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How to measure your life

Page history last edited by kimsia 11 years, 2 months ago

By Clayton Christensen

 


 

At the tenth year school reunion with classmates from HBS, many of my classmates despite outstanding professional accomplishments were deeply unhappy.

 

I know for sure that none of these people graduated with a deliberate strategy to get divorced or lose touch with their children -- much less to end up in jail. Yet this is exact strategy that too many ended up implementing.

 

In my MBA Course, Building and Sustaining a Successful Enterprise, we study theories regarding the various dimensions of the job of general managers. These theories are statements of what causes things to happen -- and why.

 

The students learn that a robust theory is able to explain what has and what will occur across the hierarchy of business: in industries; in the corporations within those industries; in the business units within those corporations; and in the teamas that are within the business units.

 

On the last day of my class after I've summarized the what so frequently happens in the lives of our graduates, we have taken the discussion a step further. Rather than use businesses as the case studies, we use ourselves.

 

To help structure the discussion, I write the theories we have studied along the top of chalkboard. Then I write three simple questions beside those questions:

 

How can I be sure that

  • I will be successful and happy in my career?
  • My relationships with my spouse, my children, and my extended family and close friends become an enduring source of happiness?
  • I live a life of integrity -- and stay out of jail? 

 

 

The difference between what to think and how to think

There are no quick fixes for the fundamental problems of life. But I can offer you tools that I'll call theories in this book, which will help you make good choices, appropriate to the circumstances of your life. 

 

I showed Andy of Intel a diagram of my theory of disruption.

 

Ten minutes in, Andy interrupted impatiently: "Look, I've got your model. Just tell us what it means for Intel."

 

I said, "Andy, I can't". I told the story of the steel mill industry and how Nucor and other steel mini mills disrupted the integrated steel mill giants.

 

When I finished the mini-mill story, Andy said, "I got it."

 

Andy has forgotten more thant I will ever know about his business. Instead of telling him what to think, I taught him how to think.

 

I don't have an opinion. The Theory has an Opinion.

 

A good theory doesn't change its mind: it doesn't apply only to some companies or people, and not to others. it is a general statement of what causes what, and why.

 

I presented the same theory to WIlliam Cohen, Secretary of defense in CLinton administration.

 

USSR was the high end problem. Cohen was worried that everything about the way they do their jobs is focused on the high end of the problem and not the low end -- the local policing forces and terrorism.

 

On the surface, competition in computer chip market and proliferation of global terrorism could not seem like more different problems to tackle. But they are fundamentally the same problem, just in different contexts. Good theory can help us categorize, explain, and, most importantly, predict.

 

Consider mankind's attempts to fly.

 

Early researchers observe a strong correlation between having feathers, and wings and flying itself. The breakthrough came from Daniel Bernoulli and his book Hydrodynamica, a study of fluid mechanics.

 

We had gone from correlation (wings and feathers) to causality (lift).

 

But even then the breakthrough understanding of cause of flight still wasn't enough to make flight perfectly reliable. Researchers need to define what rules pilots needed to follow in order to succeed in each different circumstance. 

 

That is a hallmark of good theory: it dispenses its advice in "if-then" statements.

 

The appeal of easy answers -- of strapping on wings and feathers -- is incredibly alluring.

 

Solving the challenges in your life requires a deep understanding of what causes what to happen.

 

You might be tempted to try to make decisions in your life based on what you know has happened in the past or what has happened to other people. You should learn all that you can from the past. This does not solve the fundamental challenge of what information and advice you should accept, and which you should ignore as you embark into the future.

 

There can be multiple theories that provide insight. E.g., it took resistance, gravity, and Bernoulli's thinking to fully explain flight.

 

Using robust theory to predict what will happen has a much greater chance of success.

 

One of the best ways to probe whether you can trust the advice that  a theory is offering you is to look for anomalies -- something that the theory cannot explain. Ostriches have wings and feathers but can't fly. Bats have wings but no feathers, and they are great fliers. FLying squirrels have neither wings nor feathers and they get by.

 

Finding happiness in you career - Section I

 

What makes us tick

Frederick Herzberg wrote motivation theory or two factor theory.

 

True motivation continues in good times and bad.

 

Herzberg noted the common assumption that job satisfaction is one big continuous spectrum -- starting with very happy on one end and reaching all the way down to absolutely miserable.

 

This is not actually the case. Instead satisfaction and dissatisfaction are two separate, independent measures.

 

Two factors: Hygiene factors and motivation factors.

 

Hygiene factors are status, compensation, job security, work conditions, company policies, and supervisory practices.

 

Bad hygiene factors causes dissatisfaction.

 

The best you can achieve with hygiene factors is that you won't hate the job.

 

The opposite of job dissatisfaction is NOT job satisfaction. It is merely an absence of job dissatisfaction.

 

Having good hygiene factors alone will not make you love your job. THey will just stop you from hating it.

 

Motivation factors include challenging work, recognition, responsibility, and personal growth.

 

Many of my peers had chosen careers using hygiene factors as the primary criteria: income was often the most important of these. on the surface, they had lots of good reasons to do exactly that. 

 

"Don't worry this is just for a couple of years. I'll pay off my loans, get myself in a good financial position, then I'll go chase my real dreams." is a common retort.

 

It was a reasonable argument. After some time, it became, "just one more year..." it will not be too long before some of them privately admitted that they had actually begun to resent the jobs they'd taken.

 

The problems start occuring when money becomes the priority over all else, when hygiene factors are satisfied but the quest remains only to make more money.

 

Even careers that seemed to specifically focus onmoney, like traders and salespeople, they are subject to these rules of motivation.

It is just that in these professions, money serves as a highly accurate yardstick of success. Traders, for e.g,, feel success and are motivated by being able to predict what is going to happen in the world and then make bets based on those predictions. 

 

If you get motivators at work, Herzberg's theory suggests that you are going to love your job even if you're not making piles of money.

 

The Balance of Calculation and Serendipity

 

Henry Mintzberg taught options for your strategy spring from two sources: 

 

  1. the first source is anticipated opportunities. When you are pursuing these, you are pursuing a deliberate strategy.
  2. the second source is unanticipated opportunities

 

Honda originally planned to sell big bikes in America in the 1960s. That was their deliberate strategy. However, through some twists and turns, their profitable strategy was to sell smaller bikes called Super Cubs.

 

The unanticipated problems and opportunities then essentially fight the deliberate strategy for attention, capital, and hearts and minds of the management and employees. The company has to decide whether to stick with the original plan, modify it, or even replace it altogether with one of the alteratives that arises. The decision is sometimes an explicit decision; often, however a modified strategy coalesces from myriad day-to-day decision to pursue unanticipated opportunities and resolve unanticipated problems

 

When strategy forms this way, it is known as emergent strategy.

 

When the company's leaders made a clear decision to pursue the new direction, the emergent strategy becomes the new deliberate strategy.

 

The process of strategy then reiterates through these steps over and over again, constantly evolving. In other words, strategy is not a discrete analytical event -- something decided, say, in a meeting of top management based on the best numbers and analysis available at the time.

 

Rather, it is a continuous, diverse, and unruly process. Managing it is very hard --- the deliberate strategy and the new emerging opportunities fight for resources.

 

On the one hand, if you have a strategy that really is working, you need to deliberately focus to keep everyone working together in the right direction.

 

At the same time, however, that focus can easily cause you to dismiss as a distraction what could actually turn out to be the next big thing.

 

It may be challenging and unruly, but this is the process by which almost all companies have developed a winning strategy.

 

I'm always struck by how many of my students and other young people I've worked with think they're supposed to have their careers planned out, step by step, for the next five years. 

 

Underlying this belief is the implicit assumption that they should risk deviating from their vision only if things go horribly wrong.

 

But having such a focused plan really only makes sense in certain circumstances.

 

If you have found an outlet in your career that provides both the requisite hygiene factors and motivators, then a deliberate approach makes sense. But if you haven't reached the point of finding a career that does this for you, like a new company finding its way, you need to be emergent.

 

This is another way of saying that if you are in these circumstances, experiment in life. As you learn from each experience, adjust. Then iterate quickly. Keep going through this process until your strategy begins to click.

 

Hopefully you will find a field where you can maximize the motivators and satisfy the hygiene factors as you go through your career. But it's rarely a case of sitting in an ivory tower and thinking through the problem until the answer pops into your head.

 

Strategy almost always emerges from a combination of deliberate choices and unanticipated opportunities.

 

What has to prove true for this to work?

 

Of course, it's easy to say to be open to opportunities as they emerge. It's much harder to know which strategy you should actually pursue.

 

There is a tool that can help you test whether your deliberate strategy or new emergent one will be a fruitful approach.

 

Ian MacMillan and Rita McGrath called it "discovery-driven planning". Easier to think about it as "What has to prove true for this to work?"

 

Companies make decisions to go ahead with an investment based on what initial projects suggest will happen but then they never actually test whether those initial projections are accurate. So, they can find themselves far down the line, adjusting projections and assumptions to fit what is actually happening, rather than making and testing thoughtful choices before they get too far in.

 

Disneyland Paris lost 1 billion dollars in the first two years because they assumed that people will spend on average 3 days  with 11 million visitors a year just like the other Disney theme parks.

 

It turned out that there were 11 million visitors in first year, but they stayed on average 1 day. 

 

Disneyland Paris had 15 rides. The other parks had 45 each. Some person down in the organization made an unconscious assumption about Disneyland Paris  being the same size as the other parks. That assumption got embedded in the numbers. The folks at the top didn't even know to ask, "What are the most important assumptions that have to prove right for these projections to work -- and how will we track them?" 

 

Before you take a job, ask yourself, "What are the assumptions that have to prove true in order for me to be able to succeed in this assignment?" List them. Are they in your control?

 

Equally important, ask yourself what assumptions have to prove true for you to be happy in the choice you are contemplating.

 

Every time you consider a career move, keep thinking about the most important assumptions that have to prove true, and how you can swiftly and inexpensively test if they are valid. Make sure you are being realistic about the path ahead of you.

 

Your strategy is not what you say it is

You can talk all you want about having a strategy for your life, understanding motivation, and balancing aspirations with unanticipated opportunities. But ultimately, this means nothing if you do not align those with where you actually expend your time, money, and energy.

 

In other words, how you allocate your resources is where the rubber meets the road.

 

Watch where your resources flow. If they're not supporting the strategy you've decided upon, then you're not implementing that strategy at all.

 

Kevin Goodman, CEO of SonoSite, knew that Sonosite needed to sell their portable, but less sophisticated iLook over the more powerful and profitable Titan before a competitor came in and disrupted them. Both Titan and iLook are products of SonoSite.

 

Salesmen of SonoSite completely ignored promoting the iLook, even though it was a strategic priority for SonoSite.

 

The problem was, the salespeople were all on commission, and success for them was defined by the total value of their sales and gross margin dollars. It was much easier for Goodwin's best salesman to sell one Titan than it was to sell five iLook.

 

Paradox of Resource Allocation

This conflict was not an inadvertent oversight. It is a pervasive paradox. THe company's income statement highlighted all the costs that the company was incurring. It also showed all the reveneues that SOnoSite needed to generate day in and day out, in order to cover those costs -- which, by the way, it had to do if it wanted to improve the quality and cost of health care for millions of people.

 

Those where the things make sense don't make sense.

 

Sometimes these problems emerge between departments within a company. E.g., at SonoSite, what made sense from CEO perspective did not make sense from salespeople perspective. What made sense to engineers perspective which was to push the next line of products to be more sophisticated and capable, regardless of expense was counter to the logic of the company's strategy, which was to make the iLook even smaller and more affordable.

 

Often even more perplexing, however, is when these problems arise within the mind of the same person: when the right decision for the long term makes no sense for the short term; when the wrong customer to call on is actually the right customer to call on; and when the most important product to sell makes little sense to sell at all.

 

The resource allocation process determines which deliberate and emergent initiatives get funded and implemented, and which are denied resources. Everything related to strategy inside a company is only intent until it gets to the resource allocation stage.

 

When individuals cause the problems

 

At Apple Inc, engineers seemed more interested in dreaming up new ideas than finishing what had already been promised.

 

When Jobs returned as CEO in 1997, he immediately set to work fixing the underlying resource allocation problem.

 

Anything not aligned with Apple vision got scrapped; people who did not agree were yelled at, abased, or fired.

 

The Dangers of getting the time frame wrong

 

if you study the root causes of business disasters, over and over you'll find a predisposition toward endeavors that offer immediate gratification over endeavors that result in long term success.

 

Unilever and many incorporations like them inadvertently teach their best employees to hit only bunts and singles as opposed to home runs.

 

Senior executives yearly identify HPLs (high potental leaders) and cycle them through assignments of eighteen months to two years in every functional group.

 

The quality of work they have completed typically determines the prominence of the next assignment they receive.

 

The system rewards tomorrow's senior executives for being decidedly focused on the short term -- inadvertently undermining the company's goals.

 

Allocation Resources among your "businesses"

 

To understand a company's strategy, look at what they actually do rather than what they say they will do.

 

Resource allocation works pretty much the same way in our lives and careers.

 

The danger for high-achieving people is that they'll un-consciously allocate their resources to activities that yield the most immediate, tangible accomplishments. The students in my class are often like this -- they leave school with an intense drive to have something to show for their education.

 

They prioritized things that gave them immediate returns -- such as a promotion, a raise, or a bonus -- rather than the things that require long-term work, the things that you won't see a return on decades, like raising good children. And when those immediate returns were delivered, they used them to finance a high-flying lifestyle for themselves and their families: better cars, better houses, and better vacations.

 

The problem is, lifestyle demands can quickly lock in place the personal resource allocation process.

 

"I can't devote less time to my job because I won't get that promotion -- and I need that promotion ... "

 

Few people set out to do this. The decisions that cause it to happen often seem tactical --- just small decisions that they they think won't have any larger impact. But as they keep allocating resources in this way --- and although they often won't realize it --- they're implementing a strategy vastly different from what they intend.

 

If the decisions you make about where you invest your blood, sweat, and tears are not consistent with the person you aspire to be, you'll never become that person.

 

Finding Happiness in your Relationships Section II

 

The three parts of the strategy process to experience happiness in what we do at work.

  1. Focus on what truly motivates us
  2. Balance a deliberate plan for finding a career that delivers you those motivations, alongside the unexpected opportunities that will always arise along the way.
  3. Allocating our resouces in a manner consistent with all these concepts.

 

Work can bring you a sense of fulfillment -- but it pales in comparison to the enduring happiness you can find in the intimate relationships that you cultivate with your family and close friends.

 

Whenever it is is that you're dealing with other human beings, it's not always possible to control how things turn out; nowhere is this more true than with children.

 

There is no one-size-fits-all approach that anyone can offer you. The hot water that softens a carrot will harden an egg. As a parent, you will try many things that simply won't work. When this happens, it can be very easy to view it as a failure. 

 

Don't.

 

If anything, it's the opposite. If you recount our discussion of emergent and deliberate strategy -- the balance between your plans and unanticipated opportunities -- then you'll know that getting something wrong doesn't mean you have failed. Instead, you have just learned what does not work.

 

Intimate, loving, and enduring relationships with our family and close friends will be among the sources of the deepest joy in our lives. They are worth fighting for.

 

 

The Ticking Clock

 

When it seems like everything at home is going well, you will be lulled into believing that you can put your investments in these relationships onto the back burner.

 

That would be an enormous mistake.

 

By the time serious problems arise in these relationships, it often is too late to repair them. This means, paradoxically, that the time when it is most important to invest in building strong families and close friendships is when it appears, at the surface, as if it's not necessary.

 

At a basic level, there are two goals investors have when they put money into a company: growth and profitability.

 

Professor Amar Bhide in Origin and Evolution of New Business showed that 93% of all companies that ultimately become successful had to abandon their original strategy -- because the original plan proved not to be viable. In other words, successful companies don't succeed because they have the right strategy at the beginning; but rather, because they have money left over after the original strategy fails, so that they can pivot and try another approach. Most of those that fail, in contrast, spend all their money on their original strategy -- which is usually wrong.

 

The theory of good money and bad money essentially frames Bhide's work as a simple assertion.

 

When the winning strategy is not yet clear in the initial stages of a new business, good money from investors needs to be patient for growth but impatient for profit. 

 

What job did you hire that milkshake for?

 

Many products fail because companies develop them from the wrong perspective. Companies focus to much on what they want to sell their customers, rather than what customers really need. What's missing is empathy: a deep understanding of what problems customers are trying to solve. The same is true in our relationships: we go into them thinking about what we want rather than what is important to the other person. Changing your perspective is a powerful way to deepen your relationships.

 

It's fascinating that in forty years, nobody hsa copied IKEA. Think about that for a second. Here is a business that has been immensely profitable for decades. IKEA doesn't have any big business secrets -- any would-be competitor can walk through its stores, reverse-engineer its products or copy its catalog... and yet nobody has done it.

 

Why is that?

 

IKEA's business model --- the shopping experience, the layout of store, the design of products and the way they are packaged --- is very different from the standard furniture store. Most retailers are organized around a customer segment or a type of product. The customer base can then be divided up into target demographics such as age, gender, education, or income level. 

 

Rather than organizing themselves around the characterization of particular customers or products, IKEA is structured around a job that customers periodically needs to get done.

 

We don't go through life conforming to particular demographic segments: nobody buys a product because he is an eighteen to thirty-five year old white male geting a college degree. That may be correlated with a decision to buy this product instead of that one, but it doesn't cause us to buy anything.

 

Instead, we periodically find ourselves  that some job has arisen in our lives that we need to do, and we then find some way to get it done.

 

If a company has developed a product or a service to do the job well, we buy or "hire" it, to do the job.

 

The mechanism that causes us to buy a product is "I have a job I need to get done, and this is going to help me do it."

 

The job-to-be-done theory began to coalesce in a project that I worked on with some friends for one of the big fast-food restaurants. The company had spent months studying the issue. They had brought in customers and peppered them with questions like "Do you want it chocolatier? Cheaper? Chunkier?" the company would take all this feedback and improve the milkshake on these dimensions.

 

The improvements had no impact on sales, or profits whatsoever. The company was stumped.

 

My colleague Bob Moesta then offered a completely different perspective to the milkshake problem: "I wonder what job arises in people's lives that causes them to come to this restaurant to 'hire' a milkshake?"

 

It turns out that there are two different jobs that the milkshake is hired for. The morning the milkshake is needed for commuters facing a long and boring ride to work. The thick milkshake and the thin straw helped to keep the customers sated and fight off the midmorning stomach rumble.

 

In the afternoon, the milkshake is hired by parents to make themselves feel good about being a parent to their children.

 

An inventor approached BIG CEO about a game. The CEO turned him down but asked why he developed it. THe inventor said, "I have three young children and a demanding job. By the time I get home from work and we finish dinner, it's eight o'clock and the kids need to go to bed. But we haven't had any fun together. What am i going to do? Set up Monopoly or Risk? I need some fun games that we can set up, play and put away in fifteen minutes."

 

The CEO thought the game was mediocre, but the insight was valuable.

 

One of the puzzles in research was why so many of our school children just seem so unmotivated to learn. We bring technology, special education, amusement, field trips, and many other improvements in the way we teach, and little seems to make a difference.

 

The conclusion we reached was that going to school is not a job that children are trying to get done. It is something that a child might hire to do the job,, but it isn't the job itself.

 

The two fundamental jobs that children need to do are to feel successful and to have friends -- every day.

 

The problem is, only a fraction of students feel successful through school.

 

Schools that have designed their curriculum so that students feel success every day see rates of dropping out and absenteeism fall to nearly zero. When structured to do the job of success, students eagerly master difficult material -- because in doing so, they are getting the job done.

 

I suspect taht if we studied marriage from the job-to-be-done lens, we would find that husbands and wives who are most loyal to each other are those who have figured out the jobs that their partner needs to be done --  and then they do the job reliably and well. By working to truly understand the job she needs done, and doing it well, I can cause myself to fall more deeply in love with my spouse, and, I hope, her with me.

 

This may sound counterintuitive, but I deeply believe that the path to happiness in a relationship is not just about finding someone who you think is going to make you happy. Rather the reverse is equally true: the path to happiness is about finding someone who you want to make happy, someone whose happiness is worth devoting yourself to. 

 

This principle -- that sacrifice deepens our commitment -- doesn't just work in marriages. It applies to members of our families, and close friends as well as organizations and even cultures and nations.

 

Given that sacrifice deepens our commitment, it's important to ensure that what we sacrifice for is worthy of that commitment, as the church was for me and Annie.

 

Sailing your Kids on Theseus's Ship

 

We all recognize the importance of giving our kids the best opportunities. Each new generation of parents seems to focus even more on creating possibilities for their children that they themselves never had. With the best of intentions, we had our children off to a myriad of coaches and tutors to provide them with enriching experiences  -- thinking that will best prepare our kids for the future. But helping our children this way can come at a high cost.

 

Dell, one of the world's most successful PC manufacturers, started by making simple entry-level computers at low costs. Its products were modular, allowing customizations. Slowly, Dell outsourced the manufacturing of the components piece by piece to ASUS until one day, Dell essentially outsourced everything inside its PC business to Asus. 

 

Then in 2005, Asus announced its own brand of of computers.

 

There is a danger to outsourcing. You need to understand what capabilities are, and which of them will be critical to the future, to know which capabilities are important to keep in-house and which matter less.

 

The factors that determine capabilities fall into one of three buckets: resources, processes, and priorities. These offer an accurate snapshot of a company at any time because they are mutually exclusive (no one part of business belongs to more than one of the three categories) and are collectively exhaustive (together, these categories account for everything inside a business).

 

Capabilities are dynamic and built over time; no company starts out with its capabilities fully developed. The most tangible of the three factors is resources, which include people, equipment, technology, product designs, brands, information, cash, and relationships with suppliers, distributors, and customers.

 

But resources are only one of three critical factors driving a business. The ways in which employees interact, coordinate, communicate, and make decisions are known as processes. These enable the resources to solve more and more complicated problems.

 

Processes include the ways that products are developed and made, and the methods by which market research, budgeting, employee development, compensation, and resource allocation are accomplished. Unlike resources, which are often easily seen and measured, processes can't be seen on a balance sheet.

 

The third and perhaps most significant capability is an organization's priorities. This set of factors define how a company makes decisions; it can give clear guidance about what a company is likely to invest in, and what it will not. Employees  at every level will make prioritization decisions -- what they will focus on today, and what they'll put at the bottom of their list.

 

The larger the organization, the more important it is for senior management to ensure employees make, by themselves, prioritization decisions that are consistent with the strategic direction and the business model of the company.It means that senior executives need to spend a lot of time articulating clear, consistent priorities that are broadly understood throughout the organization. Over time, a company's priorities must be in sync with how the company makes money, because employees must prioritize those things that support the company's strategy, if the company is to survive. Otherwise the decisions they make will be in conflict with the foundation of the business.

 

What a Child can and cannot Do

 

Teachers and scholars create knowledge that a young child can absorb. The knowledge he has acquired is his resource. BUt it doesn't necessarily mean he can create new knowledge. If he were able to take the information he absorbed in class and use it to, say, create an application for a tablet computer, or conduct his own scientific experiment --- that capability is a process.

 

The desire the child has to spend his precious free time creating the app, the problem he cares enough  to create the app to solve, the idae of creating something  unique, or the fact that he cares that his friends will be impressed -- those are the priorities leading him to do it.

 

Resources are what he used to do it, processes are how he does it, and priorities are why he does it.

 

Parents seem to be carting their children to an endless array of activities in which the kids are not truly engaged, it should start to raise red flags. Are the children developing from these experiences the deep important processes such as teamwork, entrepreneurship, and learning the value of preparation?

 

When we focus on providing our children with resources, we need to ask ourselves a new set of questions: Has my child developed the skill to develop better skills? THe knowledge to develop deeper knowledge? The experience to learn from his experiences? These are the critical differences between resources and processes in our children's minds and hearts -- and,  I fear, the unanticipated residual of outsourcing.

 

Self esteem -- the sense that "I'm not afraid to confront this problem and I think I can solve it" -- doesn't come from abundant resources. Rather, self-esteem comes from achieving something important when it's hard to do. By sheltering children from the problems that arise in life, we have inadvertently denied this generation the ability to develop the processes and priorities it needs to succeed.

 

I'm not advocating throwing kids straight into the deep end to see whether they can swim. Instead, it's a case of starting early to find simple problems for them to solve on their own, problems that can help them build their processes -- and a healthy self-esteem.

 

Denying children the opportunity to develop their processes is not the only way outsourcing has damaged their capabilities, either. There is something far more important at risk when we outsource too much of our lives: our values.

 

Children learn when they are ready to learn

Your parents most likely were not thinking consciously about teaching you the right priorities at the time --- but simply because they were there with you in those learning moments, those values became your values too. Which means taht first, when children are ready to learn, we need to be there. And second, we need to be found displaying through our actions, the priorities and values that we want our children to learn.

 

In outsourcing much of the activities that filled our homes, we have created a void in our children's lives that often gets filled with activities in which we are not involved.

 

As a result, when our children are ready to learn, it is often people whom we do not know or respect who are going to be there.

 

As a tribute to the mythical founder of their city, the Athenians kept Theseus's ship seaworthy. As parts of the boat decayed, they were replaced until every last part of the boat had been changed.

 

The conundrum was this: given that every last part of it had been replaced, was it still Theseus's ship? 

 

If your children gain their priorities and values from other people .. whose children are they?

 

If you find youself outsourcing more and more of your role as a parent, you will lose more and more of the precious opportunities to help your kids develop their values -- which may be the most important capability of all.

 

Children need to do more than learn new skills. The theory of capabilities suggests that they need to be challenged. They need to solve hard problems. They need to develop values.

 

The Schools of Experience

 

Helping your children learn how to do difficult things is one of the most important roles of a parent. It will be critical to equipping them for all the challenges that life will throw at them down the line.

 

The idea  that some people have innate talents that just need to be identified has proven to be an unreliable predictor of success in business.

 

Professor Morgan McCall of University of Southern California had a book called High Flyers, that could help people make better decisions about whom to hire in their future. It explained why so many managers make hiring mistakes.

 

McCall's theory gives a causal explanation why fighter pilots are the best of the best. It was because they had honed their superior skills along the way, by having experiences that taught them how to deal with setbacks or extreme stress in high-stakes situation.

 

This model asks if candidates have actually wrestled with a similar problem in an earlier assignment. In terms of the language of capabilities, it is a search for process capabilities.

 

In candidates' resumes, look for past tense verbs. Not adjectives.

 

Nolan Archibald has had a stellar career, including having been the youngest-ever CEO of a Fortune 500 company -- Black & Decker.

 

After he retired, he discussed with my students how he'd managed his career. What he described was not all of the steps on his resume, but rather why he took them.

 

Archibald had a clear goal in mind when he graduated from college -- he wanted to become CEO of a successful company.

 

Instead of taking jobs or experiences because they looked like a fast-track to the C-suite, he chose his options very deliberately for the experience they would provide.

 

He always asked, "Is it going to give me the experiences I need to wrestle with?"

 

His first job after business school was not a glamorous consulting position. Instead, he worked in Northern Quebec, operating an asbestos mine. He thought that particular experience, of managing and leading people in difficult conditions, would be important to have mastered on his route to the C-suite. It was the first of many such decisions he made.

 

The strategy worked. It wasn't long before he became CEO of Beatrice Foods. And then, at age forty-two, he achieved an even loftier goal: he was appointed CEO of Black & Decker. He stayed in that position for twenty-four years.

 

As a parent, you can find small opportunities for your child to take important courses early on. You're doing what Nolan Archibald did, working out what courses your child will need to be successful and then reverse engineering the right experiences. Encourage them to stretch --- to aim for lofty goals. If they don't succeed, make sure you're there to help them learn the right lesson: that when you aim to achieve great things, it is inevitable that sometimes you're not going to make it. Urge them to pick themselves up, dust themselves off, and try again. Tell them if they're not occasionally falling off, they're not aiming high enough.

 

Everyone knows how to celebrate success, but you should also celebrate failure if it's a result of a child striving for an out-of-reach goal.

 

So much of our society's culture is focused on trying to build self-esteem in children by never letting them lose a game, giving them accolades simply for trying their best, and constantly receiving feedback from teachers or coaches that never requires them to think about whether they can do better.

 

The most important thing for a parent is, as always, to never give up; never stop trying to help your children get the right experiences to prepare them for life.

 

The Invisible Hand inside your Family

As parents, we share a common worry: one day, our children are going to be faced with a tough decision... and we are not going to be there to make sure they do the right thing. 

 

All we can do is hope that somehow we've raised them well enough that they come to the right conclusions by themselves.

 

How do we make sure that happens?

 

It is not as simple as setting family rules and hoping for the best. Something more fundamental has to occur --- and it has to happen years before the moment arises when our children are faced with a difficult choice. Their priorities need to be set correctly so they will know how to evaluate their options and make a good choice. The best tool we have to help our children do this is through the culture we build in our families.

 

MIT's Edgar Schein defined culture as

 

"Culture is a way of working together toward common goals that have been followed so frequently and so successfully that people don't even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful."

 

Instincts are not formed overnight. A culture is the unique combination of processes and priorities within an organization. 

 

As long as the way they have chosen keeps working to solve the problem --- it need not be perfect, but working well enough -- the culture will coalesce and become an internal set of rules and guidelines that employees in the company will draw upon in making the choices ahead of them. 

 

If these paradigms of how to work together, and of what things should be given priority oer other things, are used successfully over and over again, ultimately employees won't stop and ask each other how they should work together. They will just assume that they way they have been doing it is the way of doing it.

 

The advantage of this is that it effectively causes an organization to become self-managing. Managers need not be omnipresent to enforce rules. People instinctively get on with what needs to be done.

 

The culture we picked is the right culture for our family, but every family should choose a culture that's right for them. What is important is to actively choose what matters to you, and then engineer the culture to reinforce those elements, as Schein's theory shows. It entails choosing what activities we pursue, and what outcomes we need to achieve, so that as a family, when we have to perform those activities again, we all think: "This is how we do it"

 

Make no mistake: a culture happens, whether you want it to or not.

 

But in the pressures of day-to-day living, consistency can be tough.

 

There will be days when enforcing the rules is harder on a parent than it is on a child. With good intentions, many exhausted parents find it too difficult to stay consistent with their rules early on -- and inadvertently, they allow a culture of laziness or defiance to creep into their family.

 

Left unchecked long enough, "once or twice" quickly becomes the culture.

 

Staying out of Jail

 

THe safest road to Hell is the gradual one -- the gentle slop, soft underfoot, without sudden turnings, without milestones, without signposts.

 

-- C.S. Lewis

 

I only want to use one theory to talk about living a life of integrity. In many ways, it is that simple. This section is intentionally short, but I believe it's equally powerful and universally applicable.

 

What I offer here is a theory called "full versus marginal thinking" that will help you answer our final question: how can i be sure I live a life of integrity?

 

Just this Once ... The trap of marginal thinking

 

in the late 90s, Blockbuster dominated the movie rental industry. Netflix was the upstart whose idea was simply to use postal services to send DVDs to the people instead of making them to go to the video store.

 

By 2011, Netflix had almost 24 million customers. Blockbuster declared bankruptcy the year before.

 

Blockbuster followed a principle that is taught in every fundamental course in finance and economics: that in evaluating alternative investments, we should ignore sunk and fixed costs (costs that have already been incurred), and instead base decisions on the marginal costs and marginal revenues (the new costs and revenues) that each alternative entails.

 

Almost always, such analysis shows that marginal costs are lower and marginal profits are higher, than the full cost. This doctrine biases companies to leverage what they have put in place to succeed in the past, instead of guiding them to create the capabilities they'll need in the future.

 

If we knew the future would be exactly the same as the past, that approach would be fine. But if the future's different -- and it almost always is --- then it's the wrong thing to do.

 

Blockbuster looked at the DVD postal business using a marginal lens: it could only see it from the vantage point of its own existing business. When viewed like this, the market Netflix was going after did not look at all attractive. Worse, if Blockbuster did go after Netflix successfully, this new business was likely to kill Blockbuster's existing business. No CEO wants to tell shareholders that he wants to invest to create a new business that's going to be responsible for killing the existing business, especially if it's much less profitable. Who would go for that?

 

Marginal thinking made Blockbuster believe that the alternative to not pursuing the DVD postal market was to happily continue doing what it was doing before, at 66 percent margins and billions of dollars in revenue.

 

But the real alternative  to not going after Netflix was, in fact, bankruptcy. The right way to look at this new market was not to think, "How can we protect our existing business?" Instead Blockbuster should have been thinking: "If we didn't have an existing business, how could we best build a new one? What would be the best way for us to serve our customers?" Blockbuster couldn't bring itself to do it, so Netflix did instead. 

 

THis is almost always how it plays out. Because failure is often at the end of a path of marginal thinking, we end up  paying for the full cost of our decisions, not the marginal costs, whether we like it or not.

 

The paradox: Why is that the big, established companies that have so much capital find these initiatives to be so costly? And why do the small entrants with much less capital find them to be so straightforward?

 

The answer is in theory of marginal versus full costs. Every time an executive in an established company needs to make an investment decision, there are two alternatives on the menu. The first is the full cost of making something completely new. The second is to leverage what already exists, so that you only need to incur the marginal cost and revenue. Almost always, the marginal-cost argument overwhelms the full-cost. 

 

For the entrant, in contrast, there is no marginal-cost item on the menu. If it makes sense, then you do the full-cost alternative. Because they are new to the scene, in fact, the full cost is the marginal cost.

 

When there is competition, and this theory causes established companies to continue to use what they already have in place, they pay far more than the full cost -- because the company loses its competitiveness. 

 

An unending stream of extenuating circumstances

 

This marginal-cost argument applies the same way in choosing right and wrong: it addresses the third question I discuss with my students, of how to live a life of integrity -- and stay out of jail.

 

The marginal cost of doing something "just this once" always seem so negligible, but the full cost will typically be much higher.

 

100% of the time is easier than 98% of the time

 

Many of us have convinced ourselves that we are able to break our own personal rules "just this once." In our minds, we can justify these small choices. None of these things, when they happen, feels like a life-changing decision. The marginal costs are almost always low. But each of those decisions can roll up into a much bigger picture, turning you into the kind of person you never wanted to be. That instinct to just use the marginal costs hides from us the true cost of our actions.

 

The only way to avoid the consequences of uncomfortable moral concessions in your life is to never start making them in the first place. 

 

The importance of purpose

Whether they want one or not, every company has a purpose.

 

To maximize the value of the advice in this book, you must have a purpose in your life. For that reason, I want to describe to you the best process I know to develop a purpose.

 

The three parts of purpose

A useful statement of purpose for a company needs three parts. The first is what I call a likeness.

 

By analogy, a master painter often will create a pencil likeness that he has seen in his mind before he attempts to create it in oils.

 

Likeness is what the managers and employees hope they will have actually built when they reach each critical milestones in their journey.

 

Second, for a purpose to be useful, employees and executives need to have a deep commitment -- almost a conversion -- to the likeness that they are trying to create.

 

Employees without this deep conversion will find that the world will compromise the likeness by  wave after wave of extenuating circumstances.

 

The third part of a company's purpose is one or a few metrics by which managers and employees can measure their progress. These metrics enable everyone associated with the enterprise to calibrate their work, keeping them moving together in a coherent way.

 

These three parts -- likeness, commitment, and metrics -- comprise a company's purpose. Companies that aspire to positive impact must never leave their purpose to chance. Worthy purposes rarely emerge inadvertently; the world is too full of mirage, paradox and uncertainty to leave this to fate.

 

Purpose must be deliberately conceived and chosen and then pursued. When that is in place, however, then how the company gets there is typically emergent -- as opportunities and challenges emerge and are pursued.

 

The world will not deliver a cogent and rewarding purpose to you.

 

The type of person you want to become -- what the purpose of your life is -- is too important to leave to chance. It needs to be deliberately conceived, chosen, and managed. The opportunities and challenges in your life that allow you to become that person will, by their very nature, be emergent.

 

If you begin to feel that the likeness you have sketched out for yourself is not right, that is not the person you want to become, then you must revisit your likeness.

 

But if it becomes clear that it is the person you want to become, then you must devote your life to become that person.

 

For me, defining the likeness of the person I wanted to become was straightforward. However, being deeply committed to actually becoming this type of person was hard.

 

Had I instead spent that hour each day learning the latest techinques for mastering the problems of autocorrelation in regression analysis, I wpuld have badly misspent my life. I apply the tools of econometrics a few times a year, but I apply my knowledge of the purpose of my life everyday. This is the most valuable, useful piece of knowledge that I have ever gained.

 

Finding the right metric

 

The third part of my life's purpose was to understand the metrics by which my life would be measured. For me, this took me the longest. I didn't come to understand that until about fifteen years after the experience at Oxford.

 

The most important thing you'll ever learn

I promise my students that if they take the time to figure out their life's purpose, they'll look back on it as the most important thing they will ever have discovered.

 

I warn them that their time at school might be the best time to reflect deeply on that question.

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