Tag: Business

Earning Your Stripes: My Conversation with Patrick Collison [The Knowledge Project #32]

Reading Time: 2 minutes

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On this episode of the Knowledge Project, I chat with Patrick Collison, co-founder and CEO of the leading online payment processing company, Stripe. If you’ve purchased anything online recently, there’s a good chance that Stripe facilitated the transaction.

What is now an organization with over a thousand employees and handling billions of dollars of online purchases every year, began as a small side experiment while Patrick and his brother John were going to college.

During our conversation, Patrick shares the details of their unlikely journey and some of the hard-earned wisdom he picked up along the way. I hope you have something handy to write with because the nuggets per minute in this episode are off the charts. Patrick was so open and generous with his responses that I’m really excited for you to hear what he has to say.

Here are just a few of the things we cover:

  • The biggest (and most valuable) mistakes Patrick made in the early days of Stripe and how they helped him get better
  • The characteristics that Patrick looks for in a new hire to fit and contribute to the Stripe company culture
  • What compelled he and his brother to move forward with the early concept of Stripe, even though on paper it was doomed to fail from the start
  • The gaps Patrick saw in the market that dozens of other processing companies were missing — and how he capitalized on them
  • The lessons Patrick learned from scaling Stripe from two employees (he and his brother) to nearly 1,000 today
  • How he evaluates the upsides and potential dangers of speculative positions within the company
  • How his Irish upbringing influenced his ability to argue and disagree without taking offense (and how we can all be a little more “Irish”)
  • The power of finding the right peer group in your social and professional circles and how impactful and influential it can be in determining where you end up.
  • The 4 ways Patrick has modified his decision-making process over the last 5 years and how it’s helped him develop as a person and as a business leader (this part alone is worth the listen)
  • Patrick’s unique approach to books and how he chooses what he’s going to spend his time reading
  • …life in Silicon Valley, Baumol’s cost disease, and so, so much more.

Patrick truly is one of the warmest, humble and down to earth people I’ve had the pleasure to speak with and I thoroughly enjoyed our conversation together. I hope you will too!

Listen

Transcript

Normally only members of our learning community have access to transcripts, however, we pick one or two a year to make avilable to everyone. Here’s the complete transcript of the interview with Patrick.

If you liked this, check out other episodes of the knowledge project.

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Members can discuss this podcast on the Learning Community Forum. 

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[Episode 27] The Art of Letting Other People Have Your Way: Negotiating Secrets from Chris Voss

Reading Time: 2 minutes

Negotiation expert Chris Voss, former lead international kidnapping negotiator for the FBI and author of the excellent book, Never Split the Difference, offers some hands-on negotiation training.

Whether you’re buying a car, requesting a raise at work, or just deciding where to eat out with your spouse or partner, your negotiating skills will determine how pleased you are with the outcome.

Today, we have the special opportunity to learn some of the most effective tactics and strategies from a true master, Chris Voss.

Chris is the former lead international kidnapping negotiator for the FBI and author of the excellent book, Never Split the Difference: Negotiating As Though Your Life Depended On It.

In this fascinating conversation, Chris shares how you can use the same techniques that have been field tested in some of the most high-stakes, pressure cooker situations, in your daily life.

If you want to become a better haggler, a better communicator, or a better listener, don’t miss this episode. It’s packed with actionable insights you can start using today to be more persuasive and grab hold of more of what you want in life.

Here are just a few things we cover:

  • What it really takes to be great at negotiating (most people approach it all wrong)
  • How to keep your emotions in check in a negotiation
  • The three different voices you can use to connect with your counterpart and put them at ease
  • How many of us “take ourselves hostage” in a negotiation and ruin it before it starts
  • The biggest time-waster (and profit-killer) that plagues so many negotiations
  • The main problems with traditional negotiation techniques (BATNA, etc.) and how they’re leaving lots on the table
  • The “negotiation one-sheet” Chris uses before entering into any negotiation (and how you can use it, too)
  • How to use an “accusations audit” when you’re structuring winning deals (this is brilliant)
  • One technique to get your counterpart to spill their guts when they’re trying to be tightlipped.
  • “Prospect theory” and how to use it to your advantage
  • Maximizing employee satisfaction in the hiring process so you get the best talent… and keep them!
  • How empathy saves time and makes you more likely to get what you want in a negotiation
  • The power of deference (and when to use it)
  • Chris’ go-to tools that work best on all personality types, in nearly any situation
  • How intentionally getting the other party to say “no” substantially increases the success rate of a negotiation

And much more.

#ListenAndLearn

Transcript

A transcript is available to members of our learning community or for purchase separately ($7).

More Episodes

A complete list of all of our podcast episodes.

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Members can discuss this post on the Learning Community Forum. 

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Footnotes
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    Image Copyright Kate Haley Photography

Batesian Mimicry: Why Copycats Are Successful

Reading Time: 5 minutes

One of our first interview guests for The Knowledge Project was the former NFL executive Michael Lombardi. In our interview, we discussed topics ranging from the nature of leadership to decision making in a football context. Mike is one of the wisest thinkers associated with the game.

We heard Mike on an NFL podcast recently, and in a brief clip you can listen to here, Mike makes a fascinating comment on differentiating between a Mimic and the Real Thing:

“There’s two kinds of snakes you come across. There’s the Texas Coral Snake, and the Mexican Milk Snake, and they both look exactly alike. The Texas Coral Snake is dangerous, it’s venomous, it can kill you in a minute. The Mexican Milk Snake can’t do anything to you; it’s an impostor.”

Mike got the idea from my friend and CEO of Glenair, Peter Kaufman. Following Mike’s lead, we chose to dig in a little further.

***

Turns out there are a host of Coral Snake Mimics, all designed to look exactly as fierce as the true bad guys. Besides the Mexican Milk Snake, there is the Scarlet King Snake, the Florida Scarlet Snake, and the California Mountain Kingsnake. (At least.)

For an example, here are the Texas Coral Snake on the left and the Mexican Milk Snake on the right. Pretty damn close!

220px-lampropeltis_triangulum_annulata

According to Wikipedia, the Texas Coral Snake’s venom is a “powerful neurotoxin, causing neuromuscular dysfunction”, and terrifyingly describes its bite as coming from “a pair of hollow, small, fixed fangs in the front of its upper jaw, through which the venom is injected and encouraged via a chewing motion. Due to this method of venom delivery, a coral snake must bite and hold on for a brief time to deliver a significant amount of venom…”

The Milk Snake, on the other hand, is described as a pretty ideal pet: “The Mexican Milk Snake adapts well to captive care, and its smaller size and striking colorations can make it an attractive choice for a pet snake. They are normally docile, and not typically apt to bite or expel musk.”

So, how is it that these two look alike? It’s due to a phenomenon called Batesian Mimicry.

In the 1850s, the naturalist Henry Walter Bates found a certain set of butterflies who were clearly not of the same species but whose wings looked almost the same to the naked eye. After thinking it over, Bates eventually figured out what was going on: While the butterflies which were toxic to potential predators (the “models”) were able to operate freely and relatively unmolested, there had also developed a “mimic” population of butterflies which wasn’t toxic at all, yet still went untouched!

In fact, biologists eventually figured out that the more toxic and dangerous the “model” was and the more frequently they appeared in the local population, the easier it was for its “mimics” to get by! Predators simply wouldn’t take the risk of mixing up the two. If there aren’t as many “models” around or they aren’t that dangerous, the mimics have a harder time.

This is a wonderful model, and in the practical world we live in, a similar phenomenon abounds: Copycats or “pretenders to the throne” are often very effective, very convincing “mimics” of the true champions. They dress the part, they talk the talk, and they know what buttons to push. But in the end, they are merely chauffeurs.

We see a very Batesian effect at work: The more impressive the “model,” the more effective its mimics can be in convincing people they too are impressive, and in all the same ways. But for every Warren Buffett (just one by our count), there has been many “future” Warren Buffett’s. For every Steve Jobs, there have been many “next” Steve Jobs’.

In fact, sometimes even just appearances can be quite convincing: now-disgraced Theranos founder Elizabeth Holmes was very fond of wearing a very Steve Jobsian black turtleneck outfit.

It seems almost a law of nature that success will be copied, sometimes in a very disgraceful way. (Charlie Munger thinks that the fundamental algorithm of life is “Repeat what works.”)

Because they can be very convincing,  we must be wise enough to watch out for Batesian mimicry — even in ourselves.

This brings up an interesting, at times paradoxical, question: Who can best tell the difference between a Coral Snake and its Mimics? The Coral Snake itself.

The real thing knows a fake. Charlie Munger once commented on this in relation to the field of money management:

“It’s very hard to tell the difference between a good money manager and someone who just has the patter down. If you aren’t a good money manager yourself, rather than trying to pick one, you’re probably better off with a low cost index fund. ‘It takes one to know one’.”

***

An insight this good is only possible through continued study across the largest and most relevant fields of study. Peter got this idea by studying biology, a field full of incredible insight but, strangely underappreciated by most “non-biologists”. It’s not just ideas about predators and prey, but niches, competition, co-evolutionary arms races and a whole host of others which give us massive insight into the human world.

Peter realized that studying across fields like biology and physics is something like buying an index fund: It works because you captures all the important companies traded on the public exchange, not just a select few. That means you capture the massive winners, which tend to greatly outweigh the failures.

Studying across all of the important fields gives you the same advantage, except it’s even better: If an index fund buys a new position, it must sell something to do so; consequently, the “big winners” can only impact your portfolio in a limited way. But if you come to understand a new Great Idea, you don’t have to give up the ones you already know! This is a great advantage.

And so it’s worth taking the time to work on learning all the big ideas you can find, not just the ones you want to learn. In that search, you’ll find a host of big winners you didn’t even know existed.

If you liked this post, you’ll probably also love:

The Need for Biological Thinking to Solve Complex Problems — How should we think about complexity? Should we use a biological or physics system? The answer, of course, is that it depends. It’s important to have both tools available at your disposal.

The Founder Principle: A Wonderful Idea from Biology — In his brilliant The Song of the Dodo, David Quammen gives us not only the stories of many brilliant biological naturalists including Mayr, but we also get a deep dive into the core concepts of evolution and extinction, including the Founder Effect.

Biology Enables. Culture Forbids. — From a biological perspective, nothing is unnatural. Whatever is possible is by definition also natural.

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Carol Dweck on Creating a Growth Mindset in the Workplace

Reading Time: 5 minutes

Carol Dweck‘s concept of Mindset permeates through every aspect of our lives.

One area particularity affected is in the workplace. We spend half of our day at work (some of you likely spend more than half) and both your mindset and the mindset of those around you will have a significant impact on your life, especially the mindset of your boss. Dweck comments:

Fixed-mindset leaders, like fixed-mindset people in general, live in a world where some people are superior and some are inferior. They must repeatedly affirm that they are superior, and the company is simply a platform for this.

These leaders tend to have a strong focus on personal reputation, generally at the expense of the company. Lee Iacocca, during his time at Chrysler, is a good example of this. Iacocca had his ego severely bruised when he was forced out of Ford. Fixed-mindset leaders tend to respond to failure with anger instead of viewing it as an opportunity to learn or get better.

So the king who had defined him as competent and worthy now rejected him as flawed. With ferocious energy, Iacocca applied himself to the monumental task of saving face and, in the process, Chrysler Motors. Chrysler, the once thriving Ford rival, was on the brink of death, but Iacocca as its new CEO acted quickly to hire the right people, bring out new models, and lobby the government for bailout loans. Just a few years after his humiliating exit from Ford, he was able to write a triumphant autobiography and in it declare, ‘Today, I’m a hero.’

He showed Ford that they made a mistake when they let him go, and he reveled in his triumph. But in his glory-basking, Iacocca forgot that the race wasn’t over yet.

This was a hard time for the American automotive industry, the Japanese were challenging the market like no one ever had before. Chrysler needed to respond to the competition or they would be in trouble again. Meanwhile, Iacocca was still focused on his reputation and legacy.

He also looked to history, to how he would be judged and remembered. But he did not address this concern by building the company. Quite the contrary. According to one of his biographers, he worried that his underlings might get credit for successful new designs, so he balked at approving them. He worried, as Chrysler faltered, that his underlings might be seen as the new saviors, so he tried to get rid of them.

Instead of listening to the advice of his designers and engineers, Iacocca dug his feet into the ground.

See, a fixed-mindset doesn’t easily allow you to change course. You believe that someone either has ‘it’ or they don’t: it’s a very binary frame of mind. You don’t believe in growth, you believe in right and wrong and any suggestion of change or adaptation is considered a criticism. You don’t know how to adopt grey thinking. Challenges or obstacles tend to make you angry and defensive. 

Iacocca was no different.

But rather than taking up the challenge and delivering better cars, Iacocca, mired in his fixed mindset, delivered blame and excuses. He went on the rampage, spewing angry diatribes against the Japanese and demanding that the American government impose tariffs and quotas that would stop them.

Blame is a big part of the fixed-mindset; when something goes wrong you don’t want to take responsibility because that would be akin to accepting inferiority. This can push some bosses to become abusive and controlling. They feel superior by making others feel inferior. Colleagues may feel this way too, but management has power. This is when you will notice the effect of mindset on your corporate culture. Everything starts to revolve around pleasing upper management. 

When bosses become controlling and abusive, they put everyone into a fixed mindset. This means that instead of learning, growing, and moving the company forward, everyone starts worrying about being judged. It starts with the bosses’ worry about being judged, but it winds up being everybody’s fear about being judged. It’s hard for courage and innovation to survive a companywide fixed mindset.

In these circumstances, the fear of punishment leads to groupthink. No one wants to dissent or put their hand up because it’s likely to get slapped. 

So what can you do if you’re new to a company and working against a fixed-mindset? This will be a difficult road but there are definitely ways of nudging your company towards a growth mindset.

Dweck outlines the main attributes that create a growth-mindset environment:

  • Presenting skills as learnable
  • Conveying that the organization values learning and perseverance, not just ready-made genius or talent
  • Giving feedback in a way that promotes learning and future success
  • Presenting managers as resources for learning.

At the end of each chapter of Dweck’s book, she has a brilliant section entitled ‘Grow Your Mindset.’ She reviews the chapter’s contents and asks the reader probing questions to help them evaluate their situation and suggests concrete ways to move forward. Here are a few pertinent examples to explore:

What kind of workplace are you in?

Are you in a fixed-mindset or growth-mindset workplace? Do you feel people are just judging you or are they helping you develop? Maybe you could try making it a more growth-mindset place, starting with yourself. 

Is it possible that you’re the problem?

Are there ways you could be less defensive about your mistakes? Could you profit more from the feedback you get? Are there ways you can create more learning experiences for yourself? How do you act toward others in your workplace? Are you a fixed-mindset boss, focused on your power more than on your employees’ well-being? Do you ever reaffirm your status by demeaning others? Do you ever try to hold back high-performing employees because they threaten you?

Can you foster a better environment?

Consider ways to help your employees develop on the job: Apprenticeships? Workshops? Coaching sessions? Think about how you can start seeing and treating your employees as your collaborators, as a team. Make a list of strategies and try them out. Do this even if you already think of yourself as a growth-mindset boss. Well-placed support and growth-promoting feedback never hurt.

Do you have procedures to overcome groupthink?

Is your workplace set up to promote groupthink? If so, the whole decision-making process is in trouble. Create ways to foster alternative views and constructive criticism. Assign people to play the devil’s advocate, taking opposing viewpoints so you can see the holes in your position. Get people to wage debates that argue different sides of the issue. Have an anonymous suggestion box that employees must contribute to as part of the decision-making process. Remember, people can be independent thinkers and team players at the same time. Help them fill both roles.

Mindset is filled with practical advice that will change the way in which you think and interact with the world. Through examples from her rigorous research Dweck eloquently explains the nature of the two mindsets and their influence on sports, business and relationships. Since culture eats strategy, it’s important to understand her main points. Understanding her core concepts will also add depth to your comprehension of metal models like confirmation bias and bias from overconfidence.

If you’d like a bit more on Mindset we suggest taking a look at Dweck’s Google talk or perhaps revisit a more detailed explanation of the two mindsets.

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Simple Rules for Business Strategy

Reading Time: 5 minutes

The book Simple Rules by Donald Sull and Kathleen Eisenhardt has a very interesting chapter on strategy, which tries to answer the following question: How do you translate your broad objectives into a strategy that can provide guidelines for your employees from day to day?

It’s the last bit there which is particularly important — getting everyone on the same page. 

Companies don’t seem to have a problem creating broad objectives (which isn’t really a strategy). Your company might not call them that, they might call them “mission statements” or simply “corporate goals.”  They sound all well and good, but very little thought is given to how we will actually implement these lofty goals.

As Sull and Eisenhardt put it: 

Developing a strategy and implementing it are often viewed as two distinct activities — first you come up with the perfect plan and then you worry about how to make it happen. This approach, common through it is, creates a disconnect between what a company is trying to accomplish and what employees do on a day-to-day basis.

The authors argue that companies can bridge this gap between strategic intent and actual implementation by following three steps:

  1. Figure out what will move the needles.
  2. Choose a bottleneck.
  3. Craft the rules.

1. Moving the Needles

The authors use a dual needle metaphor to visualize corporate profits. They see it as two parallel needles: an upper needle which represents revenues and a lower needle which represents costs. The first critical step is to identify which actions will drive a wedge between the needles causing an increase in profits, a decrease in costs, and sustain this over time.

In other words, as simple as it sounds, we need an actual set of steps to get from figure a. to figure b.

screen-shot-2016-10-17-at-1-36-10-pm

What action will become the wedge that will move the needles?

The authors believe the best way to answer this is to sit down with your management team and ask them to work as a group to answer the following three questions:

  1. Who will we target as customers?
  2. What product or service will we offer?
  3. How will we provide this product at a profit?

When you are trying to massage out these answers remember to use inversion as well. 

Equally important are the choices on who not to serve and what not to offer.

Steve Jobs once pointed out that Apple was defined as much by what it didn’t do as by what it did.

2. Bottlenecks

Speaking of inversion, in order to complete our goal we must also figure out what’s holding us back from moving the needles — the bottlenecks standing in our way.

When it comes to implementing a strategy of simple rules, pinpointing the precise decision or activity where rules will have the most impact is half the battle. We use the term bottleneck to describe a specific activity or decision that hinders a company from moving the needles.

You may be surprised at the amount of bottlenecks you come across, so you’ll have to practice some “triage” of your issues, sorting what’s important from what’s really important.

The authors believe that the best bottlenecks to focus your attention on share three characteristics:

  1. They have a direct and significant impact on value creation.
  2. They should represent recurrent decisions (as opposed to ‘one off’ choices).
  3. They should be obstacles that arise when opportunities exceed available resources.

Once we’ve established what the bottlenecks are, it’s time to craft the rules which will provide you a framework in which to remove them.

3. Craft the Rules

Developing rules from the top down is a big mistake. When leaders rely on their gut instincts, they overemphasize recent events, build in their personal biases, and ignore data that doesn’t fit with their preconceived notions. It is much better to involve a team, typically ranging in size from four to eight members, and use a structured process to harness members’ diverse insights and points of view. When drafting the dream team to develop simple rules, it is critical to include some of the people who will be using them on a day-to-day basis.

This probably seems like common sense but we’re guessing you have worked at least one place where all information and new initiatives came from above, and much of it seemingly came out of nowhere because you weren’t likely involved.

In these situations it’s very hard to get buy-in from the employees — yet they are the ones doing the work, implementing the rules. So we need to think about their involvement from the beginning.

Having users make the rules confers several advantages. First, they are closest to the facts on the ground and best positioned to codify experience into usable rules. Because they will make decisions based on the rules, they can strike the right balance between guidance and discretion, avoiding rules that are overly vague or restrictive. User can also phrase the rules in language that resonates for them, rather than relying on business jargon. By actively participating in the process, users are more likely to buy into the final rules and therefore apply them in practice. Firsthand knowledge also makes it easier to explain the rules, and their underlying rationale, to colleagues who did not participate in the process.

It’s important to note here that this is a process, a process in which you are never done – there is no real finish line. You must always plan to learn and to iterate as you learn — keep changing the plan as new information comes in. Rigidity to a plan is not a virtue; learning and adapting are virtues. 

***

There’s nothing wrong with strategy. In fact, without a strategy, it’s hard to figure out what to do; some strategy or another must guide your actions as an organization. But it’s simply not enough: Detailed execution, at the employee level, is what gets things done. That’s what the Simple Rules are all about.

Strategy, in our view, lives in the simple rules that guide an organization’s most important activities. They allow employees to make on-the-spot decisions and seize unexpected opportunities without losing sight of the big picture.

The process you use to develop simple rules matters as much as the rules themselves. Involving a broad cross-section of employees, for example, injects more points of view into the discussion, produces a shared understanding of what matters for value creation, and increases buy-in to the simple rules. Investing the time up front to clarify what will move the needles dramatically increases the odds that simple rules will be applied where they can have the greatest impact.

***

Still Interested? Read the book, or check out our other post where we cover the details of creating your simple rules.

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Jared Diamond: How to Get Rich

Reading Time: 0 minutes Less than a minute

We’re constantly asked for examples of the “multiple mental models” approach in practice. Our standard response includes great books like Filters Against Folly and Will Durant’s The Lessons of History.

One of the well-known examples of this brand of thinking is Guns, Germs, and Steel, a book that opened thousands of eyes to the power of leaping across the walls of history, sociology, biology, geography and other fields to truly understand the world. (If you haven’t read it yet, why are you still here? Go order it and read it!)

Jared Diamond, the book’s author, is a great master of synthesis across many fields — works like The Third Chimpanzee and Collapse show great critical thinking prowess, even if you don’t come to 100% agreement with him.

Lesser known than Guns, Germs, and Steel is a follow-up talk Diamond gave entitled How to Get Rich:

… probably most lectures one hears at the museum are on fascinating but impractical subjects: namely, they don’t help you to get rich. This evening I plan to redress the balance and talk about the natural history of becoming rich.

The talk is a great, and short, introduction to “multiple mental models” thinking. Diamond, of course, does not literally answer the question of How to Get Rich. He’s smart enough to know that this is charlatan territory if answered too literally. (Three steps to surefire wealth!)

But he does effectively answer an interesting part of the equation of getting rich: What conditions do we need to set up maximal productivity, learning, and cooperation among our groups? 

Diamond answers his question through the same use of inter-disciplinary synthesis his readers would be familiar with: As you read it, you’ll see models from biology, military history, business/economics, and geography.

His answer has two main parts: Optimal group size/fragmentation, and optimal exposure to outside competition:

So what this suggests is that we can extract from human history a couple of principles. First, the principle that really isolated groups are at a disadvantage, because most groups get most of their ideas and innovations from the outside. Second, I also derive the principle of intermediate fragmentation: you don’t want excessive unity and you don’t want excessive fragmentation; instead, you want your human society or business to be broken up into a number of groups which compete with each other but which also maintain relatively free communication with each other. And those I see as the overall principles of how to organize a business and get rich.

Those are wonderful lessons, and you should read the piece to see how he arrives at them. But there’s another important reason we bring the talk to your attention, one of methodology.

Diamond’s talk offers us a powerful principle for our efforts to understand the world: Look for and study natural experiments, the more controlled, the better.

I propose to try to learn from human history. Human history over the last 13,000 years comprises tens of thousands of different experiments. Each human society represents a different natural experiment in organizing human groups. Human societies have been organized very differently, and the outcomes have been very different. Some societies have been much more productive and innovative than others. What can we learn from these natural experiments of history that will help us all get rich? I propose to go over two batches of natural experiments that will give you insights into how to get rich.

This wonderfully useful approach, reminiscent of Peter Kaufman’s idea about the Three Buckets of Knowledge, is one we see used effectively all the time.

Judith Rich Harris used the naturally controlled experiment of identical twins separated at birth to solve the problem of human personality development. Michael Abrashoff had a naturally controlled experiment in leadership principles when he had to turn around the USS Benfold without hiring or firing, or changing ships or missions, or offering any financial incentive to his cadets. Ken Iverson had a naturally controlled experiment in business principles by succeeding dramatically in a business with massive headwinds and no tailwinds.

And so if we follow in the steps of Diamond, Peter Kaufman, Judith Rich Harris, Ken Iverson, and Michael Abrashoff, we might find natural experiments that help illuminate the solutions to our problems in unusual ways. As Diamond says in his talk, the world has already tried thousands of things: All we have to do is study them and then align with the way the world works.

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