The Consummation of Empire by Thomas Cole, 1836

Quoted in chapter 1 of The Science of Success:

He that would know what shall be, must consider what hath been.

—Henry George Bohn

"You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes."—Morpheus

In The Matrix (1999), Keanu Reeves’ character Thomas Anderson has to make a choice. Humankind has been enslaved by robots, who plug them into a massive virtual reality system and then use their heat and bioelectric energy to sustain themselves. Mr. Anderson doesn’t know this yet, and is offered the opportunity to take the red pill—and learn this unpleasant truth—or take the blue pill—and go back to his “normal life” in The Matrix.

Fortunately for moviegoers, Mr. Anderson takes the red pill and the movie continues on.

The scene where Mr. Anderson chooses the red pill has become a classic pop culture reference. Taking the red pill is now a euphemism for acceptance of stark reality, and the blue pill is the modern symbol for burying your head in the sand.

Taking the Blue Pill

Stephen Covey articulated the concept of “P/PC balance” in The 7 Habits of Highly Effective People. P refers to production, and PC refers to productive capacity.

If I own a car I can skip the scheduled oil change and drive more miles, but the life of the engine will be shortened. Therefore, I have sacrificed PC to P. If I have the scheduled maintenance performed, then I will get more miles out of the car and extend the service life. Since changing the oil doesn’t take much time and is a minor expense, it raises my return on capital invested to perform the maintenance.

But I might say that I have an important trip to make, and I’m too busy to do the job myself or too broke to spend $30 at the local quickie lube. By factoring in only my next week of ownership, this conclusion makes perfect sense.

Yet, as Thomas Jefferson is attributed as saying “Those who think they have not time for bodily exercise will sooner or later have to find time for illness.” Those who think they have not time (or money) for maintenance will sooner or later have to find time (and money) for breakdowns.

Taking the blue pill can be more comfortable in the moment, but leads to pain later on. As Epicureans are fond of pointing out, “A lesser pain today that avoids a greater pain tomorrow is to be embraced.”

As Chin Ning-Chu points out in Thick Face, Black Heart, modern western culture is not too good at taking painful preventive measures for the greater good. That needs to change, and that change begins with the red pill.

Taking the Red Pill

In terms of asset reliability, to take the red pill is to recognize what your gaps are, including “undiscussable” or sensitive gaps. Such gaps might include:

• Talent or skill gaps, especially among respected or longtime employees.
• Virtue gaps. A term I like is the “evil genius,” which is an employee who is good at their job, knows it, and uses it as leverage to create difficulty or resist efforts to improve. Yet, they know how not to go so far that they are fired or disciplined.
• Strategy inconsistency. When the behavior of senior management does not match their words, the inconsistency is noticed. But is it challenged? If so, do you take the red pill?
• Perverse or conflicting incentives. Incentives which create behavior contrary to the vision stated by management are perverse. For example, management tries to achieve a “culture of reliability,” but rewards supervisors for daily production. Incentives that create conflict among different employees are conflicting. For example, the storeroom manager is given an inventory reduction assignment (without considering service levels) and the maintenance team is trying to get caught up on the backlog.

Sensitive topics, also known as Crucial Conversations, are actually crossroads. They are the choice between the red pill and the blue pill. For an integrated approach to raising these sensitive issues effectively, I highly recommend that title.

Quoted in chapter 8 of The Science of Success:

Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.

—Peter Drucker

Is this what you meant by employee empowerment?

Some time ago, I sat transfixed as an industrial operations leader explained to a large group of employees that they would no longer be provided with checklists and procedures. Going forward they would learn to be “entrepreneurial,” and do their jobs without such “authoritarian” tools.

This paradigm was confirmed by a machine operator who told me on another occasion that in their area, they did not use procedures to start equipment, while “over there” in another area, their brutally authoritarian supervisor made them turn in various check sheets.

Both areas had an issue that was overloading certain bearings, resulting in serious maintenance expense and downtime. When investigation brought to light the role of the equipment startup procedure in overloading the bearings, guess which area was better able to institutionalize the new knowledge?

The day that the operations leader spoke about entrepreneurship, I was transfixed because I had been communicating the opposite message to many of these employees for weeks!

In another interesting situation, a new procedure was developed for doing a dangerous task. The new procedure was clearly better for safety and for the equipment. Safety incidents had resulted from doing the procedure the old way. However, it did take longer to perform the task, and the task was generally performed under time pressure. Yet, the environment where the new procedure was introduced was one in which challenge was encouraged when new procedures were inferior.

What should an entrepreneurial employee have done when the new procedure was introduced and explained? Some employees embraced it. Others ignored it. There were no consequences for those who neither followed it nor challenged it.

Did the executive leadership have such situations in mind when they spoke of decision rights and innovation? I highly doubt it.

One fascinating development related to the movement to empower employees has been what I have termed “downward innovation.”

Typically, when leaders speak of innovation and entrepreneurship, they are referring to implementing employee ideas on completing tasks more effectively, with less waste and redundancy, and to higher standards of quality. As owners of the means of production, the theory goes, employees will be have a strong incentive to ensure their livelihood, often in the form of equipment, stays working.

Yet, newly “empowered” employees sometimes do the opposite. Rather than raise standards, they decide to lower them. Rather than taking extra time to do a job, they use their new authority to take shortcuts… and then resist change when new knowledge reveals better ways of producing.

None of this is to say that empowering employees with decision rights is the wrong thing to do. The question of how much authority to give an employee requires systems thinking, rather than right-wrong blanket decisions. Here are a series of questions to ask when considering shifting decision rights to employees:

• What’s the objective: is it more important to do the job right—with resulting improvements in safety and reliability—or is it more important to shift decision rights somewhere?
• What are the employees capabilities? What is the plan for any needs identified?
• What are the potential problems with the change and how do we address it?
• Where does the employee go for help in the early stages when they will probably need it?
• What are we trying to achieve? How is that to be measured? Is there a reasonable plan with targets and expectations that can and will be monitored?
• Does the initiative help or hinder institutional learning? If the work processes are not followed, they can not be improved. As a starting point, leaders must have the conversation and acknowledge this tradeoff.

What would you do to avoid Downward Innovation?

My notes on chapter 4 of The Science of Success by Charles Koch:

Quotes

• “There is a natural aristocracy among men. The grounds of this are virtue and talents.”—Thomas Jefferson [Wikipedia]
• “Laws control the lesser man. Right conduct controls the greater one.”—Chinese Proverb
• “The greatest virtues are those which are most useful to other persons.”—Aristotle [Wikipedia]
• “The surest way to have the laws respected is to make them respectable.”—Frederic Bastiat [Wikipedia]

Concepts

1. Rules of Just Conduct. Encompasses “rule of law” (central authority) and “norms of behavior” (spontaneous order).
2. Rule of Law. Bounds government power and limits arbitrary changes in law. [Implementation is tricky, as the last 200 years have shown. "Eternal vigilance is the price of liberty."]
3. Norms of Behavior. How we behave and expect others to behave.
4. Values and Beliefs. What is deeply cared about.
5. Group Culture.Combination of norms of behavior with shared values and beliefs.Question:Is this diagram, described by Koch, correct? Does Rule of Law (or lack thereof) have an effect on values and beliefs or group culture? Where do the Rules of Just Conduct come from? This diagram from a lecture given by Leonard Peikoff may be instructive:
6. General Rules vs. Detailed Instructions. When detailed instructions are necessary, they must be judged against already existing general rules. Over-specification leads to inactivity.
7. Principled Entrepreneurship. Maximizing long-term profitability for the business by creating real value in society while always acting lawfully and with integrity.
8. Culture of Virtue. Culture always exists, but can be intentional or unintentional.
9. MBM Guiding Principles. Consistency with the principles required for continued employment.
10. Walking the Talk. Knowing the principles is not enough, they must be applied profitably.
11. Talents. There are many different kinds, and not everyone is equally gifted in them.
12. Diversity. Reward people by individual merits, not group affiliation.
13. Multiple Intelligences. A person’s absolute potential [not existing actual capability?] in each of these areas: Intrapersonal, Interpersonal, Linguistic, Logical-Mathematical, Spatial, Naturalist, Musical, Bodily-Kinesthetic
14. Directional vs. Exact Correctness. A directionally-correct mental model, such as multiple intelligences, is superior to most existing models, even if is not deductively factual, or minor flaws are known to exist.
15. Selection Process. Starts with a clear vision of the role and the talent necessary to carry out the role. In the notes, Koch says that the selection process applies to all of us all the time, not just when selecting new employees. See also: creative destruction.
16. Virtue and Talents Matrix. Vertical axis: values & beliefs consistent/not consistent with MBM Principles. Horizontal axis: knowledge & skills specific to role meets/does not meet expectations. “Quadrant 1″ performance expected of all employees: consistent w/ MBM principles, meets job expectations.
17. Employee Development. Leaders need to ensure the right mix of talent on their teams. Each employee should be rated on an ABC scale. Just a guideline: not be be applied as a rigid bureaucrat formula!
18. ABC Process. A employees are top 15% of peers in industry and create the most value [see: Pareto's Law]. B employees are 15-50th percentile and solid contributors. Bs are not an afterthought, but should be encouraged to grow. C employees are below average, but may be in the wrong role or organization. They should move to a more suitable position or company. Initial emphasis is on A and C employees.
19. Selecting Partners. Choosing who to go into business with is as important as choosing employees. Partners should share vision and values. Must have separation mechanism to ensure hostile partnership is not cemented.
20. Trust. Allows people with shared vision to stick together through bad time and good times, allows for the best long-term results.

Source Note and Links

1. 1812 Letter to John Adams. [Actually, 1813]
2. Rhetoric i.c., 322 B.C. [Amazon]
3. Frederic Bastiat, Selected Essays on Political Economy. The Foundation For Economic Education, Inc., New York, 1964, p. 56. [Amazon]
4. Howard Gardner, Frames of Mind: The Theory of Multiple Intelligences. Basic Books, New York, 1983, p. 3-70 [Amazon] and Changing Minds, Harvard Business School Publishing, Boston, Mass., 2006, pp. 27-42. [Amazon]
5. Note references Neurosis and Human Growth [Amazon] by German Neo-Freudian psychoanalyst Karen Horney [Wikipedia]
6. No external reference.
7. Kenneth Arrow, The Limits of Organization, Norton, New York, 1974, p. 23. [Amazon]

Common Symptoms and Related Mental Models

Virtues & Talents section of a handout on MBM mental models:

Establishing the Right Climate

From another document showing what happens when a piece of the MBM framework goes missing (click for full-size image):

The MBM Framework: Virtue & Talents

Applying MBM as a Supervisor: Virtue & Talents

In addition to answering these questions for yourself, how are you ensuring your direct reports are striving to get results with their own direct reports?

MBM Mental Model: Form vs. Substance

The difference between “talking the talk” and “walking the walk” is one of form versus substance. Merely talking the talk, whether intentionally or unintentionally, is unacceptable, and obstructs our goal of a self-sustaining MBM culture.

Application

A challenge process is essential if we are to develop substance rather than form. Every employee has three responsibilities in this regard: 1) to openly accept constructive feedback (from any employee) about how well we are practicing MBM; 2) to tactfully, respectfully, and honestly confront employees who do not properly apply

MBM or GP principles; and, 3) to continually examine our own behavior and thinking, and to improve our ability to apply MBM in our unique roles.

MBM Mental Model: Talents

Summary: Skills, aptitudes, and the ability to profitably apply knowledge are all valuable talents. A person’s particular mixture of talents relative to others determines his comparative advantage. Multiple talents residing in one individual often interact to create more value than the same talents spread across several individuals. Teams are still important, however, because they offer unique advantages when formed with attention to achieving a diverse blend of talents.

Listed Aptitudes:

• Intrapersonal
• Interpersonal
• Logical/Analytical
• Verbal/Written
• Vision
• Creativity

MBM Mental Model: Comparative Advantage

Summary: A person’s comparative advantage is that at which she creates more value than she could given her other options. One’s comparative advantage can change with one’s skills, the skills of other team members, or the needs of the team. An organization’s success depends in part on its ability to motivate and empower people to find and exercise their comparative advantages.

This is similar to Gary North’s definition of calling, which is more concise: “That which you do best and where you would be most difficult to replace.” Meaning: the opportunity cost of replacing you in that particular function is too high. Example: it was costlier to replace Babe Ruth with another batter than it was to replace him as a pitcher even though he was the best at both because the second best pitcher was closer to him in performance than the second best batter. Therefore, batting was what he did best and where he was most difficult to replace.

Application

Comparative advantage is a somewhat abstract concept that is based on factors that can change quickly. One way to handle this uncertainty is to think about a few key questions:

• Is what you work on from day to day the most valuable thing you could be doing for your team, given its current vision and talent, and given your capabilities?
• What valuable activities do you give up to work on your current projects or activities? Which are worth more to GP?
• Are you flexible in response to changing conditions and problems facing your team, or do you go about your work in the same way month after month?
• What are you doing to develop yourself so that your comparative advantage changes into more valuable activities, especially activities for which you have a passion?

Karen Horney’s Ten Patterns of Neurotic Needs

Horney believed that neurosis could occur sporadically in life (rather than existing continuously in a person) and were not always a response to negative stimulus.

From Wikipedia, the ten patterns of neurosis:

Moving Toward People (Compliance/Self-Effacement)

1. The need for affection and approval; pleasing others and being liked by them.

2. The need for a partner; one whom they can love and who will solve all problems.

Moving Against People (Aggression/Expansiveness)

3. The need for power; the ability to bend wills and achieve control over others—while most persons seek strength, the neurotic may be desperate for it.

4. The need to exploit others; to get the better of them. To become manipulative, fostering the belief that people are there simply to be used.

5. The need for social recognition; prestige and limelight.

6. The need for personal admiration; for both inner and outer qualities—to be valued.

7. The need for personal achievement; though virtually all persons wish to make achievements, as with No. 3, the neurotic may be desperate for achievement.

Moving Away from People (Detachment/Resignation)

8. The need for self sufficiency and independence; while most desire some autonomy, the neurotic may simply wish to discard other individuals entirely.

9. The need for perfection; while many are driven to perfect their lives in the form of well being, the neurotic may display a fear of being slightly flawed.

10. Lastly, the need to restrict life practices to within narrow borders; to live as inconspicuous a life as possible.

The last coping strategy (“moving with” people) is thought to develop psychologically health relationships. This is the path of “compromise.” The other strategies are unhealthy and neurotic.

More on Thomas Jefferson’s Letter of John Adams

A fascinating letter that touches upon matters eugenic and dysgenic. Starts upon the subject of sex for pleasure vs. procreation (advocating the latter), moves into transmissibility of qualities through generations, and then moves into the paragraph from which Charles Koch collects his quote:

For I agree with you that there is a natural aristocracy among men. The grounds of this are virtue and talents. Formerly bodily powers gave place among the aristoi. But since the invention of gunpowder has armed the weak as well as the strong with missile death, bodily strength, like beauty, good humor, politeness and other accomplishments, has become but an auxiliary ground of distinction. There is also an artificial aristocracy founded on wealth and birth, without either virtue or talents; for with these it would belong to the first class. The natural aristocracy I consider as the most precious gift of nature for the instruction, the trusts, and government of society. And indeed it would have been inconsistent in creation to have formed man for the social state, and not to have provided virtue and wisdom enough to manage the concerns of the society. May we not even say that that form of government is the best which provides the most effectually for a pure selection of these natural aristoi into the offices of government? The artificial aristocracy is a mischievous ingredient in government, and provision should be made to prevent it’s ascendancy.

The paragraph has several key messages:

• Physical strength was one the prime determinant of social standing. Now strength is just another distinction.
• It was the gun which gave primacy to non-physical qualities in social standing.
• The aristocracy of wealth is artificial. The aristocracy of virtue & talents (“natural aristocracy”) is true.
• The best form of government is that which provides for pure selection of the natural aristocracy for leadership. (Would this include the modern incarnation of democracy and/or republicanism?)
• The artificial (titled?) aristocracy is pernicious and vigilance is needed to prevent entrenchment.

Continuing, Jefferson frames his political difference with Adams in terms of dealing with the artificial aristocracy. Jefferson claims Adams would segregate it in a separate legislative body to protect it from plunder by what is today called populists. Jefferson counters that this arms them for increased mischief.

Following, Jefferson expresses the naive belief that free men will elect the natural aristocracy to leadership of their own accord!

The next key passage describes measures taken to thwart the artificial aristocracy by limiting rights of inheritance, including:

• Abolishment of entails: multi-generational wealth transfers
• Abolishment of Primogeniture: the rights of the first-born child to succeed the parent
• Division of Intestates Among Heirs: those who died without a will had their property divided evenly among all children

Abolishment of inheritance rights appears to have been a primary goal of Jefferson as he describes another bill to fight entrenchment which failed to pass: free public education!

Worth and genius would thus have been sought out from every condition of life, and completely prepared by education for defeating the competition of wealth and birth for public trusts.

Jefferson concludes the letter in an increasingly personal manner and is of less interest to the subject of Virtues & Talents.

Aristotle’s Rhetoric on Virtue

Here is the entire paragraph from which Charles Koch excerpts his quote:

The Noble is that which is both desirable for its own sake and also worthy of praise; or that which is both good and also pleasant because good. If this is a true definition of the Noble, it follows that virtue must be noble, since it is both a good thing and also praiseworthy. Virtue is, according to the usual view, a faculty of providing and preserving good things; or a faculty of conferring many great benefits, and benefits of all kinds on all occasions. [1366b] The forms of Virtue are justice, courage, temperance, magnificence, magnanimity, liberality, gentleness, prudence, wisdom. If virtue is a faculty of beneficence, the highest kinds of it must be those which are most useful to others, and for this reason men honour most the just and the courageous, since courage is useful to others in war, justice both in war and in peace. Next comes liberality; liberal people let their money go instead of fighting for it, whereas other people care more for money than for anything else. Justice is the virtue through which everybody enjoys his own possessions in accordance with the law; its opposite is injustice, through which men enjoy the possessions of others in defiance of the law. Courage is the virtue that disposes men to do noble deeds in situations of danger, in accordance with the law and in obedience to its commands; cowardice is the opposite. Temperance is the virtue that disposes us to obey the law where physical pleasures are concerned; incontinence is the opposite. Liberality disposes us to spend money for others’ good; illiberality is the opposite. Magnanimity is the virtue that disposes us to do good to others on a large scale; [its opposite is meanness of spirit]. Magnificence is a virtue productive of greatness in matters involving the spending of money. The opposites of these two are smallness of spirit and meanness respectively. Prudence is that virtue of the understanding which enables men to come to wise decisions about the relation to happiness of the goods and evils that have been previously mentioned.

Question: Why are productivity and voluntary trade absent from Aristotle’s list? Several of his virtues are economic: liberality, magnanimity, magnificence, and prudence. Ethical virtues would be justice, courage, temperance, gentleness, and wisdom.

Question: If courage is doing noble deeds in dangerous situations consistent with the law, how is gentleness defined so as not to conflict with courage? Aristotle does not define gentleness as he does with the other virtues.

More on Bastiat’s Selected Essays

The quote attributed to Bastiat is, “the surest way to have the laws respected is to make them respectable.” While a book of “selected essays” is referenced as the source, the quote comes from The Law, and here is the context:

The Results of Legal Plunder

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.

What are the consequences of such a perversion? It would require volumes to describe them all. Thus we must content ourselves with pointing out the most striking.

In the first place, it erases from everyone’s conscience the distinction between justice and injustice.

No society can exist unless the laws are respected to a certain degree. The safest way to make laws respected is to make them respectable. When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law. These two evils are of equal consequence, and it would be difficult for a person to choose between them.

The nature of law is to maintain justice. This is so much the case that, in the minds of the people, law and justice are one and the same thing. There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are “just” because law makes them so. Thus, in order to make plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it. Slavery, restrictions, and monopoly find defenders not only among those who profit from them but also among those who suffer from them.

Some observations:

• Bastiat assigns moral equivalence to losing moral sense and losing respect for the law.
• Law is assigned the purpose of maintaining justice, and defined purely as “organized justice.” Bastiat does not define “justice” in any of the 68 instances in The Lawwhere the term is used. However, we just encountered Aristotle’s definition of justice as “the virtue through which everybody enjoys his own possessions in accordance with the law.” This makes Aristotle’s conception of justice very economic, and is quite consistent with the way in which Bastiat uses the term. Of course, neither Aristotle nor Bastiat wrote in English, so I may be reading into this excessively.
• The equivalence of law and morality in the minds of people is so strong that a legal declaration of plunder find proponents in the ranks of the victims as well as the aggressors. In my own terms: the cattle love and appreciate the farmer who gives them so much, and would trample any cow or bull who would resist their chains.

More on the Theory of Multiple Intelligences

Howard Gardner goes into much more detail on each of the intelligences described in SoS. Here are a few notes from the brief excerpt available on Amazon:

• Gardner goes over the insufficiency of a single number (intelligence quotient) in predicting life success. Correlation to academic success is acknowledged.
• Linguistic Intelligence is embodied in poetry. (I would probably challenge this point, but possibly without success.) Language is primarily auditory-oral, and therefore encompassing tonality as well as word selection. This is consistent with the general practice of drawing conclusions about a person’s regional origin, intelligence, and intentions from factors other than the grammatical. However, Gardner specifically differentiates linguistic intelligence from the other auditory intelligence: Musical Intelligence, which is the ability to discern meaning and importance in arrangements of rhythmic pitches.
• Logical-Mathematical Intelligence.Differentiated from spatial intelligence. Defined in terms of order and objects, but how does this account for symbolic logic, especially when differentiated from spatial intelligence? References Piaget, who traces numerical realization to conclusions about order, patterns, and cause-and-effect relationships.
• Spatial Intelligence. Illustrated through questions on tests of spatial intelligence:
  
  
  Difference with logical-mathematical intelligence is elaborated upon as one of abstraction. Spatial intelligence remains firmly rooted in the physical, spatial world.
• Bodily-Kinesthetic Intelligence. An example of superior B-K intelligence is the mime. Gardner also points to artisans, athletes, and musicians who must exercise great control over their body.

MBM Blog (Rooted in Prosperity) Posts in Category “Virtue and Talents”

• Rules vs. Judgment, Continued 2/17/2011: DIscusses the problems of judicial activism: the replacement of generations of evolved consensual knowledge for the instantaneous judgment of a single individual and the increased arbitrariness of court rulings destroying the stability and order of the rule of law. Includes a Hayek quote on the chief requirement for capacity maximization (creativity? experimental discovery?) being the knowledge of what of the circumstances in the environment he can count on. [Reminds me of a letter from Ayn Rand to Bobby Fischer in which she poses a thought experiment where the rules of chess change every turn. How could a strategy for the game be developed?]
• Rules vs. Judgment 2/17/2011: Compared the “flexibility” of a personal budget to a more inflexible document like the constitution. Asks when rules should be followed and enforced vs. when flexibility is called for. Embeds a TED video about flexibility and the downsides of having rules for everything and compares it to F. A. Hayek’s perspective in Constitution of Liberty:The idea that each conflict, in law or in morals, should be so decided as would seem most expedient to somebody who could comprehend all the consequences of that decision involves the denial of the necessity of any rules….few beliefs have been more destructive of the respect for the rules of law and of morals than the idea that a rule is binding only if the beneficial effect of observing it in the particular instance can be recognized.Asks the question about who is right: Hayek or Schwartz.[While Americans consider themselves the most free people in the world, I am consistently amazed at the degree of restriction they are willing not only to endure but to embrace. It seems to coincide with the degree of hysteria which has developed in reaction to opinions contrary to what has been set by network executives as "moderate." Nietzsche may offer some perspective here with "master" morality and "slave" morality. With slaves, or those who have the outlook of slaves, the most important consideration in any action is the intention, regardless of consequence. With someone with the outlook of a master, what matters is the effect of the decision. Adam Smith, with his invisible hand, had a master's morality. He understood that selfish conduct could be beneficial effects, and was therefore good. Most Americans seem to have a slave morality. Can a group with a slave's outlook thrive in a principle based culture? Can people who act in order to avoid blame have a master morality? Can the slave morality be so easily changed in order to enable a principle-based culture? I do not know the answer.]
• Finding the Right Passion 2/14/2011: Covered this post in the “Vision” notes.
• Sea Stories: Tales of a High School Entrepreneur 1/10/2011: Covered this post in the Vision notes.
• The Art of MBM: “… and Justice for All” 1/7/2011: Nothing to note.
• Leadership Tools 12/15/2010: Links to this hilarious video about the use of clipboards in leadership. Even funnier: the video is a spoof, but the poster and commenters take it seriously.
• Culture is Priority One 11/15/2010: Videos of Tony Hsieh and why and how he makes culture first priority at Zappos. Interesting point: they offer people $2000-3000 to quit after the first couple of weeks. Offer has been raised over the years since not enough people took the offer. Since customer service is at the center of the culture, every employee spends 2 weeks taking customer calls. Another interesting point is the “culture book.” All employees write a few paragraphs about what Zappos culture means to them and is the published unedited by department and published. Also has a page for the 500 employees active on Twitter that aggregates tweets.
• MBM Readings 8/3/2010: List of recommended further reading in each of the framework elements.
• Rule of Law 7/13/2010: Points out parking meters in Arlington, VA which have stickers stating “all may park, all must pay.” Contrasts to practices in New York City.
• Grounded in Reality 6/7/2010: Reviews a movie about Enron and contrasts culture with MBM guiding principles. Asks some good questions. Interesting comment by Drew Battista as well:During 2000-2001, prior to my employment with GP/KII, I had quite a bit of interaction with Enron employees. Two small observations that may be worth sharing with the Associates.1. I saw the personalities of several very bright, talented, young people devolve in dramatic ways. The loss of integrity and humility, in particular (in such a short span), bears witness to the comparison to Milgrom’s experiments.2. When discussing Enron’s commodity hedging programs with other (non-Enron) industry folks, the conversation often ended with the observation, “Either those guys are geniuses or they’re making some big mistakes … but they seem rather smart.”Given that Enron employees were hostile to challenge and clever at side-stepping serious inquiry, any sort of whistle-blowing must have been rather more difficult than usual.
• Hunches 5/31/2010: While hunches are often valid, a principled entrepreneur must follow up on hunches by applying economic and critical thinking skills before acting.
• Reviews 5/26/2010: Refers to performance reviews. Brings up an interesting potential perverse incentive: does a confidential 360-style annual performance review dis-incent continuous feedback throughout the year. [I believe it does. I have attempted to atone for my own poor performance in writing annual feedback reviews by sending frequent SBOs, both positive and opportunity-oriented, throughout the year and copying supervisors.]
• Pause 5/5/2010: Asks questions about “Knowledge.” Really doesn’t touch on V&T.
• On Interruptions 4/14/2010: Links to a BigThink video Why You Can’t Work at Work, which is highly anti-interruption. Talks about tradeoff between interruptions and productivity. [Agree with author. Raises another question: what about principled entrepreneurship and sense of urgency? Am I always working on the most value-added work, with absolute certainty that nothing is important enough to interrupt me? How would I respond to equipment or safety issues, where the value of information preservation is very time-sensitive, if I could not be interrupted?]
• Looking Busy 11/24/2008: We need all of our efforts on creating value. We can’t spare a single minute looking busy.
• On the Integrity of Nations (and Business) 6/2/2008: Power and freedom of action seem to occur with the abandonment of integrity, but it is actually planting the seed of downfall. Charles Koch: “If we wanted to make a quick buck, then we would just rob banks.” Mentions the mutual non-aggression pact between Germany and the USSR in 1939 that was abandoned in 1941 because neither side intended to follow the agreement. [This is an incredibly oversimplified view of WW2 history!!! Some simplification is always necessary, but this leaves out significant factors necessary to the understanding of relations between Germany and the USSR beyond "lack of integrity on both sides"!!!)
• A Cautionary Tale 3/23/2007: Jim Cramer admits in an interview that he was deliberately dishonest in his responsibilities work in hedge funds. Talents were not matched with virtues.
• The Trouble with Blind Loyalty 3/19/2007: Managers must beware of expecting blind loyalty when their reports disagree with them. Subordinates must exercise caution against seeing things they know their boss wants out of a sense of loyalty.
• Profit and Ethics 3/7/2007: Ethical lapses often occur when people can not figure out how to create real value or a business model isn't working. [Ties knowledge in to value creation in a way I haven't considered. Is it worth it to pay any price to keep a failing business—one that isn't creating enough value for customers given the resources required—alive?] Quote: “Effective entrepreneurial action produces profit, making unethical behavior a waste of time. A culture infused with strong principles, meanwhile, makes unethical behavior a non-starter. One of the advantages of building a company based on principled entrepreneurship, then, is that it will be filled with people who, most importantly, will not tolerate any violation of law or integrity, but also who would never need to do such a thing, because they are focused on creating genuine value for customers.” Challenge: Would Koch Industries have complied with the positive obligation of the Fugitive Slave Act prior to 1865?
• The Entrepreneurship/Culture Connection 8/17/2005: Typical explanations of variability in entrepreneurship point to systematic factors such as tax rates, regulations, etc. However, culture plays a role, and entrepreneurship tends to attract entrepreneurship. [In the United States, almost all children have 13-17 years to absorb a message that minimizes at best and demonizes at worst inventors and entrepreneurs. Schools are structured so that children are taught by a licensed, credentialed bureaucracy designed to produce more bureaucrats and conformists. There is no way that an accomplished outside professional could ever get a job as a full-time educator in a public school, even if they wanted to and were willing to take the pay cut. This is why I will not in any way support public education beyond what I am forced to contribute by the law. It is the single most damaging institution in the history of the country.] Points out that talking culture is not as effective as well-designed incentives.
• Leading Change 7/27/2005: Quote from an interview:Change initiatives only take root through a well-functioning top team and committed leadership across the organization….And in each of the big boxes of the organizational chart, you must have people…who not only support your business but share your values.Obviously, there are healthy tensions…If necessary, you have to get rid of individuals — even the talented ones — who quarrel and cannot work together.  If you choose the right people, everything else is a lot easier.You also have to be clear about which responsibilities are individual and which are collective….That calls for a compensation mechanism that simultaneously rewards personal results, groups results, short-term results, and long-term results.
• Employee selection – reducing the gamble 7/3/2005: Points out the 21% of respondents of a certain survey lied to get a job, and asks how to reduce the risk of hiring liars. I recall interviewing one individual who clearly misrepresented their experience on their resume, and every other individual on the interview team was able to identify this independently. The SBO questioning process check seems to work much better than a background check.
• What Makes MBM So Great? 7/1/2005: Broken link to a book review that complains about the cost/benefit ratio of college education and asks what a practitioner of MBM would think. In my opinion, a practitioner of MBM would calculate the complete opportunity cost of college and then weigh the net present value and IRR against the best alternatives: skilled trades, or starting a business with high social (but not financial) barriers to entry such as daycare or sewage. For a liberal arts, social science, business, or psychology degree, they would probably conclude that college does not have a good return on investment. For engineering, law, medicine, or an MBA from a top-tier school, the results would probably be in favor of more education. The data is out there. The BLS Occupational Outlook Handbook has great information on pay and working conditions in a variety of occupations. However, the title implies that the viewpoint of the book review author is not valid and the question is rhetorical. The impact of college debt on the current generation is becoming mainstream knowledge to a greater extent than 2005. There is even a trend in men breaking off relationships with women who have too much debt and not enough career to cover it. The title of this post really does not advance our knowledge or add useful perspective to the question raised, however ineffectively in the excerpt, by the book reviewer.
• Book Review: Winners Never Cheat 6/1/2005: See book listing on Amazon. Quote: “He articulates that what’s needed in today’s business environment is a booster shot of commonly held moral principles from the playgrounds of youth:  be fair, don’t cheat, play nicely, and tell the truth.”

Interesting Posts from “Quiet: The Power of Introverts” That Relate to Virtue & Talents

This blog, linked to from the MBM Blog, presents a very politically-incorrect picture of introverts and their capabilities.

• Why Nerds Are Unpopular 2/24/2011: Nerds are unpopular because they do not wish to be popular. They do not focus their efforts outwardly. They may think they want to be popular, but they do not wish to pay the price. The opportunity cost—a significant amount of hard work—is too high. Example: navigating the Byzantine rules of girls’ fashion at the junior- and high-school level. A very interesting point was comparing the adult world to high school: when adults congregate, they tend to have a purpose, and those who are best at achieving it become leaders. Most schools have no purpose, so hierarchy becomes the purpose. Like in the time of Louis XIV, there are no external enemies, so everyone is at each others’ throats.
• “Some People Are More Certain of Everything Than I Am of Anything” 2/22/2011: Uncertainty is associated with introverts, but the culture of America values straight-talking self-confidence. Counters that people who are unerringly self-confident are probably glossing over ambiguities.
• Why Our Leaders Aren’t More Creative (and What to Do About It) 2/3/2011: Introverts are more creative, isolation is a success enabler for creativity, and extroverts tend to be better career ladder climbers. Consistent with my observation that original thinkers are eccentric. (Would I want to “report to” Albert Einstein? Isaac Newton? John Boyd? Wolfgang Mozart?) Also presents the idea that original thinkers are not “goal oriented” (result-oriented?) in the same way that traditional leaders (certainly projecting, goal-oriented, speech-making, troop-rallying) are. Mentions that today’s “team-based” organizational culture is uncomfortable for introverts.