Capitalism, unions, equality, the fallacy of the average and mediocrity

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A short caveat: while this post is not totally unrelated to my regular line of writing, it does somewhat detaches from my usual subject matter and is focused more on personal doubts, questions and thoughts and less on practical implications.


I see myself a capitalist. I believe in its basic premises. And while my views have become less extreme in the last few years and I do think there is a need to rethink and change some of the basic practical behaviors we derive from the concept, it is still a part of how I define my world views.

Within this framework I have always wondered about the idea of work unions. On a very shallow level it seems incompatible with the some of the ideas I used to think capitalism represented, so in my younger years I immediately thought of unions as something wrong. However, over the years I understood the importance of mechanisms that will put some balance into the capitalist system so it will not undo itself. Having said that, maybe because of my biased viewpoint, wherever I looked I saw unions resisting change and progress, upholding stupid rules (see this Gates talk on TED for some examples) and keeping the interests of the top quartile of employees instead of those who actually need protection. This has always bothered me.

Lately, because of current political and economic issues in Israel, I have been thinking about this issue quite a bit. This week, while listening to a freakeconomics podcast about the negotiations between the NFL league and the players union (negotiations, many of the players themselves are not privy to) I came to a realization that what troubles me about unions is something that has been troubling me about other fields as well. The misuse of the idea of equality. I have written before (see also here):

Equality is an important concept in many aspects of life, especially in the legal field, I know so well, as a former lawyer. But in real life, because equality is intertwined into our thinking DNA it is used in ways that many times hinders excellence. All men are not born equal. Whoever tells you that is lying. All man should deserve an equal opportunity to excel, to be happy and to use their comparative advantage. That is the truth. And there is a big difference between the two.

In western societies, equality is part of the ethos. People fought for the right of equality for ages and it is so commonplace and understood (even if not completely practiced) we regard it as a given right. The quotation “All men are created equal” is arguably the best-known phrase in any of America’s political documents. And if all men are created equal, they should be treated as equal in the workplace as well. And they think as themselves as equal. And this creates problems. Because we are not equal. We are unique. Special. With different talents, skills, perspectives, life experiences, likes and dislikes. And that means that treating us as if we are the same is wrong.

In the case of unions, the idea of equality means that unions can act like all workers are equal. If they are equal, they can talk about the average worker. It is a classic case of the fallacy of the average. Because of everybody is equal and we are taking care of the average worker we are losing the individuality. And that is the fastest way to mediocrity.

In Practical Wisdom: The Right Way to Do the Right Thing, Barry Schwartz and Kenneth Sharpe write:

That’s what Aristotle meant when he said that practical wisdom as opposed to a universal rule was necessary because of the priority of the particular. A wise person knows how to do the right thing, in the right way, with this person, in this situation. To be wise, we need cognitive and perceptual machinery that picks up on similarities without being blind to differences.

I am not an expert on the issue of unions, their history and their contribution to society. I am also not against the idea that workers should be protected to some degree and have a right to be represented. I do resent the fact that some unions focus their attention on keeping the status quo and base their thinking on a misconception of equality that leads to a discussion of averages. In general, the work of any leader, political, business, union or other, is to balance similarities and differences. I am not sure that many of the union leaders or those that sit with them to the table of negotiations are actively thinking of this balance. What will happen if both sides of a labor dispute (or even better, prior to the dispute) will start doing just that? Isn’t it worth a try?


The last ten percent

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A few weeks ago Seth Godin wrote about the last ten percent. The part of the work that is the hardest to do but makes all the difference. The change from standard to excellent. The change from ordinary to extraordinary.

The last ten percent is the signal we look for, the way we communicate care and expertise and professionalism. If all you’re doing is the standard amount, all you’re going to get is the standard compensation. The hard part is the last ten percent, sure, or even the last one percent, but it’s the hard part because everyone is busy doing the easy part already.

As I see it, a few question come out of this type of thinking:

  1. Do you know how to recognize the difference between the standard and the last ten percent in what you do? Do you know what the little things that make a difference are?
  2. Answer honestly now: in how much of your work do you put the effort of the last ten percent?
  3. If you don’t, do you ask yourself why?
  4. If you can’t because it’s hard or you don’t know how, what are you doing about it?
  5. If you can’t because you are not the right person to for it, do you make sure to find the right people to collaborate with in order to take care of last ten percent?

My bottom line take: find the one place you feel comfortable doing the last ten percent and focus your attention on it.


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Compromise or tradeoff?

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Two seemingly unrelated posts I read this week made me think again about an issue that I think is at the heart of business strategy and leadership. Tradeoffs and priorities.

In the first post, Hugh MacLeod describes the decision Howard Schultz of Starbucks tells about in his book, Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time. Sometime in the 1980’s it was a really bad year for coffee crops. Starbucks had to make a choice. Either raise prices or start using cheaper coffee. Research said that using poorer coffee will only be felt by 10% of customers (as a non-coffee drinker, this number surprised me a little) while raising prices would be felt by all costumers. This is how Hugh described what happened:

The accountants, predictably, recommended that they go with the cheaper coffee option. Numbers don’t lie etc, it was better to tick off 10% of their customers than 100% etc, cheaper coffee was the “obvious” thing to do etc etc.

Howard didn’t do that in the end. Instead, he raised the prices accordingly, and left a note in every store, telling people why his company was forced to regretfully raise their prices. And he also told them about the option he could’ve taken but chose not to i.e. cheapen the coffee.

And you know what? The customers understood his reasoning, and stood by the business.

Eventually wholesale coffee prices came down again, allowing Starbuck’s to lower their prices as well. The company weathered the storm and the brand ended up all the stronger for it. Life was good again.

Sorry, Bean Counters. Numbers do lie. Sometimes pathologically so…

The other post was written by Jon R. Katzenbach and Zia Khan on they describe what they call “Proud to be Cheap: The “Secret Sauce” of Low-Cost Winners”. Most companies engage in cost cutting and try to reduce costs. But some companies, Katzenbacha and Khan claim, have it as part of their D.N.A:

In a nutshell, it is a culture that is “proud to be cheap” in good times and bad. Their people cut erasers in half, turn off the lights when they leave the building, bring their lunch to work, fly in the back of the bus, and stay in Day’s Inns. More important, they are always on the alert for ways do things on the job more cheaply, without compromising quality and service standards. Nothing is wasted, nothing is redundant, and nothing is overlooked when it comes to doing it on the cheap.

These seem to be two very different stories. But actually, they are the same. It is the stuff success is made of. Tradeoffs. Priorities. Consistency. Average is the most dangerous path. If you do something, go all the way. Pure you heart into it. Make everything about your concept. Build the decision around it. Sure, at times it might not seem like a good idea. At times, everybody will tell you that you need to settle. That principles are good but they don’t provide a living or they don’t satisfy the shareholders they will say. I think it is all nonsense. Ignore Everybody.

The problem with stories about companies’ strategies and CEO’s decisions is that sometimes they seem distant. How many of us are going to be CEO or make decisions that have so much impact? In this case? Every day. Every one of us makes many choices every day. And each of these choices could be comprise or could be a tradeoff. What will your next decision be?


<a href=”″>Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time</a><img src=”; width=”1″ height=”1″ border=”0″ alt=”” style=”border:none !important; margin:0px !important;”

Initial thoughts after Seth Godin’s #Linchpin launch presentation


Today I attended Seth Godin’s launch of his new book – Linchpin. I am in the process of reading the book and I guess I will write about it a lot in the next few days/weeks, but for the mean time, I just wanted to share some quotes from the presentation that especially resonated with me. Many times during the presentation and going through the book I felt that many of the things I write about in this blog are explained by Godin (better of course, it is, after all, Seth Godin).

Should managers transform employees into Artists?

One of the main themes Godin talks about is the idea of Art. Not art in the meaning we all think about, but Art as anything creative, new, that changes the world and connects people. And one of the main things about artists is, as Godin put it today’s presentation is that they do their work without rules or manuals. This resonated with me as in the last few weeks I have been advocating here that managers should stop trying to create rules (also see here) with the original post being inspired, but Godin himself.

In his talk today Godin showed me another aspect of the same idea. If managers stop trying to create rules they will help take away some of excuses employees make against being remarkable and help them become … Linchpins (I urge you to look for the dictionary definition or better yet, buy the book). We need more workers who are artists. Godin points a finger to each and every one of us to take up the cause and become an artist (or Linchpins or Geniuses). I point my finger to managers. If there is one person who can help your employees become a Linchpin it is you. So why don’t you start by stopping with the rules. As Godin said today:

If you can write down what you do I can find someone else to do it cheaper.

How do you make sure your employees can not be replaced by someone cheaper? What will happen if you help them transform into something indispensable?

Don’t ignore them if they fit in, better yet – don’t let them fit in

Another saying that deeply resonated with me in today’s presentation was this sentence:

The reason they want you to fit in is that then they can ignore you!

Now Godin meant this sentence to say that you should not fit in. You should try to become indispensable, a Linchpin. It made me think of something else. This is what I wrote a while back about how managers ignore those who are doing OK:

Managers concentrate on trying to “help” the struggling workers. Those who under perform. They think to themselves, hey – that guy who is doing OK doesn’t need me, he is doing OK. So they ignore him and work with the struggling guy. How does that make that make the “OK guy” feel? What is the message that this kind of behaviour sends to him? How does this affect his perception?

What is the problem with this scenario? Not only is the “OK guy” not being recognized, he is also doing OK. OK is not enough. A manager’s job is to make him excel. Average, is not enough. Helping employees excel starts by noticing and letting our employees know that we noticed. This is the basic elements of employee engagement and employee recognition.

Godin got it just right. We ignore those who fit the mold. We let them stay in their mediocrity and put our efforts somewhere else. If you are a cog doing its job, I, the manager, can ignore you. I want peace and quiet. And when employees only get management attention when they are out of line, they start doing everything they can to not be noticed by management – that means no risks, not extraordinary thing. Mediocrity. Management failure.


Lessons about Business in Asia – it is not different

As I mentioned in my last post, in the last three weeks, I have been visiting Singapore and India as part of a International Business in Asia course (part of my AGSM MBA). While I have accumulated many ideas for new posts in the last few weeks, I think there is no better was to restart my posting than with a post that summarizes my main learnings from the trip.

Everybody talks about how different Asia is. About how business in India, China, Singapore or any other country in Asia is totally different then the western way of doing business. This is the frame of mind that I came with to a n educational trip in Asia (Singapore and Mumbai). However, I discovered  that there are no differences! Business is business. Everywhere.

“This guy is crazy”, you must think to yourselves. “Everybody knows that there are cultural differences and that companies have failed because they did not understand these differences”. And my answer is… You are completely right. Well, expect about the crazy part…

I am not saying that the countries are not different or that you do need to respect diversity before you venture into a new market. I am just saying, that this is what you would do when you will go to every country in the world. East or West. Let me go over some of the lessons I learned and try to explain this idea  a little more thoroughly:

1. Respect for the local culture – the fact that people from different countries differ from one another in habits, behavior, communication and heritage.  And companies should be careful not to make the assumption that if something works in one market, it will work in another. There is a need to first understand the culture, then tweak and customize the products and services to the local culture. However, this is true to any other “western” country. IKEA had to change its offerings when it came to the states. Starbucks failed when it came to Israel. No one would try to sell exactly the same thing in France and in Germany. Lesson: When you go into a new market, start by re-examining all your assumptions about customers. It is true in Asia as it is in any other place. Not doing it is just bad business.

2. Local differences – a theme the came up again and again in the trip is the diversity inside some of the countries. There are many Chinas and Many Indias was the theme. South India is not like North India. Different languages, different foods, different costumes and holidays. And again, the European market is not the same all over Europe.  Products that work in the UK do not necessarily work in Belgium. There are differences in foods and languages even inside some the European countries. The American market is not the same all over the states as some companies realized when tweaking their products to the Hispanic market in California and the Cuban market in Miami. Things that work in New-York will not necessarily work in Lo-s-Angles. Looking at countries as one segment or market is just not smart business. Lesson: Beware of the fallacy of the average (in the wider sense of the term – and see an interesting perspective of this here).

3. Time, Time, Time – people expect immediate successes. In real life going into a new market, starting a new business and overcoming cultural barriers take time. You wont succeed over night in the west. You will not succeed overnight in the east. Don’t let anybody else tell you otherwise. Lesson: Size of market does not guarantee immediate success no matter where you do business. Patience and perseverance are the keys to success (and see point number two again to understand why the size of the market is in some ways, a myth).

4. People are people – as this blog concentrates on managing people I tried to understand all through the trip if the difference in the culture has an impact on the principles of people management. Does people motivations for work differ? Does the role of a manager or a leader in these countries differ? My answer is – no, it does not. You will find the same diversity of people in Asia as you will find anywhere in the world and there is a need to understand it and leverage it. True, as a whole, Indians are more entrepreneurial in nature than Chinese and Chinese are more bound by conformity, but this is only as a whole. In the individual level, which is the most important level for the manager, people still vary. In this sense, sensitivity to communication methods is vital and understanding the preferences of each individual becomes even more important. Lesson: Managers face the same challenges everywhere, even though the tactical problems might appear to be different.

Countries and people are different. However, they are different in the same way everywhere. Smart business uses good processes and ignores assumptions and attempts to copy models from one market to another. This is true everywhere in the world.


Is money equals motivation a conventional wisdom we have to break?

The last few days I have been reading the book Predictably Irrational, by Dan Ariely. It describes many experiments done over the years that illustrate how people behave in irrational ways when we – and when I say we I mean traditional economics – expect them to act like rational people. While I don’t agree with some of the conclusions Ariely makes in his book, I find the questions fascinating. Thus, I am going to dedicate my next few posts to relevant lessons for managing people the book.

Chapter 4 of the book is called: “the cost of social norms – why we are happy to do things, but not when we are paid to do them”. In it, Ariely describes a number of experiments that show how when people are paid to do things, they do them with less enthusiasm and effectiveness. It reminded me of the above fascinating TED talk by Dan Pink that talks about similar experiments that led to similar (but a little different) conclusions. Both Ariely and Pink conclude that we need to rethink the effectiveness of money as a motivator for work.

So, is money being the best motivator another conventional wisdom that needs breaking.  Well, I will let my past as lawyer get the better of me and say – yes and no.

Yes, because we need to realize that the world is changing. That some things that we thought were true are not true anymore. There is a growing tendency of people to seek out work that not only gives them money, but also gives them joy, a sense of impact and work life balance. People look to use their strengths more and attempt to reach a state of flow. And we need to understand that money creates problems, because it is easy to compare (link in Hebrew). I would direct you to Ariely’s first chapter in the book about relativity.

But the answer is also no. in some situations, monetary rewards work. And when we think about these experiments we need to remember a few things. First, the experiments described in Ariley’s book and in Pink’s lecture are experiments, done in a lab, on students and not in a real work environment. Real life is different and we need to be careful in applying the lessons learned in the lab without thinking about the differences between students in the lab and real life work environment. Second, these experiments are social science experiments. They don’t have one result. They check for averages. And averages are sometimes dangerous. The experiments show trends. They show tendencies. But they don’t show how all people behave in all situations. And we know that monetary rewards do work in certain circumstances. As Paul Hebert from I2I explains, although there are some accurate things in Dan Pinks’s lecture, we must be careful when taking it as saying all monetary rewards are bad. Below is his presentation on how to look at incentive reward strategies within the context of how business operates:

From all the theories of motivation I encountered to date, the one I like the most is Vroom’s expectancy theory.  The reason I like it so much is that it talks about personalization. About understanding each employee specific motivation and about customizing the right rewards, invectives, and recognition, in order to motivate him. And I think this is the most important lesson from the science and experiments. We should be careful from applying one approach. We should doubt and check if what we are doing actually works. And the most important thing of all, we should not assume what motivates people, we should find out.


A culture of excellence with an emphasis on hiring practices


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Two independent posts that I have read in the last few weeks have connected in my mind. The first is Auren Hoffman’s quote of Netflix’s value system. It is worth a read, but this is my favourite part:

In many companies, adequate performance gets a modest raise. At Netflix, adequate performance gets a generous severance package. For us, the cost of having adequate in any position is simply too large, when we could have extraordinary

So many times in life we settle for mediocre. For average. Because it is easy. I would like to say, I never do it. But I do. That does not mean it is the right thing to do. We do it, because we conceive mediocre or average with low risk. But good enough is the riskiest option you can take.

Too many companies settle for good enough. They don’t invest in their hiring process because it is hard. Because hiring somebody who looks to be right for the job is a shorter process. But it isn’t. I have taken part in such hiring processes. It is disappointing.

And this is where the second post comes in. Jon Gordon writes about getting the right people on the bus.

This principle of identifying the right people was echoed by the Director of Learning at the Ritz-Carlton Hotel Company. He told me how the Ritz has saved millions of dollars by identifying the key characteristics, strengths and traits of each job/position at the hotel and then creating a benchmark that every potential employee is measured against. Utilizing a company called Talent Plus they interview each potential employee and then identify how they measure up to the benchmark of the position they are applying for. As a result they are better able identify who the right people are for each job at the hotel

Creating a culture of greatness is not an easy task for any company. But I believe that the first few steps are to start treating adequate performance as inadequate. The second is to start thinking about how to hire the right people. Even if it means giving them a 1000$ bonus to leave after the first week on the job.  It is important to note that these two ideas do not mean that we must hire only the best or smartest people. Just those that have the best fit to the company’s culture and are willing to do the best and strive for excellence.

So, what have you done to promote excellence in your company?