaliate in some way if your opinionated remark has injured their self-esteem. Oh…another minor point…your opinion could be totally wrong. The point is, favoring the world at large with your many "fascinating" opinions is a virtual “kick me” sign to the universe, and can open the door to a surprising number of repercussion, many of them painful
Using credit and leverage
The more you lever up, the more it can work against you in the exact proportion to the amount you have borrowed/leveraged. Much of the financial agony of the past few years was caused by huge amounts of leverage, from homeowners putting up miniscule amounts as down payments, to giant banks borrowing against those same mortgages at 30-to-1 margins. There are even hints that the U.S. Government could lose it’s own Triple-A credit rating because of too much borrowing. Again, it is the “unknown” side of the coin that is the bombshell. You don’t know what will precipitate the destructive side of leverage: you might lose your job; your industry could go into a slump; you could have miscalculated the whole nature of the bet you made. The fact is you just don’t know, but one thing you can know is that leverage is a door to the unknown. You never know what might walk through.,
Avoid washing your hands, annual checkups, exercise
None of these actions are a ticket to doom. What they are is a ticket to the unknown. You don’t wash your hands? Well…perhaps you will never get sick from some germ. Or maybe you’ll be sick 2,3,or 4 weeks per year and it will just “slip under the radar”, with those lost weeks of productivity, family activities, friends, etc just “gone” without your even thinking about them.
Skipped your checkup? So what? You’re feeling fine. Maybe there’s nothing there. Or maybe you have something quiet and chronic that could chew up a few years of your life, but you won’t know that for a while.
Don’t exercise enough? Maybe you lose an hour of life per hour of exercise…I don’t know. Maybe you lose just a teeny biit of flexibility over time, so when you have to lift that heavy object, instead of some aches and pains, you rupture something. Again, these are issues of playing the odds. Of letting the unknown, or ignored, into your life. And once it gets in, because convexity tends to increase, you may find yourself in the “steep part of the curve of “hurt”, when you never needed to be there.
More on Negative Convexity in another post.
Shakespeare said “discretion is the better part of valor”. Woodworking experts admonish “measure twice and cut once”. Billionaire Warren Buffett and his mentor Benjamin Graham emphasized investing with a “margin of safety”, a level of business value that would endure no matter what the price or vicissitudes of the business, thus making it safer to invest in. Airplanes and space shuttles are designed with redundancy: multiple systems that can be pressed into service if a main system (hydraulic, navigation, etc) fails. 
Woody Allen once said "eighty percent of success is showing up". A pithy and ever-so-true Success Secret. I went to the grocery store today and they didn't have my favorite focaccia bread. Big deal? Sure, but now, in the back of my mind, I have this meme that reminds me: "well, if you go out of your way, they might not have the focaccia". Similarly, if you don't show up, your clients, friends, etc may start taking you off the "guaranteed list" and putting you on the "maybe" list. On the other hand, if you always pick up the phone, meet your deadlines, get your eight hours sleep, etc, you create a "base" from which to build. You certainly wouldn't like it if various bodily organs worked "inconsistently". How could you get through your day? We should expect of ourselves the same consistency that we expect of many of the small, but priceless goods and services we enjoy today without even thinking about it. Many nations don't have consistent power, water, and other infrastructure. Whole countries get avoided by international investment because you can't build a factory there, because you don't know if the lights will be on. Consistency seems like a little thing, but it is a base from which positive convexity can be built.
and The Invisible Hands
, I noticed that many of the brilliant hedge fund managers he interviewed repeatedly used the term “convexity” to define the characteristics of the financial returns they were seeking. Now there are precise financial definitions of this term, but my overall impression was that these investors were using convexity to define an investment that had a strong potential to do increasingly well if conditions were right, but had the additional property of not creating a ruinous loss if things went bad. In short, they were seeking something like this: 
Great post on work-life balance at Journey of a Serial Entrepreneur. Makes simlar points to a few of my own remarks in my review of Pete Peterson's new book. Usman Sheik is a startup founder and loves his work. Like many successful people, he sees the lines between work and "the rest of life" as blurred. There is work-as drudgery, and there is work-as-passion. And when work is your passion, there may not be as much need for "balance".
Here is a short video by investor (and Warren buffett disciple) Monish Pabrai and a long video of Bill Gates and Warren Buffett. In both videos it is clear that the key to these peoples' success is not hyperactivity, but reading and thinking. They spend huge parts of their days reading, and they rank it as their most important activity. Even Pabrai, already a Buffett admirer, was struc by how "empty" Buffett's schedule was. You don't look very busy when you're reading, but the results speak for themselves.
Two links from Science Daily:
Body Posture Affects Confidence in Your Own Thoughts
"Researchers found that people who were told to sit up straight were more likely to believe thoughts they wrote down while in that posture concerning whether they were qualified for a job.
On the other hand, those who were slumped over their desks were less likely to accept these written-down feelings about their own qualifications."
Mediterranean Diet Associated with Reduced Risk of Depression
, which devotes an entire chapter to this fact. The chapter heading: "Stand Tall, Straight, and Smile".
In my recent review of Steve Martin's auto-biographical tour-de-force Born Standing Up: A Comic's Life
I recently posted a video of Jack Welch, ex-CEO of General Electric, speaking brilliantly at MIT. In the video, he reiterated some of the key practies he used to power GE to dominance. Can Jack Welch’s techniques, used to manage corporate behemoth General Electric, be used in our individual efforts towards personal achievement? Yes, they can.
Jack Welch Technique: 20/70/10 (Reward the top 20%, encourage/coach the middle 70%, fire the bottom 10%)
In our personal projects, we can get deeper and deeper into what works. This area is equivalent to Jack Welch's "top 20%". We should concentrate on doing more in the areas in which we are successful. These are “golden”. These areas include our natural aptitudes. We should expand this territory by meeting more people in our field, stressing our core competencies, and getting training in contiguous and appropriate skills. Toyota stresses continuous improvement down to the tiniest level…and it’s already the best-in-class automaker. Charlie Munger has suggested that the best results we are getting should be the benchmarks for the next investments we make. In other words…use our best to make the rest better.
The “middle 70%” is the area of our average aptitudes. This is the area where we may not be outstanding, but it includes areas that are important to our lives. These areas (perhaps diet, exercise, “giving back”, etc) are amenable to an organized approach to productivity (checklists, regular monitoring, etc). They are not “natural” for us, but they are important. We can improve in them, and we must, while taking into account that we may not be “stars” in that particular firmament.
The “bottom 10%" corresponds to what’s not working. Relationships, goals and plans, outright failures. So, how do we “fire” the bottom 10% if it’s only ourselves? First, we can outsource. If we are not organized, we can hire a consultant who can help us organize. If we dress badly, we can get a personal shopper. Another method is to “outsource” the job to software. I felt I needed budgeting help recently so I found YNAB, a superb budgeting program. It’s a lot more organized than I am and much better at keeping categories and totals straight.
Another technique: “fire” what’s not working. Just stop doing it. Stop watching TV shows that are meaningless. Stop hanging out with whiners and complainers. Stop consuming food and drink that are bad for you. “Fire” the unproductive behaviors and people in your life.
Jack Welch Technique: Let employees repeatedly know where they stand
Welch comes down hard on bosses that fire without warning. He is a champion of regular employee reviews. This concept is not far from Drucker’s “What gets measured gets done”. So, in our personal goals and plans, how regularly do we sit down with ourselves and review? Do we actually know what’s working? Do we have benchmarks to check for our income, health, contacts, learning goals, business plan? The better-specified our activities are, and the more frequently measured, the more successful they will be. Forget about keeping track “in your head”. It’s virtually impossible. And, the more categories you are measuring, the fuzzier your “off the cuff” reviews will be.
Jack Welch Technique: Spend 5% on planning, 95% on execution
Plans are great, but they always change. Military planners know that planning is crucial, but that all plans get torn up the moment the battle starts. We must avoid perfectionism, which may be procrastination in disguise. All important things are “hard”. All important tasks involve painful new behaviors, learning, adjusting, and just plain hard work. Life is too short not to get it done. Furthermore, life moves so fast that an extended period of planning, instead of just working, may, in itself, make the plan outdated and obsolete. There is no substitute for actually “doing it’
Jack Welch Technique: A manager’s job is to constantly fire up the troops.
Well… YOU are the “troops”. How often do you read and write positive affirmations? How often do you visualize success? How about multiple levels of success? 1 year out? 5 years out? 20 years out? Do you keep a journal of good things that happen to you? Compliments people pay you? Did you frame that first check from the new business? Do you keep a “dreams list”? Remember, you are a human being, not a machine. Your fuel is emotion. Passion. Even envy, greed, and lust have their place. Get the fires burning. Never let them go out. Jack Welch is still going strong. He knows whereof he speaks.
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What if this were true: no goal is worth achieving unless it takes at least 100 of something to get there. If it were true, how would that affect the way we think about what goals we set for ourselves? How would it structure our daily lives? What if we only looked at goals that take at least 100? 100 customers, 100 days, 100 wins, 100 attempts, 100 months, 100 miles, 100X improvement, etc
I was thinking about the definition of a long term goal, and why long-term goals seem to be so much more inspiring, and so much more worthwhile. Here are my Top 10 Reasons for Thinking Long Term.
1. If 100 iterations are necessary, it makes us pick something worth doing. If I wanted to pick something that would really get me somewhere after 100 days or 100 weeks, I am going to pick something pretty important.
2. Longer time frames allow small changes to add up. Small changes on the way to a goal are often not inspiring or even invisible. But thinking in longer time scales allows more space between evaluations, allowing the invisible successes to become visible by building up. Your sales statistics, IRA balance, or body weight may not change in a dramatic way in a week. But in 100 days, or 100 weeks, you are more likely to see those results.
3. The learning curve. As you “get used” to a particular endeavor, your efficiency at it improves. If you’ve been using a particular tool for 6 months, you are going to be a lot more fluent than if you use it for 6 minutes. We underestimate the results we can get because we don’t allow ourselves to adapt to the situation over time.
4. Success is an iterative pursuit. You get better as you see the results of the last iteration. I think this is an underestimated benefit of long-term thinking. As you begin to pursue a project, each activity along the way become open to improvement. Let’s say your goal is to win a footrace in 100 days. You begin to see the components of that event as separate categories to improvement. The start, the finish, your stride, your pace. Then you begin to see inputs to each area that will improve that component. You work backward: your warm-ups, your sleep, your attitude, your nutrition, etc. Each area comes under scrutiny, and gets improved iteratively, as previous attempts are evaluated. None of these iterations can happen quickly. They come to the surface gradually, over time. Only through a longer-term point of view can these benefits be realized.
5. Commitment over time reduces competition. People get bored (but not you). People give up (but not you). People try something easier (but not you). People don’t show up month after month (but you do). Before you know it…there’s no one competing…but you.
6. Statistics, to have meaning, need a lot of events. As a trader, my work improved as I understood that any given event has very little meaning. You need a lot of events just to track your progress. Reality is “lumpy”. You have good days, you have bad days. But things smooth out if you have enough events. The trajectory becomes clear. The progress emerges from the ‘noise”. But only if you have enough events, attempts, results, etc to be able to see the arc of your progress clearly.
7. Reputation takes time to build. How many trials has your attorney won? How many years has your money manager beaten the S&P? Reputation is, in part, a function of time. And it’s not merely “results” which accrete over time. Your single-minded intensity will attract like-minded people with ideas, will attract mentors, will attract professionals and even competitors who can help you. But only if you have become a “known” quantity. At the far end of the scale, an investor like Warren Buffett, a music producer like Quicy Jones, a filmmaker like Steve Spielberg…these people spent decades achieving their mythical status. Their lives are quests. There is no goal. There is no end. This type of stature is built with decades of commitment.
8. Acquiring knowledge takes time. There is so much knowledge being generated in every field, that any significant goal is going to require significant expenditure of time to acquire that knowledge. These days, you may not even know here “square one” is until a few months of pursuing a long-term goal. Furthermore, it may take a lot of time to merely identify high-quality sources of knowledge.
9. Luck has a better chance to work over time. You’ve been thinking about a problem for a year. You wander into a bookstore, you leaf through your favorite magazine and…bam!! Out of nowhere, a solution is staring you in the face. I have had very significant breakthroughs by wandering into one more seminar, on one more topic, going over ground I thought was already covered. But it wasn’t. The new fragments added to the older data, and I was able to make progress.
10. You can relax. It’s not just about today. You have the dual reward of being proud of your discipline while on your way to the higher reward of the actual achievement of your goal
11. (I exceeded my goal of “Top 10”). Rewards tend to compound. And longer-term pursuits allow ever-higher waves of compounding. Success at a given level allows you to re-set your sights on higher goals. Success locally begets success nationally, with exponential results. Notoriety attracts higher levels of notoriety. Skills compound at accelerating rates. Your ability to focus on key drivers improves. Here’s an example: my trading results from July 1, 2008 to August 11, 2008 are almost equal to my trading results from Jan 1 2008 to July 1 2008. That’s right: I made nearly six months of profits in the seventh month of the year. How? Commitment, attention to each component of my plan, better-directed research, doing more of what works, and luck. But if I had given up in month 6, I would have given up 43% of my year-to-date profit.
If you select shorter term goals, as opposed to longer term goals, you are giving up an entire “probability funnel” of successes that come at the 3rd try, the 10th week, the 30th book, the 80th business conference. These are unknowns, but not as “unknown” as we might think. We know that if we stick to a long-term goal, we will definitely acquire more knowledge about it, meet more people in the field, find more helpers, etc. than if we switch goals, or give up too easily. Don’t believe me? Check out Michael Jordan’s lifetime record…in baseball.
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I have devoted an entire category on this blog to the thought of billionaire Charlie Munger. Munger's goals, int his many speeches and writings, often concerns the psychological behavior of humans, which, when understood, leads to success in business and other areas of life. His thought is truly deep, and so far above the "basics" of achievement skills, it might fall into a separate category, perhaps "Meta-Success".
It is truly gratifying to see Marc Andreessen's post: The Psychology of Entrepreneurial Misjudgment, Part1: biases 1-6 on his blog recently. Andreesson generously gives the reader his "take" on Munger's classic "The Psychology of Human Misjudgment". Andreesson, founder of Mosaic, Netscape, Ning, etc has been extraordinarily successful, and, from this post, it is easy to see why: he is able to abstract individual experiences into larger conceptual frameworks. This post is an extraordinary read, and I hope he will go on to discuss all 25 of Munger's principles. I have created a digest of the principles here.
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I am discussing the Toyota Production System, as articulated in a great article by Clayton Christensen . Earlier posts are here , here, and here. In particular, I am attempting to broaden the scope of the discussion beyond the car business, into various business and life domains.
To review, the four key principles, as defined in Christensen's article are:
1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen
Principle 4 , as articulated n Christensen’s article is is “Detect and solve problems where and when they happen using the scientific method”. The article elaborates the method later:
Analyze the current state of things
Document it
Formulate a hypothesis that includes an experiment with an expected outcome that could be measured and compared with the actual outcome
In my own experience, particularly with my trading activities, this comparison of expected with actual results led me to the greatest progress. But I was unable to make any progress until I documented my results with enough detail to be able to draw some statistical conclusions. This data opened my eyes and I was indeed able to make certain hypotheses about how to reduce my losing trades, and increase my performance. Often enough, the changes I made seemed to work.
Without adequate documentation, you can’t change your weight, your cholesterol, your finances, or any other measurable commodity in your life. Once documented, it is much easier to generate testable hypotheses for change.
I should mention that the documentation/hypothesis/solution process is not necessarily limited to numerically measurable events. I have mentioned Doug Newburg’s concept of Resonance from time to time. A simple journal of what seems to be working and what seems to be not working often has great results. If you feel lousy after eating a candy bar and great after a brisk walk, making a “Resonance Diary” can reinforce what is working and what is not working in your life. In my monthly reviews of my journal, I have a section I call “What works”. As I look at that section over time, I see patterns in behaviors that seem to work, as well as those I want to change.
Similarly to the other facets of the Toyota Production System, specifying an action is key to understanding it. Specifying a process is the key to consistency. And, in problem solving, specifying and carefully documenting the problem is the key step in the solution. Along these lines I also recommend some of the Kepner-Tregoe methods found in The Rational Manager
Life comes at us in random order, good and bad, without any chapter headings or identifiable rhyme or reason. But we can take a lesson from Toyota in how we choose to order that experience, and also how we choose to optimize our actions in order to get the greatest rewards.
Bloomberg has posted a terrific article about JP Morgan CEO Jamie Dimon . I have mentioned both Dimon, mentor, Sandy Weil (who built the Citibank Colossus) here and here. I have been fascinated with Dimon’s success ever since he was CEO of Bank One and also because of his prominence in Sandy Weil’s book The Real Deal: My Life in Business and Philanthropy .
The entire Bloomberg article is worth saving, but here are a few of the Success Secrets..
1. Stay within your “Circle of Competence. This Success Secret is deceptive in its simplicity and vast in its power. Billionaire Charlie Munger mentions it frequently. Another related Munger/ Warren Buffett hallmark: understand your business thoroughly. If this were football, the concept would be “work hard on the fundamentals”. Exotic ideas have their place, but being really good at “making the doughnuts” has a high probability of creating a winning business. There are a lot more successful accountants than Perpetual Motion Machine builders.
From the Bloomberg article:
He {Dimon} says that insurance, for instance, is an outlier for a bank. "You have to stay focused on where you can win," he says
And again…
Dimon largely steered clear of both collateralized debt obligations…and so- called structured investment vehicles”…
And again
"JP Morgan is still very interested in raising deposits the old-fashioned way," {i.e. seeking consumer deposits, credit cards, etc} …. "Dimon has access to federally insured deposits, and that's a huge advantage in the world that's developing.
2. Stay risk averse. Dimon focuses on maintaining a strong balance sheet (also mentioned often in Sandy Weil’s book),and called by Dimon, a Fortress Balance Sheet. From the Bloomberg article:
Dimon spent much of the past three years streamlining a bank he says he wants defined by efficiency, stable sources of revenue and risk management that protects assets, a concept he refers to as his "fortress balance sheet….sources of funding can disappear very quickly."
This Success Secret is as valuable in personal life as it is in business life, and as true (or truer) of small business as big business. The less debt, the better. The more ready cash, the better.
3. Intense, obsessive work ethic
From Bloomberg:
Dimon is a fanatic about details, says one former competitor, David Komansky. "Jamie has always had a full tank of gas," says Komansky, who ran Merrill Lynch from 1996 to 2002. "It's very much about having your oar in the water all the time, 24 hours a day, 7 days a week and dealing with hundreds and hundreds of unrelated issues every day. Jamie has clearly excelled at the management dimension of these jobs."
Elsewhere in the article an associate says “, that when he worked for Dimon, he rarely saw him take a break. While other executives may relax by reading about sports, "Jamie would read a 10K," he says. "It's related to his doggedness to get stuff done."
So, to review a few of the Success Secrets of Jamie Dimon
1. Read the Bloomberg article. It’s great.
2. As simple a business model as possible
3. Stay risk averse. Hone your “fortress” to withstand the inevitable chaos that surrounds life and business
4. Maintain an intense work ethic. If you’re not interested enough to work hard, it might pay to find something that will keep you fascinated.
Some related posts:
Scwheich's "Crashproof Your Life"
Obsession
Scott Young on task completion
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I am discussing the Toyota Production System, as articulated in a great article by Clayton Christensen Earlier posts are Here and Here. In particular, I am attempting to broaden the scope of the discussion beyond the car business, into various business and life domains.
To review, the four key principles are:
1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen
Today I am discussing Rule 2: Clearly Define Transfer of materials and information, and a corollary mentioned in the article is: Pathways must be simple and direct.
It is easy to see that this rule has a far wider applicability than building automobiles.
There are at least three consequences of violating this rule:
1. Diffusion or confusion of responsibility
2. Loss or degradation of information
3. The Incentive Bias
How do these consequences unfold?
If you don’t know who is going to FedEx the job to the client…it probably won’t get done.
If you don’t know who is going to take Jimmy to soccer practice, …it probably won’t get done.
Another example of paths that are not “simple and direct" comes from my experience as a trader. In the late 90’s the only way to get an order to the pit was to phone my broker. Electronic futures trading was not available at that time (at least to me). I would call the number, wait for the guy to answer, tell him my order, he would phone it into the pit, and then, sometime between 5 and 30 minutes later, I would get my fill. Sometimes the market would move hundreds of dollars away from the point I wanted to enter at, causing losses for me, but gains for a lot of the other providers in the chain. Now, since I can electronically enter the trades myself, I get filled at the price I expect, and I save a lot of money.
What does it mean when you eliminate just one person from an information path?
One fewer salary
One fewer set of benefits
One fewer person to be out sick, late, on vacation
One fewer person who forgot to listen to their voicemail, read their email, get the memo…etc
The savings of time, money, and angst are clearly huge as one pares down the path in a process.
As you pare down the people in a given process path, you also progressively eliminate what Charlie Munger calls the Incentive Bias. I have mentioned Charlie Munger’s work extensively. The Incentive Bias states that individual suppliers (salespeople, brokers, doctors, lawyers, ad infinitum) will serve you in accordance with the incentives that benefit the supplier, not necessarily the customer. I am not saying the incentive bias is 100% bad, after all, the profit motive is what creates all the services we use every day. However, as these biases accumulate, the efficiency of the process path degrades. Suppose you have five people in your process path. If each one of them just holds you up long enough to take a 15-minute coffee break, you’ve lost over an hour. And a coffee break is the smallest incentive bias I can think of. More normally, your suppliers want to make money by billing you extra hours, supplying you in ways that maximize their profits, working on their highest paying client (not you), etc. If you keep the path “simple and direct”, eliminating as much incentive bias as possible, through online purchases, auction tactics, “no haggle” pricing, careful questioning, you are actually using the Toyota Production system to your advantage.
I’ll continue my discussion of TPS in an upcoming post.
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This is Part two of my discussion of a recent article on the Toyota Production System (TPS). Part 1 is here.
Although the authors of the article applied TPS to a semiconductor plant, I feel it’s worthwhile to generalize this industrial concept to our pursuit of better outputs in all areas of our lives and work.
The Toyota system as mentioned in the article, contains four key points that combine to continuously improve productivity and output.
1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen
Item 1 : Highly Specified Activities
The more completely and accurately we describe our activities, the more able we are to determine which steps in those activities might be subject to improvement. If the inputs to our activities keep changing, it is difficult, if not impossible, to determine the origin of the results we are getting, much less to obtain better outputs.
The article further defines the specification process as: “all work shall be highly specified as to the content, sequence, timing, and outcome”.
But this process is applicable in far more areas of life than building cars. Consider these examples:
Who’s going to lose weight fastest?
Person A:
“I’m trying to cut back on starches and sweets”
Person B:
“I reduced my calorie intake from 1800 to 1300 per day with only n grams of fat per meal. I added an additional hour per week of exercise beyond the 3 hours I was doing. I expect to lose about 1 pound per week over the next 20 weeks, to attain my goal of X pounds”
Or …here’s another example:
Who’s going to sell more?
Person A:
“I called up a bunch of purchasing managers to see if they needed any aluminum”
Person B:
“This month I am targeting purchasing managers in the machine tools field within 150 miles of our main plant who have returned my questionnaire about the tradeoffs between fast turnaround aluminum products vs. cost. My goal is to increase sales to this market by 15% by the end of Q2”.
I would bet on Person B in both of the foregoing instances. Surely, there are people who can “wing it”, or, perhaps have a highly developed intuition, or a great situational sense of what actions to take at the moment, but for the broad sweep of humanity, I would bet on detailed specifications to achieve repeatable outputs.
And, there is another reason why highly specified activities are desirable. What do you do if your program is not working? How do you change your diet if all you wrote down is “I am trying to cut back”? On the other hand, If you know the content of your meal plan, as well as your exercise regimen, as well as your weight on each day, you have a measurable set of inputs and outputs; a stationary series of data points , enabling you to measure the effect on each “moving part” if you decide to change it. In other words, you can’t go to “Plan B” if you don’t even know what “Plan A” was.
Thomas Edison’s 10,000 attempts to come up with a filament for the electric light bulb is a well-known story, but consider this: unless he had kept meticulous (“highly specified”) records of the failures, i.e. the materials that didn't work, we’d still be living by candlelight!! In other words, careful specification procedures vastly improve the net effect of the experiment. So much so, that Edison may have not been able to give us the electric light without carefully documenting what did not work.
This point reminds us that all the careful specifying in the world will not substitute for the creative input necessary to create a processes, and for the drive necessary to sustain a process. Far from turning us into a bunch of robots, the process of specification is merely the enabler of creativity. But only when the creative process is allowed to be specified, can the results turn into repeatable outputs. You might be able to bake a chocolate cake without specifying, but not 10,000 chocolate cakes, due in 24 hours. The specification process thus leverages creativity.
We’ll discuss the other three TPS processes in upcoming posts.
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A wonderful post at Next Big Future led me to a fascinating article by Harvard Business School guru Clayton M. Christenson and associates, “The New Economics of Semiconductor Manufacturing”. The article tells of their experiments applying the Toyota Production System (TPS) to a semiconductor fab. The results were astounding. Christensen's team writes:
"In just seven months, the organization was able to reduce the manufacturing cost per wafer by 12 percent and the cycle time—the time it takes to turn a blank silicon wafer into a finished wafer, full of logic chips—by 67 percent. It did all this without investing in new equipment or changing the product design or technical specifications. And this short experiment has exposed only the tip of the iceberg."
My first thought (after removing my jaw from the floor) was: “Heavens! This is a major plant run by a major manufacturer (Christensen won’t say who). I thought this kind of plant was already ruthlessly efficient. You mean they don’t even know how many wafers they have in the fab (yes, that is one of the questions the team suggests asking!!) ??? Apparently, that is only one of a litany of seemingly obvious data points that are not routinely tracked in such environments. But the miracle is that such amazing improvements can be wring out of such granular, simple, straightforward and relatively easy-to-obtain data. This is not he first time this blog has explored the astounding results that flow from some fairly simple "specifying" procedures.
Elsewhere in this blog I have mentioned a magnificent article on checklists , and how such lists have drastically cut infection rates in hospitals, where it was assumed that the highly trained staff already knew the processes well. But it was discovered that , to use a quote from Christensen, “memory fades quickly”. The more detailed and concrete the specifications in the hospital, the more patients were saved. It’s that simple. Christensen’s article mines a similar vein. If you don't know exactly what you're doing, you won;t be able to measure it properly, and you will have absolutely no chance of improving it. In short, highly specified procedures are the key to vast improvements in output, no matter what the area of inquiry.
In upcoming posts I will discuss the four key Toyota Production System (TPS) principles outlined in Christensen’s article, and I’ll attempt to broaden their application to personal and business success . The principles are:
1. Highly Specified Activities
2. Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen using the scientific method.
As I continue this blog, I am always fascinated at how much one can “cross-pollinate” best practices, even from such seemingly disparate worlds as a semiconductor fab, to a hospital room, to our own lives as individuals, single practitioners, or just running a Saturday errand. Stay tuned.
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Do the superstars of the VC world have any success secrets that the rest of us can use? What could we possibly have in common with John Doerr and Michael Moritz, who bankrolled the likes of Amazon and Google? Actually in this keynote presentation at the National Venture Capital Association, these men reveal a few gems that reflect actions that all of us can take to achieve success. Would you believe that John Doerr went for Dale Carnegie sales training, spending his own money to do so? What of the fact that Michael Moritz, a very well-known person indeed, still chooses to wear unique styles of socks to create memorability and stand out a bit? Many coaches recommend the same techniques for all of us to be noticed. Also, both men, at various times in their professional lives, learned the virtues of using rigorous quantitative techniques to aid productivity and avoid mistakes due to emotional judgements, not unlike Charlie Munger, whose name appears int his blog a lot. Here's the whole podcast:
PodTech.net: Technology and Entertainment Network - - Keynote Podcast: John Doerr and Michael Moritz, Live at the National Venture Capital Association
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I have been downloading a couple dozen PDFs from Darpatech, a symposium where DARPA (the government’s futuristic science arm) meets with and presents ideas to outside scientists and companies.
These PDFs are actual speeches given at Darpatech that both explain what DARPA’s current objectives are, and are also clearly intended to inspire and excite scientists and engineers to join in the work they are conducting.
The DARPA programs of the past and present are awe-inspiring. DARPA has literally re-invented our world since is inception in 1958. The Saturn rocket, the Internet, Stealth, night vision, cell phone and gps components, and UAVs are just a few of the extraordinary results of DARPA research. In the amazing PDFs available on the symposium site, new ideas are described that will continue to revolutionize all of our lives: a 90% reduction in the cost of Titanium, autonomous vehicles that drive as well or better than you or I (especially “I’), and even “programmable matter”.
The PDFs are an incredible read, but there is another reason I am mentioning DARPA on this blog: DARPA deliberately makes the impossible possible. And that is, at its core, what this blog is all about. Darpa has proven time and time again that imagination routinely becomes reality. DARPA is not a motivational organization. Darpatech is not a “feel good” seminar. DARPA creates new realities, out of “thin air”, every day. And not only that, their mandate is to go for “new concepts and systems whose feasibility is still unknown and risky”, in the words of Dr. Tony Teather the current DARPA director. He goes on to say that “We search for those ideas world-wide that may make a tremendous difference, and whose time has come to bring them to the near side as fast as possible”. In short, they aim to make the impossible possible.
So here is the paradox. In most of our daily lives, we aim for reasonably achievable goals (career advancement, recognition, financial security, the solution of various home, family, career, or life-logistics problems). We work at these problems every day. We probably get reasonable success, and, through reading and studying books, tapes, websites, etc we can measurably improve or output.
But DARPA has chosen much more challenging problems, has an incredible batting average, and has changed the world, not by selecting easy problems, but by selecting the hardest problems that exist!!! We’re scrambling to get a home business started, or get 10% in our IRA, and they’re trying to invent tele-robotic surgery!!! And succeeding better than us!!!
There are deep lessons to be learned from the “idea” of DARPA. Lessons that impact our personal success.
1. It is crucial to remember in a world of discouragement, often filled with dream-killing people and heart-breaking setbacks, that far more ambitions goals than ours are being routinely accomplished on a day-to-day basis.
2. An ambitious, “outside the envelope” – type goal attracts higher quality minds, organizations, and solutions than an incremental , current-technology goal. Just reading the speeches of the DARPA directors makes it clear that they are utilizing the inspiring quality of a revolutionary project to bootstrap the project itself from fantasy to reality.
3. When viewed as a problem of “personal leverage”, if we really though about it, we might only work on high-risk/high-reward projects!! Clearly the results of 2 years spent on a 2X goal would be vastly less significant than 2 years spent on a 100X goal. The same two years goes by. But if the goal is even partly attained, the outputs of even a failed 100x might dwarf those of the 2X goal.
4. Even if the 100x goal is not specifically achieved, there is an overwhelming possibility that new connections (human, technological, conceptual, methodological, and more) will more than repay the time spent on the 100x goal.
5. The DARPA method works incredibly well. Its results have been so outstanding that we may well question ourselves as to why we spend even a minute on any incremental, uninspiring, humdrum project. The DARPA method may work better than any other goal-setting method in the history of mankind. By consciously focusing on inspiring outcomes that could create vast and profound effects, and yet have no known methods of achievement, DARPA has arguably instantiated more positive change in our world in the last 50 years than in the previous 5,000.
I am going to end this post with a theorem. Perhaps I will call it the Task Magnitude Theorem. It states: Achievement is more dependent on task selection than ability. I repeat: Achievement is more dependent on task selection than ability. I will be returning to this topic. It is the essence of what DARPA does, and what we all can do. I am not saying it is true. But what would be the personal implications if it were true?
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Interpersonal skills are one of my prime concerns at this point in my life, and there is a wonderful post dealing with parts of that skill set on PhD Confidential entitled Top 10 Ways to communicate with Executives.
The blogger, Dorianne, has a wealth of experience with large corporations, and has clearly honed her skills well. The list is equally important to small businesses, especially in their role as suppliers to larger entities.
In my own previous life in a small business, I found that we could always learn more about several of Dorianne’s points. One, “Present Alternatives” is illustrative. In a meeting with the executive, you are an “arrow in the executive’s quiver”. You may think you have “the solution” to the executive’s problem, and you are ready for a signature and a purchase order. But you may not know even a small bit of WHY you were called into the job in the first place. Maybe it is only to supply a bunch of alternatives. And there you go…you only supplied one. Think that executive will ever call you again?
At any rate, Dorianne has an entire list of insightful techniques of dealing with an executive, because she has been on the other side of the desk. Tis post, and this blog, are definite must-read.
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