Karl Rove

Karl Rove 140x190Wait, that Karl Rove? Yes!

The goal of this blog is to find ideas that work, no matter where they come from and Rove’s podcast with David Axelrod (wait, that David Axelrod?) was good. Not only that, but it’s a pair of political heavies having a civil conversation.

If you don’t care for Karl Rove, you can view this post two other ways. Bob Seawright said, “make sure you have people in your life that are going to challenge your thinking.” Let Rove do that. Or, you can use it to see how the enemy thinks (a form of red teaming).

Ready?

1/ Up close and personal. “First of all, I’m not objective, but on the other hand I’ve seen him up close.”

When Rove offered his thoughts on George W. Bush it reminded me of how venture capitalists talk about the companies they invest in. Chris Sacca spoke with Bill Simmons in April 2016 and mentioned a few apps he was really excited about. I downloaded them. Meh.

Investors like Sacca are up close and personal and know the app, or in Rove’s case, the person, better than anyone. This means that they might know something important that we don’t know. On the other hand, they might be so close as to be biased and seeing the world as they want it to be rather than how it is.

Rove and Sacca both have skin in the game (SITG) and are incentivized for their object of attention to do well. Rove’s legacy is tied to Bush. Sacca’s net worth is tied to his investments. On the one hand, SITG is better than none for decision-making. On the other hand the person may be incentivized to not be truthful.

2/ The village idiot from Midland. Here are Rove’s full comments about Bush:

“People sort of say, ‘village idiot from Midland,’ that was a common criticism. This guy was a Yale history major and a Harvard MBA. He’s really smart. As long as I’ve known him there’s been a book on the night table and an interesting conversation about something available. He’s really smart and it was great working for somebody who’s really smart.”

Rove and Bush had a standing bet each year to see who could read more books. Reading books is one of the most consistent pieces of good advice. Bush also graduated from Harvard and Yale.

That wasn’t all.

“It was also great working for someone who wasn’t the smartest person in the room and didn’t want to be. He wanted to get every smart person around him. He created this ability for people to come in and say ‘you’re not looking so pretty,’ and that as you know is really important in the White House. It’s easy to be isolated. That office has such a powerful presence.”

You need the right people around you to do things like argue well, red team, and choose the best course of action. Michael Dell said, “Try never to be the smartest person in the room. And if you are, I suggest you invite smarter people… or find a different room.” Daymond John likes to do Shark Tank deals with Mark Cuban to work with someone smart. Bethany McLean wrote about the “smartest guys in the room” and what happened to them.

This is compounded when your office has some level of power, and the Oval Office may be the ultimate. “Yeah,” Axelrod agrees, “there’s always people who are willing to tell you you’re doing great.”  Rove went on and told this story:

“I’d have some member of congress in my office pounding the table saying ‘you guys are a bunch of morons and you’re doing ‘x’ and you should be doing ‘y’ and by God if the president knew that,’ and I’d say, he’s got a little time on his schedule, why don’t we walk down and say hello. They walk in and say ‘Hey Mr. President! How you doing. Barney’s looking great. Laura’s looking fantastic Mr. President. How’s your golf game?’”

Whether Bush was actually that smart and whether he really surrounded himself with the right people is for someone else to decide. The point here is that the process he used is good; read a lot and surround yourself with smart people.

3/ Grading your own homework. “The odd thing about (my father’s suicide) was that my father was an immigrant who came here, went to school on the GI bill and became a psychologist. When he died, literally a hundred people came to that funeral who were patients of his who said ‘your dad saved my life’ and he couldn’t save his own, which is tragic.” – David Axelrod

Again, the humanity and civility in this conversation were not what you might expect if you only watched the news. Axelrod faced a tragedy as a teenager and it brings up this idea of grading your own homework.

In Red Teams, Micah Zenko writes:

“Yet, the dilemma for any institution operating in a competitive environment characterized by incomplete information and rapid change is how to determine when its standard processes and strategies are resulting in a suboptimal outcome, or, more seriously, leading to a potential catastrophe. Even worse, if the methods an institution uses to process corrective information are themselves flawed, they can become the ultimate cause of failure. This inherent problem leads to the central theme of this book: you cannot grade your own homework.”

It’s onerous to self-evaluate.

Bill Belichick‘s  New England Patriots have practice squads. Neville Isdell‘s Coca-Cola teams pretended they were Pepsi teams. At Andy Weissman‘s Monday morning team meetings “(we) talk about our portfolio…and hear about ways we screwed up and how we can do better.”

Michael Mauboussin pointed us toward the work of Kathryn Schulz who said that part of our problem is we equate wrongness with badness – and do so from an early age. Not only do we not practice figuring out when we may be wrong, but we assign the wrong emotions to it.

It’s more efficient to get other people to tell you. Assistant coaches to Belichick say that he likes to hear why he’s wrong (but you better have your facts right). It was Isdell’s idea to dress in Pepsi clothes. Marc Andreessen and Ben Horowitz push back at each other.

4/ Relentless Rove. “There was a temporary executive who turned into a disaster and I was asked to get on the plane every couple of weeks on Thursday night or Friday and take a student standby, fly to Washington D.C., spend three or four days cleaning up the office, answering the mail, returning phone calls, preparing the material and then fly back to Utah to take my classes.”

This was not my college experience.

Two of my favorite books about work are Cal Newport’s Deep Work and So Good They Can’t Ignore You. The theme through the books is that rare and valuable jobs require rare and valuable skills. Only when you get certain skills, can you trade them for certain jobs.

Rove had this because he worked weekends, he worked campaigns, he worked his butt off. Axelrod says “I was not the numbers guy, I was the message guy…but you have sort of an encyclopaedic knowledge of precincts, counties, and so on. Those kind of skills will lend you to  direct mail.”

Often it takes many (many!) hours of practice to earn these rare and valuable skills. If we had to pick a number, let’s say it takes 10,000 hours. Many people hustle to get those hours.

When John Boyd wanted to become a fighter pilot, he hustled. One efficiency report for him read, “His production comes from about 10% inspiration and 90% a grueling pace that his cohorts find difficult if not impossible to keep up with. He is extremely intolerant of inefficiency and those who attempt to impede his program.”

When Bill Belichick wanted to be a head football coach, he did this. He works 100 hours a week and has been studying film since he was a kid.

When Rorke Denver wanted to become a Navy SEAL, he trained for months to get ready for the physical part of BUD/S.

Gary Vaynerchuk‘s main skill is hustle.

Anson Dorrance “despises nothing more than holidays.”  Stephen King jokes that he only takes off three days a year (Christmas, July 4th, his birthday).  Peter Thiel wrote that there are many secrets to find, “but they will only yield to relentless searchers.”

Working hard isn’t all though, you need a few chances to get it right.

Rove almost messed this up.

Early in his career, Rove and a friend got an invitation for a fancy pants democratic fundraising dinner, then made and distributed a modified version (FREE FOOD and BEER!) to a bunch of homeless people from Chicago. “I did a stupid thing,” Rove admits. Neville Isdell had a similar experience, though his stupid thing involved animal theft.

Both Rove and Isdell got second chances because you need a few chances in life. There’s a certain amount of luck of anything and sometimes you get bad luck.  That’s fine if you get a few at bats. Scott Adams says it’s like a slot machine:

pablo (4)

The key is not getting kicked out of the casino before you win.

Thanks for reading, I’m @mikedariano on Twitter.

Note, Cal Newport shared his TEDx talk in September 2016:

How Ryan Holiday writes a book

Note, this was originally posted on Medium. I’m reposting here for my own ease of linking. 

I feel quite silly about how this revelation occurred. 

I’ve written about how imitation (among other things) is a great way to start as a writer.

  • Malcolm Gladwell said, “with my own writing. I began as a writer trying to write like William F. Buckley, my childhood hero. And if you read my early writing, it was insanely derivative. All I was doing was looking for models and copying them.”
  • Felicia Day suggested we not mock fan fiction because it’s a good stepping stone to bigger and better things.
  • Stephen King wrote:

When you read what someone has written, the style rubs off on you. It’s inevitable.

This makes sense, but applies to the domain of style. What if it was applied to the domain of process?

How to write a book like Ryan Holiday

I like reading Ryan Holiday’s words. My favorite book is The Obstacle is the Way, but his blog posts are generally good, and his monthly emails about books always give me something to read. I’ve liked his podcast interviews so much I’ve shared my notes; here, here, and here. In all this he’s shared (multiple times) his process for writing a book.

Why don’t I copy that? 

As I compiled this list, I realized that book writing isn’t linear. This reminded me of Steve Callahan, a man lost at sea for 76 days. Callan lived because he juggled the things he needed. Food, sleep, water, food, food, sleep, water, repairs, etc. There was no left-to-right sentence about how to stay alive, and there is none to write a book.

But there are some things I can do.

1/ Read widely.

Every author says to read widely, but Holiday’s ethos appealed to me most of all:

“collect what you’re naturally drawn to, so you start to recognize patterns and interests, which gives you direction for what you should write next. It’s a great cure for writer’s block.”

Read whatever I want? Stop, this feels like cheating.

Well, almost. Holiday’s reading lists are almost all non-fiction, with lots of biographical work. The books he’s written reflect that.

This means I won’t write a book like Mary Roach (not that I could achieve her style or substance) who rarely uses secondary material (books) or Malcolm Gladwell. They talk to scientists, read journals, and interview experts. I’ll follow Holiday’s path for one reason, it’s easier. To paraphrase Seneca, “books are never too busy to see you.”

Okay, read whatever I want. Does the medium matter?

When Lifehacker asked Holiday about his favorite gadget, he said physical books are “the perfect technology.” Michael Mauboussin (another great writer) says he remembers things better out of physical books. Sounds good to me.

Conclusion: Read a lot of nonfiction books. Choose physical over digital.

2/ The gear.

“If I have a thought, I write it down on a 4×6 notecard and identify it with a theme–or if I am working on a specific project, where it would fit in the project.”

Holiday’s system is a perfect example of a theory I have that “the gear doesn’t matter.”

Casey Neistat is always being asked what gear he uses, and always says that gear doesn’t matter. B.J. Novak said he uses notebooks and Microsoft Word. Warren Buffett doesn’t have a computer in his office. Holiday uses notecards, Google Docs, and Word.

What matters more than the gear is the work. If you fret over the gear, or wait for the right gear, or search for the best gear you lose time — and time is the input for work.

Gear only matters in that it’s good enough. Notecards are, says Holiday.

“being able to physically arrange stuff is crucial for getting the structure of your book or project right. I can move cards from one category to another. As I shuffle through the cards, I bump into stuff I had forgotten about, etc.”

Notecards spread on your desk are stepping-stones. They let a writer flit from one topic to the next. Other writers like Sebastian Munger and Anne Lamott both note that it’s not ‘writer’s block’ so much as ‘writer’s chasm.’


Just like ‘Indy,’ writers need to find the bridge to cross the chasm. 

The notecards solve this problem. They keep you moving.

When Chris Fussell was an assistant to General Stanley McChrystal he said his goal for the general was “no locked doors.” That is, Fussell anticipated what McChrystal would need next and do it before he needed it. Notecards are what the book needs next and having enough of them keeps the writing going.

Okay, so the gear doesn’t matter past a very basic point. Except for this:

Holiday is always mentioning this water. What the hell, I’ll buy some too.

Conclusion: Notecards are a good enough system. It’s about the ends, not the means. Plus, stay hydrated.

3/ Have a plan and something to say.

An author friend recently told me that he’d written 115,000 words for the book he was working on; a book that contractually was only going to be 60,000 words. And worse, it was only just now that he’d really figured out the thrust of the book…It almost broke my heart.

A plan. This is much harder. Where am I going? What am I trying to accomplish. For starters, I’m not doing this for money.

Fame, then, it’s gotta be fame.

No, I just have something to say. That’s good, writes Holiday.

My theory on writing books is that you have to have something you really must say. Anything less than that and you’re doing it for the wrong reasons.

When Holiday suggests ‘have something to say’ it reminds me of Peter Thiel’s encouragement that entrepreneurs look for secrets. Find things that people want but are not easy or impossible to provide. 

A book could be that.

  • When Phil Knight founded Nike, he found a secret.
  • When Apple released a touchscreen smartphone, they found a secret.
  • When J.K. Rowling wrote Harry Potter, she found a secret.

I imagine Thiel’s Secrets are like coal seams. They’re all around us. Some are big, some small. It takes a bit of digging and work, but you could find one. Ideas are like that too.

Conclusion: Focus on the ‘thing you want to say.’

4/ Know it’s going to be hard.

10:06am: You’re starting to think that maybe you don’t know this as well as you thought you did. Did you not prepare enough? Is the idea not good enough? Is this ever going to be anything? What the fuck, what the fuck?

I’m not sure why, but knowing something is going to be hard seems to be better than thinking it will be easy. When I ran a marathon, this was the case. When I had kids, this was the case. Starting this book, it’s good to know this is the case.

The difficulty validates the work.

Another theory I have is that dream jobs are BS. I think Holiday agrees:

Creative work isn’t about pleasure. It’s not always fun. It’s about reaching something inside yourself–something that society and everyday life make extraordinarily difficult.

Austin Kleon was once asked what it’s like to be an artist (full-time). He said not all of a dream job is dreamy. It’s still a job.

Holiday also seems to have some self-doubt (What the fuck, what the fuck?). Me too. When I tell people I’m a writer it feels like being in the wrong cage at a zoo. I’m a monkey who ends up with the lions. Oops, sorry I’m here, please don’t eat me.

Conclusion: Frame writing a book like a challenge or game. Doubters give me extra energy, embrace the real ones or manufacture fake ones. 

5/ Make commitments

the plain reality is that books are hard to write, and as you trudge along you’ll make a million excuses.

Oh, ho ho ho. Do I have excuses. First I have a confession. I’ve actually used Holiday’s notecard system before.


Not an actual book. 

Those notecards led to 20,000 words, but no book. This is the hardest decision yet.

Conclusion: Tell anyone who asks what I’m doing. Commit to a finish date. 

6/ Have a routine.

Dress in the same old clothes as always, go downstairs.

Holiday shared his full routine:

What the routine does, — I’m guessing — is remove choices. You don’t have to decide what to do. To put it another way, that blob of gray material between your ear doesn’t get to choose a quick hit of Twitter. (Which is never quick, and never scratches the itch).

I created a routine accidentally. When I decided to post three days a week at TheWaitersPad.com that began a routine that is pretty well entrenched. Malcolm Gladwell said his work at the Washington Post did this for him. My little blog and his big paper experience are widely different — except for this. They both established the habit of writing.

Conclusion: Create my own routine. 

7/ Exercise.

I can’t tell you how many times I’ve rushed home from a run and shouted, “Nobody talk to me, I have to write this down!” while I dripped sweat all over my computer or my note cards as frantically tried to get it down before I lost the thought.

Holiday’s not the only one to finish a run with an idea. Beethoven used to walk around town with loose papers and a pencil to jot down ideas. Dickens would get ideas on his daily walks too. In fact, writes Mason Currey, many people who are writers are also walkers.

Walking, writes Eric Weiner “quiets the mind without silencing it.”

Holiday runs. Malcolm Gladwell runs. Cal Newport runs.

Conclusion: I’ll keep running (and thinking).

Once the book develops further, I will let you know. You can see what I’m reading for it here. Also, I was going to link to other people who I’ve written about here that suggest you READ A LOT but it’s practically everyone. So, read a lot.

Judith Elsea

Judith Elsea was on the Origins podcast from Notation Capital to talk about seed investments, VCs, and figuring out who to work with. Much like Gina Martin Adams I had never heard of Elsea, but thought her interview was good. Here are my notes.

1/ Heuristics (including ‘default to no’). “If it (the Weathervane algorithm) makes us look at something and say ‘that’s really interesting, we don’t have a lot of exposure to that or we really like this team, or that’s a great looking portfolio or we want to know more,’ then the qualitative stuff starts clicking in.”

Weathervane is an internal tool that Elsea and her team at Weathergate Capital use to evaluate what’s a good deal and what isn’t. When I heard the podcast, I thought, that sounds really cool and I’d like to see it.

I didn’t.

The good thing though is that Weathervane is just a filter, and we can all create filters. One filter is the default “no” and Elsea has this one too. “There has to be a really good reason you’re adding a name,” to your portfolio Elsea says.

Mellody Hobson explained one of her managers has a “process of elimination, she assumes she doesn’t want to own anything, everything is a rejection.” Michael Lombardi said “Scouting’s not about finding players, scouting is about eliminating players.”  Lombardi’s former boss Bill Belichick sticks with his draft board rankings, a form of in-the-moment-“no.” Say “no” until you get to something that’s not a “no,” then, in Elsea’s words “the qualitative stuff starts clicking in.”

Seymour Schulich wrote, “The path to superior results is to accept only the best ideas.” Charlie Munger said “If something is too hard, we move on to something else. What could be simpler than that?”

The default “no” is valuable because it limits what you get into. This removes what Marc Andreessen said is a the biggest cost – opportunity.

If you can say “no” until only the best options come, you’ll do well.

2/ Optionality. “Because we were sort of pioneers of this space we happen to be known for it, but of course it’s just a portion of our portfolio. If for some reason we thought that micro-VC and seed stage investing was not going to offer a risk-return profile for our funds we just wouldn’t do it anymore.”

What freedom, “we just wouldn’t do it anymore.”

Having the options to choose what you do is powerful. Seth Klarman points out that even in a small domain like real estate investments, having optionality to pursue REITs, homes, buildings, and so on is valuable. “The more flexibility you have,” Klarman explained, “the better your ability to maneuver in complicated, volatile, and fairly competitive markets.”

In other areas more optionality means time to make a decision. During the Apollo 13 disaster, flight commander Gene Kranz focused on keeping his options open. “Generating options was our business, and options remained as long as there was power, water, oxygen, and propellant.” Some engineers wanted a faster return time. Others wanted more power to keep the astronauts warm. Whatever didn’t fit the maximize power, water, oxygen and propellant mandate was denied. Those astronauts froze their way back to earth, but made it back because Kranz kept his options open.

A big benefit of keeping a low overhead is that it provides you with more options. Jay Leno, Sophia Amoruso and William Tecumseh Sherman all kept their options open.

Not having optionality forces you, in Bill Gurley‘s words, “to play the game on the field.” When Kara Swisher asked Gurley about the inflated values for venture capital investments it sounded like he didn’t like them, but he had investments to take care of. He was limited in the options for each dollar.

3/ Rising  Ducks. When asked about how to evaluate managers in 2006/2007, Elsea said:

“The managers back then enjoyed a number of tailwinds. One was less competition for deals. The valuations were super low. The acquihire machine didn’t start with the dial set at 11 (it got to 11 a few years later). A lot of investments that may or may not have grown up to anything were taken out at pretty good multiples or at least break even. They did put down a lot of bets and some of those bets paid off in a huge way.”

to-rise-upWe call this the ducks on a rising tide effect based on the writings of early Warren Buffett who warned his investors that they should expect more from him than the rising tide that lifts all boats.

In the podcast episode, Yahoo!? we guessed that part of the reason Marissa Mayer looked so good to Yahoo was because she was on the rising tide known as Google.

In a Recode podcast, Kara Swisher told Eric Jackson:

“I had seen a different side of her, and all the Google executives. I think they get buoyed by being at Google and everybody gets this sort of extra special polish because they’re at Google. It doesn’t mean that once they remove themselves from that paradise they do well.”

Jack Schwager said “If you’ve done well in a bull market all you can assume is you’ve been long during a bull market.” When asked for his investing advice, Auren Hoffman said he didn’t have any. He was just in the right place at the right time. “I’ve been a very active investor in the last eight years, and if you were a very active investor, in the valley, 100% of them did really well.”

Our list could go on to include, Ron Johnson (Apple to JCP) and Tim Armstrong (Google to AOL). Bill Belichick‘s former assistant coaches haven’t done that well. There’s been books written about this idea too.

As Buffett wrote about the duck, “the rise and fall of the lake is hardly something for him to quack about.” Any kind of evaluation of a person should include an evaluation of the situation.

4/ Strategic inflection points (SIPs). “We made a number of observations that ultimately influenced the shape of our practice. One, we could see that these massively disruptivethatsinterestin technologies and the promise of big markets were attracting a whole new generation of entrepreneurs that hadn’t been involved in companies before…This new generation of founders were starting companies and getting to product market fit on really trivial amounts of money.”

Andy Grove explained SIPs in Only the Paranoid Survive:

“They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has.”

Grove warned that these strategic inflection points “instead of coming in with a bang, approach on little cat feet.”

Michael Mauboussin encouraged us to look for them. To expect things will change.

“In life consistency is valued as a good thing. If you’re changing your view you’re called a flip flopper. In investing, if you’re doing the right thing, that’s what you need to do.”

Andy Grove also went into how to fight through them.

  1. Be there. You have to spend more time with people who spend their time ‘outdoors,’ wrote Grove, “where the winds of the real world blow in their faces.”
  2. Have a Devil’s Advocate. “We developed a style of ferociously arguing with one another while remaining friends (we call this “constructive confrontation”).” Or as Marc Andreessen says, be able to trash the shit out of your partner’s argument.
  3. Decentralized command (tends to) work better. Those “real world winds” are felt by your front line people first and most of all – trust them.
  4. Remember the emotions.  In SIPs “confusion engulfs you,” Grove wrote. Remember this when you act.

In the book Grove compares SIPs to the valley of death where you need to pick a heading and then march. “It takes every erg of energy in your organization to do a good job pursuing one strategic aim, especially in the face of aggressive and competent competition.”

It sounds like that’s what Elsea did. The SIP she saw was that things cost a lot less than before and new people were coming to play.

5/ Partners.  “The really mundane things is that when these partnerships don’t work out, it’s usually because something is wrong with the distribution of economics internally. You don’t see it so much in young firms because they have a tendency to come with a notion that they want everything to be equally distributed but you certainly see it in the more established firms.”

In my book 28 Lessons from Startups That Failed there were six major ways startups failed.

  1. Failure to understand the customer.
  2. Failure to manage money.
  3. Failure of strategy.
  4. Failure of skills.
  5. Bad luck.
  6. Failure of the founding team.

This final area of the founding team is what Elsea has seen in her experiences. If you’re starting a company; get the right co-founder, be focused and have clear areas of responsibility, move fast but don’t hurry, and work well together. Do those things, and you’ll avoid one common pitfall.

Thanks for reading, I’m @mikedariano on Twitter.


Addendum. Mayer is easy pickings for the ducks on the pond analogy because she went from one place (Google) to another (Yahoo) and had very different ranges of success. The thing is though, everyone who talks about Mayer says how smart, sharp, and on it she is.  Which brings up this question; have we miscast her?

One tool of thinking is to consider the counterfactuals of a situation. Might it be the case that Yahoo overachieved with Mayer compared to another CEO?

Sport has the idea of VORP (value of replacement player) and we can use that model on Mayer. When she was at Google, she was a player with good stats on a good team. She went to Yahoo and her stats and team were both not as good, but maybe it’s a case where no one could have done anything to save that sinking ship. If we could find a statistically similar replacement CEO would they have done better? Would they have done worse?

Swisher likes to point out that Silicon Valley types can paid a lot and self-congratulate themselves about how smart they are and this is where Mayer gets dragged down. Fortune magazine writes that Mayer is set to make more than $100mm. A sport team manager would look at that figure and recognize they could almost that same production for a lot less.

I’ll probably still use Mayer as the example for this idea, but I could be wrong about it. She might have overachieved based on the conditions and was worth every dollar.

 

Bill Gurley

Bill GurleyBill Gurley sat down with Kara Swisher to talk tech and his experiences. This interview was great. Among other things, when Swisher plugged Audible as a sponsor she asked Gurley for a suggestion. He said:

“I’m going to give you two because we’ve been talking a lot internally about trying to identify great talent; one is called Mindset and one is Grit by Angela Duckworth and they’re both about trying to identify high performance talent.”

My notes on Grit was one of the most popular posts ever.

Also, we’re going to deviate from the list style post that this blog normally dons and do a bit more of a how-to post. It’ll be like Ramit Sethi’s business advice, Ben Horowitz’s advice on hard things, and what happened to Yahoo?. Ready?

The Google example that ‘any damn fool’ could not see. 

Swisher asked Gurley about his biggest mistake and he tells her it was not investing in Google. Why didn’t he invest?

It wasn’t that the product was bad. “We were all using it in our office,” Gurley said, “it was a better product.”

It wasn’t that the business model was bad. “The business model really wasn’t a question either.”

Okay, you have a good product (from smart people) and a business model that works. What was the problem?

“I think it came down to the price at the time was remarkably high and the team was remarkably self-confident in a way that would cause you to question whether they could pull it off, but they did.”

Gurley immediately points out the error of his reasoning. Even with a high price it can still be a good deal.

“I go back, and the learning is that if you have remarkably asymmetric returns you have to ask yourself, ‘how high could up be and what could go right?’ because it’s not a 50/50 thing. If you thought there was a 20% chance you should still do it because the upside is so high.”

That’s the tricky part about an investment. Sometimes it makes sense to bet on a long shot or pay a lot because the rewards are so high.

Charlie Munger said that “any damn fool” can pick a winner. The real trick is picking the best bet.  Michael Mauboussin said, “The way you make money isn’t picking a winner. The way you make money is picking mispriced odds. That idea really carries over to investing. I think as investors many of us blur those two things”

Google, though costly, had mispriced odds because the upside was so large. Gurley says the prices was “seemingly ridiculous but obviously very good.”

Okay, so the problem was blurring the value and the payoff. But there was something else in Gurley’s explanation that stuck out.

Gurley wasn’t the only suitor to dance with Google. He notes that his company didn’t really “pass” on the opportunity.

“We failed to pursue it, and it’s always important to state it that way. To say ‘pass’ makes it sound like I had a chance, I don’t know if we had a chance. They presented to us and we failed to pursue it and if we would have we’d had to compete with two of the best.”

Wording like this matters. It shifts the way we look at problems and gets us out of our mental ruts. Benjamin Graham did it for the stock market by renaming it, “bipolar Mr. Market.” Mellody Hobson reframed  problems by pretending her company is public rather than private.  Chris Dixon reframed startups as a maze. Dan Coyle reframed exercise repetitions as meditative.  Louis C.K.  thinks of skills as merit badges.

Imagine you have a gnarly mole. You go to the doctor and she says, “that doesn’t look good. We can slice it off and when we do 85% of patients have no further complications.”

Hmm, you think to yourself. That sounds okay, but you want a second opinion.

You go to another doctor and she says, “that doesn’t look good. We can slice it off and when we do 15% of patients have slight complications.”

People respond differently to these two options, even though the “backend” is the same. Daniel Kahneman wrote that people don’t take risks when there’s something to gain. Most people favor a sure $10 over a 20% chance to win $100. However, people are risk seeking to avoid losses. People roll the dice to keep from losing something.

Reframing situations changes the way we look at them and changes the kinds of solutions we can come up with.

Besides Gurley sharing problems, he also gives advice on how to solve problems. Let’s take a moment to appreciate how amazing this is. For sixty minutes of podcast time you get access to one of most articulate and thoughtful venture capitalist around and HE GIVES YOU ADVICE! How  great is that?!

Here’s what he suggested.

A/ Find secrets where no one else is looking. “Most big startup breakouts are where people aren’t paying attention.” Virtual reality may not be your best bet says Gurley, because “Samsung, HTC, and Facebook are all at the table.”

pablo-6

But being different is difficult. It’s easier to an imitator. In my book, 28 Lessons from Start-ups that Failed I observed this stress. People want to feel like they’re doing ‘the right thing,’ and one of the signals for that what other people are doing.

Phil Knight found a secret in running shoes. Coca-Cola found a secret in the 20 oz glass bottle. Yvon Chouinard found a secret in outdoors clothing.

It may be lonely, but as Peter Thiel wrote, “The best place to look for secrets is where no one else is looking.”

One thing that may help is looking for patterns.

B/ Look for patterns. (Uber for X) “Having come out of Opentable being successful I was trying to come up with other industries where if you put a network on top of would absorb waste and make it more efficient and more usable. The thesis of cars had come up.”

Gurley invested in Uber. The investment has done well.

At the end of the interview he told Swisher that this network idea is being applied to neighborhoods too, but not health care. It’s a running joke that there’s an ‘Uber for X’ but  finding patterns works.

Alex Blumberg started Gimlet Media because he saw patterns. Blumberg cut his teeth in public radio (a job where Terri Gross said you learn a lot because you have to do everything). Then Blumberg worked for This American Life. Then he cofounded the Planet Money podcast. Then he started Gimlet. When asked about these dominos he said:

“This American Life worked. Planet Money worked. After Planet Money worked it felt like you can take this kind of storytelling, this kind of long form journalism and you can apply it to a bunch of different places and now we know that this is fertile ground for this kind of storytelling….then Serial comes along and demolishes everything in its path and then it was very clear that it was the right instinct.”

That’s pattern recognition.

Tren Griffin said that Charlie Munger thinks we should teach this way in school.

 Business school should be taught from more of a historical case format, that you learn from pattern recognition and in order to learn from pattern recognition you have to see a lot of examples.”

Good pattern recognition is a superpower because it saves you time. Gurley didn’t start at square one to look for Uber. He had a head start because of his pattern recognition.

C/ Be patient and keep your balance. “One of the things that Silicon Valley does when it gets risk seeking, which it did in ‘99 and now is that they invest in businesses with lower and lower gross margins and that’s riskier.”

When Warren Buffett was asked what his favorite book was, he said The Science of Hitting by Ted Williams. The reason was because, “Ted Williams described that the most important thing for a hitter is to wait for the right pitch. That’s exactly the philosophy I have for investing.”

It’s patience. It’s being able to wait, wait, wait then GO!

Bill Belichick waits until the second half to try trick plays so the other team can’t adapt during the calm of halftime. Richard Feynman said “the only thing that solves safe cracking is patience.” Gary Vaynerchuk noted that “There’s not a single fucking person on earth that made it big in four minutes.” Steven Pressfield wrote, “The professional arms himself with patience.”

The two most powerful warriors are patience and time. —LEO TOLSTOY

If patience is so important, why aren’t more people doing it? Why are the valuations being driven up? Gurley notices this, pointing out to Swisher that “you have to play the game on the field.” If one of his investment’s competitors raises money, his company probably will need to too.

Seth Klarman addressed this situation when he talked about the kinds of investments he looks for. Part of Klarman’s advantage comes from his flexibility. “The more flexibility you have, the better your ability to maneuver in complicated, volatile, and fairly competitive markets.”

To some degree Gurley lacks this flexibility. His hand is forced by what other people do. He may be forced to “do something” rather than “just sit there.”

D/ Choose a business to provide, not a problem to solve.  “We made a huge mistake choosing HR over sales. HR is a corporate purchase by someone who doesn’t have any authority. Sales is a credit card purchase by someone who has all the authority.”

Part of the success of a business is the conditions around it. It’s not enough to solve a problem, but to solve a problem people want to pay for.

One of the startups profiled in my book was Dinnr, a food delivery service in Europe. The founder thought that because a service worked in Britain he could transplant it elsewhere:

“Apart from lacking a sophisticated online supermarket system like the UK, Scandinavia has a few cultural traits that make people much more susceptible to Dinnr-like services: As I’ve been told (after launch, unfortunately) by expats living in Sweden, the Swedes are generally much more attached to their routines than Brits. You can easily ask a Londoner at work if they’ll have a drink with the team after work. Ask a Scandi and chances are you’ll have to schedule it a few weeks in advance. They also have a much stronger “eat at home with your family” culture.”

This founder had found a problem to solve, easy and immediate access to good food but found the wrong environment for it. In the same way that Gurley chose the wrong department (HR instead of Sales), this founder chose the wrong country (Sweden over Britain).

Sam Shank said that all businesses need to save someone time or money, “and ideally both.”  Gurley adds that it’s easier if you’re saving the time or money of someone who can say yes.

E/ Align the incentives. “It was really helpful for me at Benchmark that there’s an equal partnership. There’s this team orientation where if you feel like you’re struggling people are getting beside you and have a stake in you doing well.”

When Coca-Cola expanded beyond America they tried to employee locals. “As one Coke executive pointed out, ‘in Germany it is a German business; in France, it is a French business; in Italy, it is an Italian business.’ Local industries to produce glass, carton, crown, and bottling equipment started in each new country.”

Seth Klarman’s company is structured like Benchmark.  Charles Ponzi paid fat commissions for his notes. Milton Hershey was good to the dairy farmers and they were good to him.

Phil Knight actually had to borrow money from one of his suppliers when he couldn’t make payroll at one of his early factories. The supplier didn’t want to do it, but when he realized that if Knight’s company left he would be in bigger trouble, he floated the loan.

F/ Get lucky. Gurley explains that he got lucky when he started. “I got very lucky that CS First Boston gave me an opportunity. Then two weeks after I joined, Charlie Wolf  announced that he wanted to resign and back off and so I went into my tiny little apartment and wrote a 20 page assessment of the PC industry. I went in and begged for Charlie’s job.”

Other people left too, and Gurley said, “it couldn’t have been more fortunate because I moved through the ranks very quickly.”

Luck has some role in any outcome. What I liked about Gurley’s response was that he noted the role of luck, but also what he did about it. He went home and wrote a report that he could show his boss and take advantage of the lucky situation.

This makes sense given the books Gurley recommends. Part of theoretical backbone to both Grit and Mindset is the idea of personal growth. It’s a belief that your actions can lead to some effect. Gurley got lucky, but he also acted.

Thanks for reading, I’m @mikedariano on Twitter.

Bill Belichick (invert, always invert)

Note: For more Belichick, he was the subject of episode 035 of my podcast. Also, this is only part of a larger piece I’m writing. Enjoy!

New England Patriots at Washington Redskins 08/28/09Drawing on inspiration from David Halberstam’s The Education of a Coach we’ll look at how Bill Belichick prepares by red teaming, specifically the act of inversion. 

Red teaming is the creation, support, and application of a friendly perspective on what you’re doing wrong. This is clear in football. It’s the scout team. Those players will adopt the mindset, strategy, and tactics of an opposing team so other players on the team can practice and improve against their specific skills.

 

 

Belichick didn’t set out to adopt a red team set of tools. He didn’t articulate this kind of system. He grew into because of forces beyond his control. It started without intention. It started when he coached the offense.

Inversion

Sometimes the best way to solve a problem is to not solve the problem. Ask, ‘what solutions won’t work?’ and by process of elimination you’ll hone in on the direction you need to go. Answering the opposite question will also expose your own ideas to parts you may not have considered before.

The two quarterbacks

It was around 1973 and Belichick got a job coaching the tight ends for the Detroit Lions. This was not what Belichick expected, explains Halberstam:

“Though Belichick’s instinct was to coach defense – it was where he was pulled as if by some kind of magnetic force – he was also beginning to understand that if you were going to coach defense, you had to master the offense as well, otherwise you were only half a coach.”

This was a valuable lesson writes Halberstam, because “the more he knew about the offensive side and the way the people on the offensive side thought, the better prepared he would be coaching defense.”

Belichick’s first red teaming skill was inversion.  He started to understand both sides. He started thinking forward and backward. He started to understand the why.

This time coaching the offense had a big impact on him. Five years later with the New York Giants, he would run laps after practice with his partner in crime, Ernie Adams and the two would talk about football. “And he would tell Adams,” Halberstam writes, “that he did not understand how some of the other coaches in the League had decided they were only going to understand one side of the ball….it absolutely amazed him.”

In knowing both sides, Belichick created a more accurate picture of the conditions. He saw things as they were, not as he wanted or thought them to be. As a coach he would use this ability to see both sides to make his greatest mistake and greatest success.

First, the mistake. If you’re a big football fan you’ve heard of him. His name is Bernie Kosar. As a kid in Ohio at the time I remember the reverence for Kosar. Halberstam put it this way:

“For almost a decade Kosar had been the signature sports figure in a sports-crazed city, a much-loved figure in a community that badly needed any success in sports to compensate for a profound economic and social decline; the city was becoming something of a national joke.”

Kosar’s reputation wasn’t unearned. He had led the team to the conference finals in 1986, 1987, and 1989. The problem was that Kosar was old. Rod Woodson, cornerback of the archrival Steelers said, “He’s not mobile at all. Now when you look at them on your schedule, you’re putting a W down before you play.”

Belichick released  Kosar. It did not go well. Soon after, team owner Art Modell moved the Browns to Baltimore and Belichick lost his job.

Belichick red teamed Kosar, looked at him as if an opposing coach would and realized he could not longer play at an elite level. He knew this from both the offensive and defensive perspective. As a coach at the Giants he devised game plans against Kosar. As a coach of the Browns he planned game plans for Kosar.

While the correct football decision (and good inversion) Belichick became a pariah in Cleveland. He received death threats. An effigy of him was hung outside the stadium on a crude set of gallows. This  happened because he failed to explain his thinking well enough.

Part of good inversion is to think like an outsider, but only to a point. Belichick told Halberstam that he and Kosar just met at an unlucky time. He knew what to do (stop playing Kosar) but not how to do it (release him with dignity). Good red teaming requires this balance. 

In his book, Red Team, Micah Zenko writes, “The red team’s engagement should not be done in a “gotcha” manner to embarrass or humiliate an office or individual.”

 


Belichick’s greatest decision was eerily similar to his time on Lake Erie, but the conditions with the New England Patriots were just different enough.

Drew Bledsoe, like Kosar, was a good quarterback. He held many individual records and made four Pro Bowl teams. Belichick thought, like he had for Kosar, that Bledsoe was too old. He had to make a change.

Why had he thought this? Why was Belichick one of the few people in a league full of experienced coaches, scouts, and player personnel managers to notice this?

There’s an anecdote about boiling frogs that helps explain this. The story goes that if you put a frog in boiling water it will notice the danger and immediately jump out. However, if you put a frog in tepid water and slowly increase the heat, the frog fails to notice the change and eventually is boiled alive.

A more relevant and easy to see example is the waistline.

The story about frogs is false, but it buoys something we intuitively know – small changes are hard to notice but add up to large changes. When a quarterback, to use football terms, “loses a step,” how can you tell? The great plays are still there. The heroics, the highlights, the hail-mary passes all look the same.

Belichick knew because he inverted the question. He put on a defensive headset and thought about how he could plan to stop the aging Kosar/Bledsoe. Then he put on the offensive headset and thought about how he could have them succeed. Looking at this from both sides he saw the strengths and weaknesses.

Inverting Coca-Cola

Coca-Cola is the greatest company in the world – ever. Started in 1886 as a patent medicine, reformulated to include Cocoa and Kola, praised for being a pick-me-up then regulated for too much pick-up. Coca-Cola invented the red Santa Claus, brought up the rear of troops in World War 2, and helped President Reagan convince Mr. Gorbachev to “tear down this wall.”

How has one company been able to do all this?

Part of the Coca-Cola success is thanks to successful inversion.

Inversion is a switch from asking “how can I succeed?” and doing that, to, “how can I fail?” and avoiding that.

Investor Charlie Munger knows a lot about this Coca-Cola technique. In the book Damn Right, Munger explained why Coca-Cola was a good investment and he points out that Coca-Cola defended their name aggressively. “The first thing you don’t do is avoid losing half the brand name.” 

If anyone else wanted to have a cola name it was “tough luck.” Coca-Cola succeeded with this course for a long time.

Former CEO of Coca-Cola  Neville Isdell took the application of inversion one step further. When Isdell was leading teams at Coca-Cola, he had trouble getting them to think outside the box, to think about the defense when they were on offense. He inspired inverted thinking by thinking like the enemy, Pepsi.

At one meeting people entered and were handed Pepsi t-shirts and hats to put on. On the walls hung Pepsi posters and Pepsi-Cola was served. “It takes about an hour for people to get comfortable,” Isdell wrote, “but eventually things fall into place and workers get a thoroughly honest assessment of their flaws and strengths.”

In dressing up like this and role playing what Pepsi would want to do they figured out what Coca-Cola should avoid or stress.

Bill Belichick inverted game plans to look at them from both sides of the ball. Coca-Cola management inverted the protection of their brand. Patrick O’Shaughnessy suggests studying short sellers to figure out good long positions. Casey Neistat suggests figuring out how not to be big on YouTube and avoiding that.

My book inverted the question for successful technology start-ups.  Bill Simmons used inversion when he asked, what can the opponent do that scares me the most? Michael Mauboussin says to look at how easy something is to lose to figure out how much skill is involved.

Rorke Denver

It’s one thing to see connections is similar things, Grit in athletes for example. If you find something that works in one sport, people like Pete Carroll will try to get it to work in another.

It’s a different kind of treat if you find connections in different things. That’s part of the appeal of what Rorke Denver writes about in Damn Few. There are things in the Navy SEAL training that can apply to a range of situations. I noticed at least four.

  • Why to roll play and run simulations.
  • Conditioning for luck.
  • The support great work needs.
  • Wait. Wait. Wait. Go!

Ready?

1/ Role play. “At the range, we have special malfunction drills for each make and model of weapon. We load a dummy round inside the magazines that will cause the gun to stop firing. You never know when that bad round is coming through. Now, how quickly can you clean the jam and get back into the fight?”

Tim Kennedy showed the same thing on Instagram.

A video posted by Tim Kennedy (@timkennedymma) on May 4, 2016 at 12:16pm PDT

This role play is valuable because it turns abnormal situations into normal ones. Denver wrote that when it came to shoot someone, he was so conditioned to the act of shooting at bodies (or at least the silhouette shape) that it didn’t affect him.

Good simulations don’t have to involve guns. We can create them anytime there is an unknown outcome that we want to prepare for.

Gene Kranz, a flight director from the Mercury through Apollo programs wrote about the simulations they did to get into space, take people through space, and land on the moon.

  • Once Kranz arrived at his office and was told he had ‘been in a car accident’ on the way and had to sit out the training runs that day. Everyone else stepped into a new role.
  • In another simulation a communication director based in Hawaii ‘had a heart attack’ and only after the simulation was over did Kranz learn it wasn’t true.
  • On the final day of simulations before the Apollo 11, a day that typically ended on a high note to encourage self belief, simulation threw Kranz’s crew  error code “1202.” Kranz ordered an abort. It was the wrong call, but a good simulation. That code, which no one had seen before, came up during the actual lunar descent.

Phil Knight saw the value of roll play  (after a few missteps).

Before Nike, Knight started a company called Blue Ribbon Sports and they imported shoes. Knight needed help. He talked Bill Bowerman – his college coach – into joining the venture. “Sure,” Bowerman told him, “come over and we’ll draw up the papers.” Knight arrived at Bowerman’s house to find Bowerman, his wife, and his lawyer all there. Knight recalls Bowerman’s wife tilting her head and “gave a pitying look. Boy they’re going to skin you alive,” she said.

Luckily for Knight, they didn’t. This meeting and a few in Japan with the shoe manufacturers taught him he should roll play his meetings. He did, writing that “Like two actors running lines, we went through every possible argument.” Sometimes he needed it. Sometimes he didn’t.

It’s not easy, and it requires going deep. “Simulation is no substitute for investing, since most mistake in investing are psychological.” wrote Tren Griffin.

The military has dummy rounds. NASA has a Simulation Supervisor. Phil Knight had someone to verbally joust with. The better the dress rehearsal, the better the performance.

2/ Conditioning for luck. “Fairness is an irrelevant concept in war. Screwing with the trainees’ expectations—forcing them to deal with failure, irrationality, and unpredictability—is a vital part of training SEALs. Things won’t be fair on the real-life battlefield, where the stakes are infinitely higher.”

If #1 Role Play, was about training for things you can control. Then #2 is about training for things you can’t control. It’s about exposure to luck. During training Denver calls it “random acts of instructor violence.”

The violence isn’t a literal physical assault. That has no place in SEAL training. But those extra PT evolutions sure can feel like abuse. “What did we do wrong?” the trainees want to know after some especially grueling evolution. “Nothing,” the instructor shrugs. “Just do it again.” And again. And again. It’s brutal. But it does send a message:

Luck is a hard thing to pin down, to point at and say there it is!

Part of it is a problem with the detection. It’s bad equipment (You and me!).

Jack Schwager said “I’ll have good luck too. The bad ones you really notice. The good ones you’re smart on the bad ones are bad luck.” It’s the ability to attribute success to your smarts and failure to external faults.

Luck, Michael Mauboussin consistently points out, can be good or bad, can be large or small. Sometimes we just get lucky. The stats for this blog are a good example. Part of the reason many or few people read it is what else is published. If it’s a slow week, more readers come here. If something bigger happens, less.

What the heck do we do about luck?

Acknowledge it, know that it affects your results, but focus on the process.

Half of soccer is luck. Economists and Coaches agree. What do the latter – like Pete Carroll –  do? They focus on the process.

Knight put it this way, “Luck plays a big role…Hard work is critical, a good team is essential, brains and determination are invaluable, but luck may decide the outcome.”

3/ Support to be great. “Standing on the beach in a tight, quiet circle with Ro, Big D, Cams, Lope, and the others, I talked about balance instead. “Before we step on that bird tomorrow and begin this campaign,” I said, “we need to be sure everything at home is taken care of. Your finances are in order. Your families have what they need.”

If you want to do extraordinary things, like write best-selling books, be in professional sports, or be a Navy SEAL you must have support to do it.

In episode 033, Failure is Not an Option we talked about this idea, around the 21:00 mark.

To recap here.  When Malcolm Gladwell wrote Outliers, he wanted the 10K hours idea not to be an instruction but a warning. If you need 10K to be great, then there are all kinds of things you can’t do.

“To me the point of 10,000 hours is: if it takes that long to be good, you can’t do it by yourself. If you have to play chess for 10 years in order to be a great chess player, then that means that you can’t have a job, or maybe if you have a job it can’t be a job that takes up most of your time,” Gladwell told Stephen Dubner.

Gene Kranz, our NASA flight director agreed. “Behind every great man is a woman – and behind her is the plumber, the electrician, the Maytag repairman, and one or more sick kids. And the car needs to go into the shop.”

The Wright brothers never married. They lived at home where their sister (and then hired help) helped out. Robert Kurson‘s pirate hunters had marriages that ended because someone wanted to be an 10K hour expert. Jay Leno told  Judd Apatow that he kept his requirements to a minimum so he could do comedy. Leno tried to minimize the stakeholders becuase he couldn’t answer to them and become a commedian.

In Denver’s podcast with Brett McKay he said

“When you first start the training program demands are full-time with very little time off. When you show up with your first team you’re going into multiple rounds of advanced training. Then you’re going to deploy and chase the nation’s enemies. It’s very very taxing on families. You have to have an extremely strong gal that’s going to make it through that experience.”

You need support to be great.

4/ Wait. Wait. Wait. Go! “Take time to deliberate, but when the time for action comes, stop thinking and go in.” Napoleon Bonaparte

Denver didn’t want to have any part of Act of Valor. He told them “no.” Twice. Then he started to think about it and talk about it. He changed his mind. Denver writes that he wanted to inform people about what being a Navy SEAL is about.

Part of any success in life is getting the timing right. Warren Buffett says it’s waiting for the right pitch.  It’s having the patience to wait, wait, wait and then go.

Louis C.K.  was patient enough to make Horace and Pete.

Gary Vaynerchuk warns people that it’s going to be a slog. Too many people, Vaynerchuk says, are  “very impatient  in the first twenty-four hours out of the box. They’re looking for fast and cheap dollars.” It doesn’t work like that. You need to be patient, persist, and have grit.

We’ll give the final word to Steven Pressfield:

“The professional arms himself with patience, not only to give the stars time to align in his career, but to keep himself from flaming out in each individual work. He knows that any job, whether it’s a move or a kitchen remodel, takes twice as long as he thinks and costs twice as much. He accepts that. He recognizes it as reality.”

Thanks for reading. If you liked this post, you might like my podcast: https://soundcloud.com/mikesnotes or book.

 

Pete Carroll

The serendipity of life is marvelous.

On a family visit to the library I saw Grit (which I recently wrote about). In Grit there’s a story about the Seattle Seahawks, who Ryan Holiday had just visited. Head Coach Pete Carroll started Win Forever with Michael Gervais, who hosts the podcast, Finding Mastery, which has some great episodes, among them one with Pete Carroll. Here are my notes.

1/ Leaders need to support their troops. Carroll said that a fork-in-the-road moment (circa 1973) was when he started to ask his players what they thought they should practice.

“I’d just had a night meeting with the defensive backs and I had decided to ask the guys what they needed to work on. We had a great discussion. I was filling up the board with stuff that we could figure out in their individual periods. It was the best meeting I’d ever had. I was so fired up. I ran into Chester Caddus (the head coach, “as old school as you could get”). He said, ‘you don’t ever ask your players what they want to work on. You tell them, you’re the coach. I don’t want you to ever do that again.’ I was just crushed, but later I thought, maybe he doesn’t get it.”

Carroll had found the idea of decentralized command – when a leader trusts individuals to make the right choice. Note, this only works when there is top down support from those leaders. Caddus didn’t provide this, Carroll does.

During the Apollo 11 moon landing there was a lot of pressure. The Mission Control Flight Director Chris Kraft told Gerry Griffin “Young man, we don’t have to go to the moon today. It’s your call.”  That was important, wrote Gene Kranz, “The impact of Kraft immediately removed all political pressure from the decision. Griffin knew all he had to do was make the right technical call.”

Carroll does this too:

“When I help guys in our organization I’ll give them guidelines. ‘When we’re in a situation, it’s okay to do this, if it doesn’t work out I’m fine with that.’…If I’m not making the call, they’re making the call for me and I’m going to try to bolster their confidence to go for it…If you called it on my team, I’m the one that ultimately takes responsibility for it. So go for it.”

Having leaders that create this environment isn’t easy, but it’s often fruitful. Phil Knight created it at Nike. It’s how to build the world’s greatest airplane. It’s how you find Russian submarines. It’s how Jocko Willink teaches leadership.

Decentralized command is paramount when times are tough. In his book, Only the Paranoid Survive,  Andy Grove explains the value of engineers, salespeople, and factory managers having a say.

“They (middle management) usually know more about upcoming changes than the senior management because they spend so much time ‘outdoors’ where the winds of the real world blow in their faces.”

Ed Catmull echoed the value of decentralized command. He said about the University of Utah, “It was completely free and open. Great professors, and they weren’t micromanaging. It was like, okay, we’re at the front of the easter egg hunt, cut the line and let’s go.”

If you don’t know exactly which way to go, trust your people.

2/ Be there. “If I’m not living it, how can I expect anyone else to. It’s trying to be as involved and available as possible. You can’t sit on your butt and do that.”

Carroll has an open door policy. A lot of great leaders do, though it may not matter. A lot of great leaders aren’t ever in their office. They’re out there.

Coca-Cola people do this a lot. Neville Isdell went all over the world and into some harry situations to see what people were buying, how, when and where. In For God, Country, and Coca-Cola, Mark Pendergrast writes, “Doug Ivester liked to prowl the back alleys of the world to see where Coke was or was not. He spent a third of his time on the road.”

You have to go see it, smell it, eat it, and talk to customers between bites. (Not talking to customers means death).

Percy Fawcett had to be there to discover things (unlike what he called “armchair archeologists”.) John Nagl wrote about how being there is great military strategy. Samuel Zemurray was there to create a banana empire.

After John Chatterton found a U-Boat off the New Jersey shore, he walked through a similar one at a museum to get a feel for the ship.  Stanley McChrystal did the same thing, only substituting Afghan vineyards for the submarine.

3/ Process is greater than product. “The winning/losing thing. The judgment at the end of it. You can’t focus on that. If you focus on that you’re missing all the things that happen in the meantime. What really gets you there are the good plays, one after another. One step at a time. One thought at a time. If you believe and trust in that, the outcome will turn out the way you want it to.”

Process is more important than product because product is a liar.

Well, maybe it doesn’t lie, but it clouds the truth. Product is a touch random.

In this Michael Mauboussin post we looked at the role randomness plays. Randomness (alias: good/bad luck) is to some degree in everything. When that’s the case, we can’t know absolutely how our effort leads to an outcome.

fork-in-the-road-585348_640.jpgIt’s easier to figure out how you messed up chicken cacciatore than how you lost a football game. Carroll’s career has a fair bit of randomness and he needs to be especially careful. Attributing an outcome to skill when it was luck is like misreading a hiking sign and going down the wrong path.

Carroll avoids this by shifting his attention to process.

4/ Be relentless.  “When you’re a competitor you don’t rest. You’re either competing or you’re not. We’re in a relentless pursuit of finding the competitive edge in everything we’re doing, and that’s a mentality. You’re either competing or you’re not. You’re either working at doing better or you’re going in the wrong direction. You’ve got to be on. You can’t be too comfortable, you have to keep pushing.”

People who succeed are relentless.

Gary Vaynerchuk observed:

“The people that win with my content are the ones who suck out everything I say for a year or two, then put their head down for 18 hours a day and then pop back up 3 years later and start reading more content from me because they’ve taken the first step and now they’re looking how to get from one thousand to one million.”

Walt Disney was relentless. The girlfriend of an early animator said Disney “had the drive and ambition of ten million men.” Later on, when he married, Disney and his wife would go for a drive through the country that always ended at his studio. She would take a nap while he worked, but as she slept he would turn the clock back an hour. Then, when she woke, he would point out that it was still early and they could stay longer.

Anson Dorrance “despises nothing more than holidays,” and has for a long time. A schoolmate remarked, “the rest of us just wanted to make good enough grades to stay in school, play sports, drink beer, and pick up women, but Anson’s goals were greater. He was not just another guy in the dorm. He was very busy doing Anson things.”

Stephen King jokes that he only takes off three days a year (Christmas, July 4th, his birthday) because it makes for good copy. He really doesn’t. “The truth is that when I’m writing, I write every day.” Peter Thiel wrote that there are many secrets to find, “but they will only yield to relentless searchers.”

Why do you have to be relentless?

In absolute terms you need to get better at the thing you’re doing. Disney had to get better at animating. Dorrance better at communicating. King better at writing.

In relative terms you need to get better than anyone else. Catmull’s work on computers had to be better than everyone else’s. Grove’s microprocessors had to be better too. Carroll’s team is very vulnerable to relative changes.

One more thing, have you ever been to Relentless.com?

5/ Culture. Given the right environment people “will function at a higher level. They’ll come in earlier. They’ll stay later. They’ll be more on it. They’ll inspire those around them. That’s the subtle way of improving an organization.”

Culture is a multiplier. Good culture is a 2.25X boost. Bad culture is a 0.8X drag.

Carroll talks a lot about good culture (like #1, how leaders support their troops; and #3 a focuses on process).

Thiel wrote, “no company has a culture, every company is a culture.” Early Nike, for example, was a group of “butt heads.” Culture is not offering Yoga or ping-pong. Culture, says Auren Hoffman is what makes you different. Culture can create things like Grit.

If you try to transplant culture like an organ it’s going to be rejected. I liked how Shane Parrish put it:

“You can’t just add 20% innovation time to your organization and expect you’re going to be Google. No, you have to understand what Google was doing. How it fit in their culture. Why it was part of their culture. Why it worked as part of their culture. And now why it’s stopped. And you further have to map it to the base rate.”

Thanks for reading, I’m @mikedariano on Twitter.