http://www.newyorker.com/reporting/2008/05/12/080512fa_fact_gladwell

Malcolm Gladwell is clever.  Anyone who has read his books can quickly deduce this.  However, perhaps what is most clever about Malcolm Gladwell is that he recognizes that cleverness is not necessarily all about being smart.  In fact, most of the truly great things that people get credit for were not really invented by them.  Henry Ford did not invent much truly new, he just was exceptional at making it work together.  Andrew Hargadon had a recent post on his blog about this issue as well, but for every great invention / business / whatever you can name, I can find three people who could probably lay claim at the idea first. It’s not that ideas are not precious, or necessary, it’s just that they are not enough.  Malcolm Gladwell is best known for several books (Tipping Point, Blink, etc.) that take well established ideas from many domains, repackage and add new insights, and make him into an icon.  The fact that most of these ideas are not original Gladwell creations does not diminish his contribution, and he’d be the first to tell you it was not all him.  It’s about putting things together in the right context, with the right people, and sometimes the right business model.

This simple insight could be pretty influential for those who seek big ideas.  Be an idea harvester, not just an idea creator.

For many people, the biggest issue in politics today is jobs. To me, it seems that America could learn a lot from Mr. Jobs about creating jobs.

From the beginning, Steve Jobs was an imaginative and farsighted thinker.  He built Apple into one of the most valuable companies in the world by focusing on two things: 1.) Creating value for people with innovative products that simplified people’s lives and 2.) Constructing new markets from scratch for these products.

Apple is really just a tremendously successful construction company. [Market Construction]

Think of all of Apple’s biggest revenue drivers: iPod, iPad, iPhone, iTunes ß each of these constructed a new market from scratch. Apple has excelled because they construct new markets that create value in people’s lives.

Why is it so great to be in the [market] construction business? There are big advantages to this approach: Better margins, less competition, more job growth, and first mover advantages.  When you pioneer, you set the standards – just ask Mark Zuckerberg at Facebook!

The market construction business is not easy, but it’s worth it. Market construction requires a different frame of thinking. The questions revolve around what could be rather than what is. Leaders think about how customers might re-imagine their experience of a product (think Apple’s mouse for computer interaction; mobile music libraries; a person’s entire life in their pocket command center). Market construction also requires a different approach to marketing / development. Questions become: Who is the customer? (You must find them because they don’t know they need you yet). What do they want from the product? (They don’t know yet.  You have to educate them). What is the right price point? (You decide, based on the value you create for customers).

For America, real and substantial job growth will come from innovative market construction. Simply, America needs to get back into the construction business

America has struggled to truly transition from ‘old industries’ where we had strong capabilities (for example, the auto industry, textile industry, and most manufacturing industries) into ‘new economy’ markets that are only beginning to emerge.

The good news is that America is exceptionally well prepared to lead in this century, but we will need to follow Apple’s example of leading on new frontiers.

The biggest areas for growth in the next 20 years, essentially the real estate with the largest “green fields” ready for market construction, will likely be in the areas of: Life sciences (personalized medicine), technical services, green technology, new sources of power generation, nanotech, pharma / medical devices.

The government can play an important role in four key ways:

  1. Fund basic science (in areas too expensive for industry to drive cost effectively)
  2. Aid fast growing companies however they can (particularly in ‘targeted’ industries)
  3. Support business-enabling infrastructure (infrastructure bank, high speed rail)
  4. Get out of the way (avoid regulatory interference)

Essentially, the government can double down on [market] construction.

Steve Jobs was a visionary. America could use a new generation of visionaries that put on their hard hats as market construction engineers and deliver the jobs of the future.

For more, I was part of a panel on “To the Point with Warren Olney” on PRI/NPR talking about these issues: click here for a link to the broadcast of the show.

 

Is everything a Remix?

Kirby Ferguson has put together a fantastic short video series that nicely describes an idea I’ve been trying to highlight in my research for a long time – that very few “breakthroughs” are really about creating something truly new, but instead are more about copying, slightly transforming, and combining other people’s ideas.

Simply: breakthroughs are a myth, and copying is king.

In the series of 3 videos linked to below, he shows how even masterful / novel contributions to music (video 1, highlighting Led Zeppelin), movies (video 2, highlighting Star Wars), and technology (video 3, highlighting Xerox before the Mac) are really remixes. Very powerful ideas that run counter to society’s views on creativity!

 

Everything is a Remix Part 1 from Kirby Ferguson on Vimeo.

Could the Oracle of Omaha have made a mistake?

All people are subject to biases that influence the way we see and interpret information.  These biases tend to be deeply rooted in our experiences, and are usually very helpful in making effective decisions.  As researchers we have found that often top executives are particularly subject to such cognitive biases.  Very powerful CEOs are especially vulnerable as their judgment has served them well through the years.  The issue in the Lubrizol situation is probably not that Warren Buffet intentionally white-washed the insider trading situation to his shareholders – it is more likely that he has been viewing the situation through the lens of his experiences – which tells him that David Sokol would not engage in such behavior.  Several specific biases could be at work.  As David Sokol is a lot like Warren Buffett – also born and raised in Omaha, wealthy, successful, and generally conservative with Midwestern values – he may be subject to a type of similarity or projection bias in which Mr. Buffett projects his own extremely strong personal values onto David Sokol.  Mr. Buffett may also be subject to a halo effect bias in which Mr. Sokol’s business values and success in other areas are falsely believed to extend into his personal values.  In each of these situations, a CEO is probably not aware of how their experience is blinding them, or leading them to selectively perceive certain information as more important than other information.

 The truth is that at this point we really do not know what really happened with these Lubrizol shares.  A federal investigation and lawsuits from shareholders will sort out the facts.  The simple point is this – sometimes we see what we expect to see, or what we want to see, at times projecting our own values onto those we trust.  Warren Buffett has made a career out of poring over data but ultimately trusting his instincts.  It may be that the shroud of his experience – clouded by key cognitive biases – has finally led him astray.

CEO pay is a very complex issue that involves a lot of tradeoffs. Ford‘s Alan Mulally represents a particularly interesting situation – he is among the absolute best executives in the world right now. In the last few years his work at Ford has been truly remarkable by nearly any metric. Further, he took an incredibly difficult job (Ford was behind when he took over and was falling fast), and he was soon faced with the most turbulent competitive landscape the automotive industry has seen in the last 50 years. Both of his primary American competitors went bankrupt. Yet through this fire, he skillfully led Ford through tremendous changes and has the company incredibly well positioned to be exceptional for the next few years – even ranked as a more attractive stock than Apple by CNNMoney readers.

This is what makes the issue so difficult. Does this tremendously successful CEO deserve a big paycheck? Absolutely. Does he deserve a $55 million dollar paycheck? That is the real question. The head of the UAW, Bob King, made this distinction very clear, which highlights the moral center of this debate. He specifically said that he does not think “any human being in the world” deserves that much money. This raises questions that business schools, boards of directors, and society at large need to contend with – do we believe that epically-large pay packages are morally responsible? Everyone agrees that long-term oriented pay packages are ideal for CEOs, as they help to solve the agency problem inherent in large public organizations by effectively aligning the CEOs interests with the interests of shareholders. However, the academic literature has shown that long-term contingent pay can be effective even if it does not involve incredibly large absolute dollar amounts. With this in mind, Bob King may be right – enormous pay packages might not be morally right. But I can assure you that until CEO labor markets adjust to bring down these huge pay packages, the best people (Alan Mulally included) will be tempted to go to organizations where they can get the best rewards for their talent.

I think this is where Notre Dame has the opportunity, and maybe the responsibility, to be a voice at the center of the debate. Given our vision to help corporate America have the courage to Ask More of Business, we need to help influence leaders and especially boards of directors to make more responsible decisions that embrace long-term contingent pay without falling victim to the easy way out of rewarding great leaders with exorbitant packages just because they feel like everyone else is doing so. Further, market leaders like Ford could use this as a ‘teachable moment’ to show their peers that truly amazing talent can be fairly compensated with large but not excessive pay packages even in the face of epic leadership we might be able to get closer to making this a reality.

For more, also see the press release Notre Dame put together about my comments:  ND Expert.  I also had the opportunity to speak with Jack Nerad on his nationally syndicated radio show about these issues more broadly. The interview should be airing in the next few weeks:  America on the Road.

I’m always interested in the guy-behind-the-guy.  Despite our tendency to lionize the individuals who do great things in this world, often those who reach great heights are propelled in part by some interesting people who stay behind the curtains.  Sometimes these people are spouses with great support, ideas, or encouragement. Sometimes they are mentors who have seen their day come and go and later find their greatest fulfillment in pressing a new hero into service or greater heights. Sometimes the ‘man behind the curtain’ is a benefactor.

Dr. Paul Farmer is a truly great man.  Even among those who have a life’s ambition to help the poor or serve the vulnerable, Dr. Farmer sets a high bar. His work, now known as Partners in Health, embodies the essence of transformational service and is rooted in a service to some of the poorest and most vulnerable people on Earth, in rural Haiti.  Much has been written about the greatness of Paul Farmer, most notably in the incredibly well reviewed book “Mountains beyond Mountains” by Tracy Kidder. This work and others attest to the great story of how a kid from Florida who was about to start at Harvard Medical School begged, borrowed, and stole whatever he could to help a people who the rest of the world seemed to have forgotten about. He built clinics, brought resources, directed the attention of institutions (the World Health Organization and Harvard Medical School among others), and changed the way modern medicine was delivered to those he served. By learning about the people he served and the lives they lived, not just their medical problems, Dr. Farmer achieved incredible results and changed medicine.

However, to me a layer beyond the Paul Farmer story is the story of a friendship and a man behind the curtain who in no small part made it all possible. Tom White was an exceptional man in just how unexceptionally he saw the world. Yet it was his humble vision and vigorous benefaction that made the Paul Farmer story possible. He seemed to have a simple way of approaching life, focused on core values of integrity and honest work, but embodied in exceptional generosity of heart and money. He was a successful businessman in his family’s construction business (J.F. White), but saw his role in this world as much more than just to be in business. In a moving eulogy reflecting on the life of his friend and chief benefactor, Paul Farmer noted that Tom saw a world in need and responded with generosity, compassion, and service. He did not accept simple answers to tough problems, and saw the needs of the poor as urgent rather than just a long-term problem. He focused on building an ‘inclusive world’ recognizing that the basic humanity of all people is the same. He rejected the idea that the poor had made bad choices, arguing that a great deal of each person’s life is determined by the circumstances into which they are born. This, in part, motivated a profound urgency to act to bring the hope of prosperity and health to those who deserved it but had little access to it. The depth of Tom’s compassion drove him to give away nearly all of his wealth toward these goals, with the Boston Globe joking that Tom White’s bumper sticker should read: “He who gives it all away wins.”

By most accounts, Tom White seemed to shy away from individual acclaim, despite his immense generosity. He preferred to be the embodied example of the man from the Wizard of Oz, who despite controlling all of the sparkle and power of the emerald city, declared, “please pay no attention to that man behind the curtain.” 

I wonder who else is back there, behind all those curtains.

A few days ago Steve Jobs announced that he was taking another leave of absence from Apple to focus on his health.  See a story on his announcement here. Of course, we all wish him the best and a safe recovery. However, this situation raises some interesting leadership questions and highlights some of the dangers of executive hubris.

The Danger for Apple

In fact, I would argue that Steve Jobs is putting Apple in a very dangerous position. Uncertainty around executive leadership is always difficult for large public firms, but is particularly precarious for an innovation-driven company in a highly chaotic consumer market. Apple faces highly tumultuous markets with nearly all of its products. Research has shown that temporary changes in leadership lead to inhibited steward-type behaviors in which the interim leader is less likely to enact significant changes as they lack the credibility and power to carry out any real change. Given the importance of fast action in the markets where Apple competes, this could be a real threat to the company. Depending on the length of the absence, constrained leadership could lead to innovation stagnation, which could also seriously hurt the Apple brand.

A Solution

The most important issue for Apple at this point is to create a long-term plan for succession to ease market anxiety over the loss of the brand’s most important face. Given Steve Jobs’ centrality to the Apple brand and culture, it is likely that he will continue to hold significant sway over the organization for the long term regardless of his official title at the firm.  Since the confusion associated with his frequent coming and going over the last few years has been so disruptive, it might be in Apple’s best interest to shift him out of day-to-day leadership role into a more stable advisory role, such as continuing his board chairmanship but moving him out of the CEO role.

Root Cause Analysis:  Executive Hubris

It would be easy for Apple to let Steve Jobs push them around on these issues, since he is so important to the firm, is a founder, and is the public face of the company. In fact, top executives are often subject to narcissism biases and hubris that can lead them to become so focused on their own legacy that they inadvertently choose paths that are in their own best interest rather than the organization’s best interest. It is not clear that such leaders always recognize that this is happening, making the problem even more difficult to solve.

What Steve Jobs Could Learn From Bill Gates

There is precedent for founders moving out of CEO roles but continuing to hold significant sway in the firms they created. Bill Gates is one example, as he has continued to stay involved in the big decisions at Microsoft as board chairman, while giving up his full-time job as CEO of the company he founded to pursue other interests. In this case, Steve Jobs could potentially save the company a lot of ongoing uncertainty by transitioning out of his official role as CEO to deal with other important issues in his life.

Although the issues are challenging, it may be time for Apple to stand up to Steve Jobs. Whether or not they will is another story.

For more, also see the press release Notre Dame put together about my comments:  ND Expert.

Follow

Get every new post delivered to your Inbox.