Category: Books

Optimizing An Organized Mind

How can one maximize mental performance? The Organized Mind- Thinking Straight in an Age of Information Overload by Daniel Levitin is a book that works towards an answer to this question. The book’s ideas on offloading things to external systems and organizational techniques are very similar to David Allen’s , Getting Things Done . However, The Organized Mind, provides much more historical and scientific background an context. Further, An Organized Mind avoids being overly prescriptive, and instead gives the reader ideas on how to best optimize for their own situation.

Some of my highlights on the key themes of the book:

Getting the mind into the right mode

One useful framework that the books develops is hte idea of the mind as functioning in different modes. An important component of high performance is the ability to use the right mode at the right time.

There are four components in the human attention system: the mind-wandering mode, the central executive mode, the attention filter, and the attention switch, which directs neural and metabolic resources among the mind-wandering, stay-on-task, or vigilance modes.

Remember that the mind-wandering mode and the central executive work in opposition and are mutually exclusive states; they’re like the little devil and angel standing on opposite shoulders, each trying to tempt you. While you’re working on one project, the mind-wandering devil starts thinking of all the other things going on in your life and tries to distract you. Such is the power of this task-negative network that those thoughts will churn around in your brain until you deal with them somehow. Writing them down gets them out of your head, clearing your brain of the clutter that is interfering with being able to focus on what you want to focus on. As Allen notes, “Your mind will remind you of all kinds of things when you can do.

The task-negative or mind-wandering mode is responsible for generating much useful information, but so much of it comes at the wrong time.

Creativity involves the skillful integration of this time-stopping daydreaming mode and the time-monitoring central executive mode.

Insights into how human memory works

The book delineates the nuances of human memory by comparing it to systems in the physical world.

Being able to access any memory regardless of where it is stored is what computer scientists call random access. DVDs and hard drives work this way; videotapes do not. You can jump to any spot in a movie on a DVD or hard drive by “pointing” at it. But to get to a particular point in a videotape, you need to go through every previous point first (sequential access). Our ability to randomly access our memory from multiple cues is especially powerful. Computer scientists call it relational memory. You may have heard of relational databases— that’s effectively what human memory is.

Having relational memory means that if I want to get you to think of a fire truck, I can induce the memory in many different ways. I might make the sound of a siren, or give you a verbal description (“ a large red truck with ladders on the side that typically responds to a certain kind of emergency”).

This feature can lead to either valuable insights or being overwhelmed, depending on how it is controlled:

If you are trying to retrieve a particular memory, the flood of activations can cause competition among different nodes, leaving you with a traffic jam of neural nodes trying to get through to consciousness, and you end up with nothing.

Categorization is key to mental functioning.

This ability to recognize diversity and organize it into categories is a biological reality that is absolutely essential to the organized human mind.”

Shift burdens to external systems

You might say categorizing and externalizing our memory enables us to balance the yin of our wandering thoughts with the yang of our focused execution.

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Is it really necessary to have a meeting?

A lot of time and money is wasted on unnecessary corporate meetings. Since the early days of Amazon , Jeff Bezos has taken a unique approach to meetings.


At a management offsite in the late 1990s, a team of well-intentioned junior executives stood up before top brass and gave a presentation on a problem indigenous to all large organizations: the difficulty of coordinating far-flung divisions. The junior executives recommended a variety of different techniques to foster cross group dialogue and afterward seemed proud of their own ingenuity. Then Jeff Bezos, his face red, and the blood vessel in his forehead pulsating, spoke up.

“I understand what you are saying, but you are completely wrong,” he said.

“Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more.”

…At that meeting and in public speeches afterward, vowed to run Amazon with an emphasis on decentralization and independent decision-making. “A hierarchy isn’t responsive enough to change,” he said. “I’m still trying to get people to do occasionally what I ask. And if I was successful, maybe we wouldn’t have the right kind of company.

Bezos’s counter intuitive point was that coordination among employees wasted time, and that the people closest to problems were usually in the best position to solve them. That would come to represent something akin to the conventional wisdom in the high-tech industry over the next decade. The companies that embraced this philosophy, like Google, Amazon, and, later, Facebook, were in part drawing lessons from theories about lean and agile software development. In the seminal high-tech book The Mythical Man-Month, IBM veteran and computer science professor Frederick Brooks argued that adding manpower to complex software projects actually delayed progress. One reason was that the time and money spent on communication increased in proportion to the number of people on a project.

When you do have a meeting, make it useful

Of course, some meetings are necessary. There is value to cross-pollination of thoughts among intelligent people. Some processes do require explicit coordination and discussion. However, in practice, many hours are wasted on routine updates, grandstanding, and “thinking out loud”. To ensure meetings were productive Bezos required the person who leads a meeting to write detailed prose explaining their thoughts. The first half hour or so of every meeting would be silent reading time. This ensured everyone thought deeply and expressed complete thoughts cogently.

Meetings no longer started with someone standing up and commanding the floor as they had previously at Amazon and everywhere else throughout the corporate land. Instead, the narratives were passed out and everyone sat quietly reading the document for fifteen minutes—or longer. At the beginning, there was no page limit, an omission that Diego Piacentini recalled as “painful” and that led to several weeks of employees churning out papers as long as sixty pages. Quickly there was a supplemental decree: a six-page limit on narratives, with additional room for footnotes.

Riches Among the Ruins

No Economy is too small, no political crisis is too dire, and no country is too bankrupt for a solo operator like me to find riches among the ruins.

-Robert Smith

Riches Among the Ruins: Adventures in the Dark Corners of the Global Economy is an incredibly entertaining bottom up look at frontier market crises over the last 3 decades from the perspective of a travelling distressed debt trader.  Each chapter is dedicated to Robert Smith’s experience in a particular country: El Salvador, Turkey, Russia, Nigeria, Iraq, etc, etc. Each country is unique, but Smith’s weaves several key lessons throughout his memoir.

Anyone who seeks  profits in inefficient markets could benefit from Smith’s experience.

Information vacuums are key for middleman and arbitrageurs

In the mid 1980s no one had any idea what an El Salvador bond was worth- which is to say, they had no idea what value others might attach to it. The ignorance, this information vacuum, was my bliss. The seller’s price was simply a measure of how desperately he wanted to dispose of a paper promise of the government of El Salvador, and the buyer’s measure of how eager he was to convert his local currency into a glimmer of hope and seeing dollars down the road. The spread, my profit, was the difference between the two. In a fledgling market, with no reporting mechanisms and precious little information floating around, the spread can be enormous, and there was no regulatory or legal restrictions on how much you could make on a transaction.

Though my sellers and buyers, usually the representative of foreign companies doing business in El Salvador, often knew each other , played golf together, or broke bread together at American Chamber of Commerce breakfasts, I knew it would take some time before they eventually started to compare notes. At the beginning I doubt any of them even mentioned they were trying to sell or buy El Salvador bonds because the market didn’t exist yet. But until the market matured it was a gold rush, and I developed a monopoly on that most precious of all commodities in any market: information. I found out who wanted to sell, who wanted to buy and their price, and I held that information very tight to the vest.

In some cases buyers and sellers were on different floors in the same office building, or different divisions of the same global corporation.  The biggest challenges for foreign companies doing business in the developing world was converting local currency revenues back into dollars.  One way to get money out was to buy dollar bonds at fixed exchange rate and over time collect principal and interest in dollars.

Creativity and information edge: Struggles over bondholder lists

In almost every country, Smith, goes through difficulty to get the list of people holding the bonds in which he was seeking to make a market. Arbitrageurs and brokers who had access to the list guarded it aggressively, because it gave them an edge in acquiring positions at a discount, or profiting as a middleman. This was a key bit of information, available from connections at the Central Bank or other places.

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9 Steps to 10x Thinking

Smartcuts: How Hackers, Innovators, and Icons Accelerate Success is a book about the power of lateral thinking- solving problems through an indirect or creative approach. “Smartcuts” means sustainable success achieved through smart work.  This is different than “shortcuts”, which are rapid, but short term gains. Ultimately the book outlines 9 key ideas, that lead up to the concept of “10x thinking”.

#1 Hacking the Ladder

Find sideways paths, like the warp pipes in Super Mario  that allows someone to beat the game in seconds, not hours.

#2 Train with Masters

Find mentors, and/or study the greats. Shoe designer Dwayne Edwards stole discarded shoes so he could study and draw the designs. This helped him develop the ability to notice tiny design details in shoes.

#3 Rapid Feedback

Rapid feedback accelerates learning. This has been critical to a lot of companies that have a website as their main product. In this book, the example of Upworthy illustrates the point. Turn work into rapid scientific experiments, and depersonalized feedback.

#4 Platforms

Tools and technology that people can buid off of. a platform “amplifies the effort and teaches skills in the process of using it.“ Key example: development of Ruby on Rails as a programming language.

Platforms are how Twitter could build Twitter in mere days while running a separate company. And Platforms are why Finland made all its teachers get a Master’s degrees and its students learn with hands-on tools that made learning better.

See also: Modern Monopolies: What It Takes to Dominate the 21st Century Economy

#5 Catching waves

The world’s best surfers arrive at the beach hours before a competition and stare at the ocean. This is a valuable metaphor for a lot of things in business and life.

“Intuition is the result of nonconscious pattern recognition,” ….. However, research shows, that we can also see patterns just as well by deliberately looking for them. Deliberate pattern spotting can compensate for experience. “but often people don’t even try it”

Budgeted Experimentation helps business avoid being disrupted, by helping them harness waves on which younger competitors might otherwise used to ride past them. Its helped companies like Google, 3M, Flickr, Conde Nast, and NPR remain innovative even as peer companies plateaued. In contrast, companies that are too focused on defending their current business practice and to fearful to experiment often get overtaken.

Key example of what to avoid: Kodak

#6 Superconnecting

Key example: Che Guevera taking control of the radio, using it as a way of promoting Castro’s revolution to a much wider audience than otherwise possible.

#7 Momentum

Build up potential energy, and amplify unexpected opportunities.

#8 Simplicity

The key feature of disruptively innovative products is cost savings(either time or money). But the key ingredient behind the scenes of every disruptive product is simplification.

Examples, email, USB Drives, Cars.(Henry Ford kept complexity under the hood).

Key example: Sherlock Holmes. He focused on what he needed to know, knowing how to figure out what he didn’t know, and forgetting about everything else.

#9 10x thinking

This quote from Astro Teller is key:

Its often easier to make something 10 times better than it is to make it 10 percent better…. In order to get really big improvements you usually have to start over in one or more ways. You have to break some of the basic assumptions and, of course, you can’t know ahead of time. Its by definition counter intuitive.

This means getting to first principles. 10x thinking forces you to come up with smartcuts.

10x thinking is probably now essential for survival in the modern economy.

Most innovation inside industries and companies today focuses on making faster horses, not automobiles.

This is why the innovator’s dilemma destroy’s so many companies.  What replaces them is something better.  Creative destruction is a beautiful thing.

Education of a Wandering Man: The Ultimate Autodidact

Louis L’amour was an autodidact’s autodidact. John Wayne called him the most interesting man in the world. L’amour spent the first couple decades of his adulthood wandering across the country, and around the world, doing odd jobs, and obsessively reading whatever he could find. Only much later did he become a famous novelist. Education of a Wandering Man is a quasi-autobiography, in which he describes the trajectory of his life, and the evolution of his thinking in terms of the places he traveled and the books he read.

L’amour spent years as a hobo, hopping trains from town to town, working various jobs. In each town he would visit the local library.

Its important to note, that unlike a bum, a hobo is ready and willing to work.

To properly understand the situation in America before the Depression, one must realize there was great demand for seasonal labor, and much of this was supplied by men called hoboes.
Over the years the terms applied to wanderers have been confused until all meaning has been lost. To begin with, a bum was a local man who did not want to work. A tramp was a wanderer of the same kind, but a hobo was a wandering worker and essential to the nation’s economy.

…Many hoboes would start working the harvest in Texas, and follow the ripening grain north through Oklahoma, Kansas, and Nebraska into the Dakotas. During harvest season ,when the demand for farm labor was great, the freight trains permitted the hoboes to ride, as the railroads were to ship the harvested grain, and it was in their interest to see that labor was provided.”

 

He also worked on merchant ships, and traveled throughout Asia and most of the world. He would find books for free or cheap wherever he went, reading 100+ books per year.  For example:

Byron’s Don Juan I read on an Arab dhow sailing north from Aden up the Red Sea to Port Tewfik on the Suez Canal. Boswell’s The Life of Samuel Johnson (Penguin Classics) I read while broke and on the beach in San Pedro. In Singapore, I came upon a copy of Annals and Antiquities of Rajasthan, Vol. 1 of 3: Or the Central and Western Rajput States of India (Classic Reprint) by James Tod.

Although he didn’t have real formal degrees, L’amour understood the value of books and knowledge:

Books are precious things, but more than that, they are the strong backbone of civilization. They are the thread upon which it all hangs, and they can save us when all else is lost.
…Knowledge is like money: To be of value it must circulate, and in circulating it can increase in quantity and hopefully, in value. “

He wrote 89 novels, and clearly a lot of ideas came from paying close attention when he travelled:

People are forever asking me where I get my ideas, but one has only to listen, to look, and to live with awareness. As I have said in several of my stories, all men look, but so few can see. It is all there, waiting for any passerby.”
… for a writer, everything is grist for the mill, and a writer cannot know too much. Sooner or later everything he does know will find its uses.

As with reading, L’amour never let the challenges of a transient lifestyle interfere with writing:

“I began my writing in ship’s fo’c’sles, bunkhouses, hotel rooms- wherever I could sit down with a pen and something to write on.”

L’amour also spent time boxing in various small towns, and coaching other fighters. I’ve seen reference online to a 51-8 professional record, although I wasn’t able to verify it.

In the later years of his life L’amour spent more time in his personal library. His deep knowledge of the world gave him perspective:

Surely, the citizens and the rulers of Babylon and Rome did not see themselves as a passing phase. Each in its time believed it was the end-all of the world’s progression. I have no such feeling. Each age is a day that is dying, each one a dream that is fading.

Grinding It Out

In Grinding It Out: The Making of McDonald’s Ray Kroc tells the story of how he built McDonalds into a behemoth. The key themes that run through it are his persistence and obsessive attention to detail. There are also some interesting strategic insights on how he views store operators differently than the typical franchise business, and how he selected real estate locations. If the book is too long, there is also a movie, and a country music song telling the same general story. The book is unique, however, since it provies a direct view into Ray Kroc’s thought process.

On Partnership:

One of the basic decisions I made in this period affected the ehart of my franchise system and how it would develop. That was that the corporation was not going to get involved in being a supplier for its operators. My belef was that I had to help the individual operator succeed in every way I could. His success would insure my success. But I couldn’t do that and, at the same time, treat him a a customer.

There is a basic conflict in trying to treat a man as a partner on the one hand while selling him something at a profit on the other. Once you get into the supply business, you become more concerned about what you are making on sales to your franchisee than with how his sales are doing. The temptation coud become very strong to dilute the quality of what you are selling him in order to increase your profit. This would have a negative effect on your franchiesees business, and ultimately, of course, on yours. Many franchise systems came along after us and tried to be suppliers, and they got into severe business and financial difficulty. Our method enabled us to build a sophisticated system of purchasing that allows the operator to get his suplies at rock-bottom prices. As it turned out, my instinct helped us avoid some antitrust problems some other franchise operators got into.

On selecting locations for new stores:

Back in the days when we first got a company airplane, we used to spot good locations for McDonald’s stores by flying over a community and looking for schools and church steeples. After we got a general picture from the air, we’d follow up wit h a site survery. Now we use a helicopter, and its ideal. Scarceley a month goes by that I don’t get reports from whatever districts happen to be using our five copters on some new locations that we would never have discovered otherwise. We have a computer in Oak Brook tat is designed to make real estate surveys. But those printouts are of no use to me. After we find a promising location, I drive around it in a car, go to the corner saloon and into the neighborhood supermarket. I mingle with the people and observe their comings and goings. That twlls me what I need to know about how a McDonald’s store would do there.

 

The Joy Of Footnotes

The Mezzanine by Nicholas Baker is a stream of consciousness novel that follows the protaganist’s thoughts during  lunch-hour activities, including the purchase of new shoelaces. Since the novel is basically just the running dialogue of the a person’s thoughts, it includes deep observations of a lot of everyday items. After reading the novel, I came away appreciating the design of everyday objects much more. The book manages to be simultaneously, deep, absurd, and hilarious.

I originally picked up The Mezzanine, after Matt Levine mentioned it during a Reddit AMA as a literary inspiration for his use of footnotes, supplementing his legal experience. The novel’s protaganist indeed praises the “luxuriant incidentalism of footnotes” in certain classic works. Those that appreciate footnotes:

“…know that the outer surface of truth is not smooth, welling and gathering from paragraph to shapely paragraph, but is encrusted with a rough protective bark of citations, quotation marks, italica, and foreign languages, a whole variorum crust of “ibid’s” and “compare’s” and “see’s” that are the shield for the pure flow of argument as it lives for a moment in on mind.”

Great scholarly works can use footnotes as “reassurances that the pursuit of truth doesn’t have clear outer boundaries: it doesn’t end with the book; restatement and self-disagreement and the enveloping sea of referenced authorities all continue.”

“Footnotes are the finer-suckered surfaces that allow tentacular paragraphs to hold fast to the wider reality of the library.

Additionally, the book indirectly considers a lot of Epistemological questions. The protagonist wonders what influences his thoughts:

“Will the time ever come when I am not so completely dependent on thoughts I first had in childhood to furnish my comparisons and analogies and sense of the parallel rhythms of microhistory? Will I reach a point where there will be a good chance, I mean a more than fifty-fifty chance, that any random idea popping back into the foreground of my consciousness will be an idea that first came to me when I was an adult, rather than one I had repeatedly as a child?”

Backgammon and Life Philosophy

Backgammon: the cruelest game provides a guide to some key principles of backgammon, and contains analysis of several games between top players. It also gets philosophical about the vicissitudes of randomness that make backgammon so challenging and intriguing:

From the start there is a complicated interplay of possibilities, probabilities, good fortune and bad, which influences every facet of the game. in backgammon, to seek position is to take certain calculated risks, and because all players are ruled by the dictates of the dice- or by chance, which Karl von Clausewitz, the ninetheenth-century military theorist, described as “an agency indifferent to the actor’s preference for the outcomes” – no player is ever in control of his particular destiny. One of the game’s chief tactics, then, is to shield oneself against the dice. The player with the strongest position can withstand the greater number of unfavorable rolls, or “bad luck,” than can the more weakly protected player, who, because he failed to protect himself, is more easily assaulted and overrun.

Nonetheless, no matter how cunningly you play, you are virtually always vulnerable. One unexpected horror roll can undermine the best positions, and derange the most sensible of plans; this is bot hthe charm and the frustration of the game. The best players know they must employ the craftiest of tactics, not because of the dice, but in spite of them. It is the enormously high luck factor in backgammon that causees it to be a game of skill. Without luck or accident, the game would not only be monotonous, but infinitely less skillfull.

In backgammon, to be skillful is to be self protective. At any given point in the ggame, the better players are aware of Murphy’s Law, which states that if anything can go wrong, it will.” Given the whimsical nature of the dice, all players have a chance in the game, but some players have more chances than others, because they have created in environment in which the more propirious is more likely to occur.

In backgammon, an understanding of the correct percentage moves in specific situations qualifies as “inside information” and will enable you to win in the long run. But not every time, alas, and often nt even in what you believe to be crucial games. This condition must be accepted philosophically, of course, and should not deter you from continuing a detailed study of the game.

Quick Thoughts on The Signal and the Noise

Learning to think probabilistically is one of the most critical skills one can master. Nate Silver’s The Signal and the Noise: Why So Many Predictions Fail–but Some Don’t is a valuable book on thinking probabilistically and forecasting in an uncertain environment. It compares and contrasts examples across multiple disciplines, including weather forecasting, seismology, finance, and more.

This book pairs well with Against the Gods, Fortune’s Formula and Superforecasting.   Against the Gods is in my opinion, the most important book on the development of probabilistic thinking. Early civilizations were good with geometry and logic, but helpless with uncertainty. Ironically it was gamblers and heretics who moved mankind forward by  developing the science of  probability, statistics, and ultimately risk management.   Fortune’s Formula shows the connection between information theory, gambling, and correct position sizing for investors. It helps the answer the question: when you have a slight edge, how much should you bet? Nate Silver draws heavily on Superforecasting.  Particularly important is the idea of “foxes and hedgehogs”. Foxes are multidisciplinary, adaptable, self critical , tolerant of complexity, cautious and empirical. In contrast, Hedgehogs are specialized, stalwart, stubborn, order-seeking, confident, and ideological. As you might expect, foxes make far better forecasters than hedgehogs, even though hedgehogs make for better television.

Anyways, here are a few key insights from my notes on The Signal and the Noise

1) Data is useless without context.

There are always patterns to find in data, but its critical to understand the theory behind the system you are studying to avoid being fooled by noise. This is true in forecasting the weather, investing, betting on sports, or any other probabilistic endeavor. The ability to understand context is also a critical advantage humans have over computer programs.

“Statistical inferences are much stronger when backed up by theory or at least some deeper thinking about their root causes. “

The importance of understanding context comes to the forefront when you compare human’s success with weather forecasting, vs relative failure with earthquake forecasting.

“Chaos theory is a demon that can be tamed- weather forecasts did so, at least in part. But weather forecasters have a much better theoretical understanding of th earth’s atmosphere than seismologists do of the earth’s crust. They know more or less, how weather works, right down to the molecular level. Seismologists don’t have that advantage. “

The ability to understand context is what separates success from failure in all pursuits dealing with uncertainty. The profile of professional sports gambler Bob Voulgaris, is highly instructive. Voulgaris focuses on NBA basketball. A key insight is that Voulgaris has powerful tools for analyzing data, and he makes good use of the data, but he also has deep understanding of the qualitative subletities of how NBA basketball works. Obvious statistical patterns are quickly incorporated into betting lines, whether they are signal or noise. Voulgaris looks deeper, and finds places where the line misprices true probabilities.

“Finding patterns is easy in any data rich environment; thats what mediocre gamblers do. The key is in determining whether the patterns represent noise or signal. “

2) Beware of overconfidence

“… the amount of confidence someone expresses in a prediction is not good indication of its  accuracy, to the contrary, these qualities are often inversely correlated. “

3) Think big, and think small. Mix the macro and the micro.

“Good innovators typically think very big, and they think very small. New ideas are sometimes found in the most granular of details where few others bother to look. And they are sometimes found when you are doing your most abstract and philosophical thinking, considering why the world is the way that it is and whether there might be an alternative to the dominant paradigm.”

This is reminiscent of the “global micro” approach used by several manager’s profiled in Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets

4) Recognize the Value of Bayesian Thinking

The work of Thomas Bayes forms the framework underlying how good gamblers think.

Bayes was an English minister who argued in his theological work that admitting our own imperfections is a necessary step on the way to redemption. His most famous work, however, was “An Essay toward Solving a Problem in the Doctrine of Chances,” which was not published until after his death. One interpretation of the essay concerns a person who emerges into the world( ie Adam, or someone from Plato’s cave), and rises to see the sun for the first time:

“At first the does not know whether this is typical of some sort of freak occurrence. However each day that he survives and the sun rises again, his confidence increases that it is a permanent feature of nature. Gradually, through this purely statistical form of inference, the probability that he assigns to his prediction that the sun will rise again tomorrow approaches(although never exactly reaches) 100 percent.”

In essence, beliefs on probability are updated as new information comes in.

Ironically Bayes philosophical work was extended by the mathematician and astronomer Pierre Simon-Laplace, who was likely an atheist. Although Laplace believed in scientific determinism, he was frustrated with the disconnect between (what he believed to be the perfection of nature, and human imperfections in understanding it, in particular with regards to astronomical observations. Consequently, he developed some measuring techniques that relied on probabilistic inferences, rather than exact measurements. “Laplace came to view probability as a waypoint between ignorance and knowledge.” The combined work of Laplace and Bayes led to simple expression that is concerned with conditional probability. In essence Bayesian math can be used to tell us the probability that a theory or hypothesis if some event has happened.

5) The road to wisdom is to be less and less wrong.

forecasting, or at least operating in an uncertain environment, is an iterative process.

Nate Silver titles one of the chapters “Less and Less Wrong, as a homage to the Danish mathematician, scientist, inventor, and poet Piet Hein, author of Grooks:

The road to wisdom? — Well, it’s plain
and simple to express:
Err
and err
and err again
but less
and less
and less.

 

Disrupting Through Good Customer Service

In Zero to One Peter Thiel theorizes that a new innovation must be at least ten times better than the currently existing solution in an important dimension. This is a high bar, but it often achieved by focusing on an ignored or under exploited niche.

The examples of Uber, and Amazon show how focusing relentlessly on customers can also achieve this goal, especially when incumbents are attached to an old way of doing things that is unpleasant for customers. Good customer service can be extremely disruptive.

When facing regulatory challenges, Uber’s CEO Travis Kalanick went against conventional wisdom of his lobbyists. Rather than seeking to compromise with regulators, he focused on delivering a better product. In The Upstarts the author discusses what is known as “Travis’ law:

“Our product is so superior to the status quo that if we give people the opportunity to see it or try it, in any place in the world where government has to be at least somewhat responsive to the people, they will demand it and defend its right to exist.”

Mobilizing customers is Uber’s  public affairs strategy.

This extreme focus on customers was a key factor in Amazon’s rise as well. Here is Jeff Bezos in the early days of Amazon(quoted from The Everything Store):

“You should wake up worried, terrified every morning.  But don’t be worried about our competitors because they’re never going to send us any money anyway. Lets worried about our customers and stay heads down, focused.”

Bezos reiterated this sentiment in the most recent annual letter:

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.

I can’t help but wonder if financial services will end up facing a similar level of disruption from Robo Advisers.  Most of the financial services industry is clearly conflicted and not focused  on actually improving client outcomes. That leaves a massive space for new entrants.