Archive for February, 2016

Leadership as seeing clearly

“Why would anybody accept the leadership of another except that the other sees more clearly where it is best to go? Perhaps this is the current problem: too many who presume to lead do not see more clearly, and in defense of their inadequacy, they all the more strongly argue that the ‘system’ must be preserved.”

-Robert Greenleaf, The Servant as Leader (1969)

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Courage as clarity

“The choice to [speak out about an injustice] is risky, and the choice of saying nothing is risky. I think courage is having the clarity to see the two bad choices. There is no safe path, but what you do know is that if you don’t speak up, everything will stay the same.”

-Margaret Heffernan (via TED Radio Hour)

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Maximum Wage Ratio

Steven Johnson (via Daring Fireball): “Steve Jobs, Jony Ive, Larry Page, Sergey Brin, Travis Kalanick—these people didn’t just accumulate wealth [by inventing technology]; they accumulated dynastic wealth, wealth that could keep their descendants in the one percent for centuries.”

It’s clear that those startup founders are brilliant people, but it’s equally clear that those people by themselves were not responsible for creating millions of times more value than the thousands or millions of other people who helped make their companies possible — from scientists working under government funding to invent the Internet and GPS, to open-source programmers creating widely-used code libraries, to finally all of the employees who worked to create better products, year after year.

As Clayton Christensen and others have noted, one reason we compensate executives so extremely is because we make the attribution error that top managers actually have significant control over company performance. That is, we thank the CEO when an organization is performing well, and several years later when it’s crashing we blame the very same CEO for causing the problems. (Much of Christensen’s research into the causes of success and failure grew out of his dissatisfaction with the theory that the very same CEO is brilliant one year and an idiot the next.)

“Over the past 40 years, the average pay ratio — the gap between the highest and median employee — inside an American corporation has increased from 30:1 to more than 300:1. […] If you want to defend Silicon Valley in a discussion about inequality, [note] that Silicon Valley has a much more sensible pay ratio than most other industries in the United States — closer to 40:1, not so far from the ratio that predominated in the age of Big Labor. [Also,] the top 100 tech companies granted 19% of their total ownership to non-senior-executive employees (i.e., everyone excluding the CEO and four lieutenants). For the rest of corporate America, that number was 2%.”

“Let’s say we decided as a society that no private company should have a pay ratio above 40:1. That would lead to a radical decrease in income inequality, and it wouldn’t involve a cent of additional taxes.”

Sounds reasonable. And even if this particular idea turns out to be impractical, it raises the point that there’s a lot of creativity to apply to the problem of income inequality.

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The Paradox of Innovation Incentives

Whether in business or academia, there are usually far more good ideas than there is time and money to explore them. So decisions must be made about who and what will get the limited funds to proceed with a novel idea. In science, these decisions are made via grants and research funding boards. In corporations, these decisions are usually made by executives and middle managers. And for many startups, these decisions are made by venture capitalists and angel investors who network with founders and review business plans and “pitch decks”.

As a result, the culture usually becomes competitive. Researchers compete for limited funds, corporate teams compete for executive approval, and startups compete for venture financing. In some ways, this is like any other market economy. “May the best idea win.” The problem is that scarcity, pressure, and stress inhibit creativity. Many studies have shown that under such conditions our minds tend to focus more narrowly, causing us to perform better at well-practiced tasks but worse at generating new ideas.

By contrast, in order to be maximally creative, we need to be relaxed and feel that resources are abundant — basically the opposite of a competitive situation with limited funds.

This is a major paradox of our innovation economy. The rewards of innovation are huge — businesses and scientific careers succeed or fail on the strength of their ability to innovate. But that very pressure causes these innovators to underperform. The more desperately you want to innovate, the more difficult it is to do so.

For most innovators stuck in an environment of scarcity, a “jedi mind trick” is necessary, similar to the one I wrote about in The Paradox of Customer Focus. Namely: to innovate, stop trying so hard to innovate. Instead, relax, work on hard problems, and assume everything will work out. All while battling off requests for progress reports, 3-year plans, and reminders that your scarce funding and position are up for renewal.

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