PHASE 3- CURATE

PHASE 3

 

Let’s Clear Something Up

Many people feel that success stems from luck or a will of the universe, and that the risks required to achieve it are too dangerous to indulge. Instead, these people force satisfaction onto themselves – a guarded and unprofitable response that makes mediocrity simultaneously both the status quo and the expectation.

Our beliefs can either discourage or enhearten us in the quest for our dream-lives; the effect is up to us. Whether the goal is completing a video game or making money, motivation is key to mastery – therefore, anyone can become an expert at anything if they dedicate a tremendous amount of time and effort. (Click here to purchase our summary of Peak, which discusses how one should specifically use deliberate practice to maximize their time and effort.)

For those unhappy with their current economic status (often the same people who change and become giant successes), this book serves as a bridge to this mentality.


The 1st Pillar: Rejecting Getting Rich Slow

The typical American lifestyle is full of high risk; it is a gamble you can neither predict nor sway. Getting fired, outsourced, or made obsolete are all unpredictable and uncontrollable patterns in work and business. In an ideal world, these events would never happen; the company you work for would remain profitable forever, and you would trade 30 years of your life for a pampered retirement. This doesn’t sound too terrible until you consider the quality of those 30 years: 3 decades of pinching pennies and being altogether limited. Instead of triumphing in your present life, you would obsess over coupons and deals just so your older self might live comfortably one day, leading a poor-quality life in the meantime. (Click here to download our summary of The Millionaire Fastlane which expands upon the risks of society’s get-rich-slow lifestyle.)

A get-rich-slowly lifestyle enslaves you to money, never experiencing the life of your dreams, despite the time sacrificed trying to attain it. Getting rich quickly is indeed possible! You must control everything, from your mind, to what you learn, to how hard you work – and recognize that everything directly affects your money. The 3 key beliefs for getting rich quickly are:

  1. You control your life.

  2. You can get better at anything.

  3. You are allowed to fail.



Upon starting, you are likely going to have difficulties and become easily frustrated. Those lacking the knowledge and discipline of the 10 Pillars will likely quit. Yet perseverance and tenacity are what set flowering entrepreneurs apart from the mediocre public. (Click here to purchase our summary of How to Make Money in which the author, who made $750 million in his lifetime, discusses the differences between tenacity and perseverance.) They are those who utterly reject society’s “getting rich slowly” mantra, and instead develop the drive and determination necessary for a “getting rich quickly” mindset. They have the courage to subtly shift their mentalities so that they may begin the long (and admittedly sometimes arduous and tiresome) process of actually seeing their dreams manifest in reality.

The 2nd Pillar: Separating Time from Money

Every day has 24 hours allocated to work, family, and self-care. Thus there is a hard limit, a cap to the amount we can accomplish, and, in turn, the amount of money we make. This leaves us with two choices:

Choice 1: Increase the Value of Our Time

LeBron James is so talented that every minute of his time is worth thousands of dollars. At the end of the day, however, he only has so many minutes; while he can make an incredible amount of money, his income remains capped. Similarly, you can treat 1 hour, 1 year, or 1 decade of your life as equal to X amount of dollars, although to earn as much as LeBron you must be truly spectacular and amazingly skilled at what you do.

Choice 2: Separate Time from Income

Instead of trying to increase the value of our time, we can create a machine that generates income regardless of our own time spent on it. In other words, you getting paid while your machine that you build does the work. Entrepreneurs should ponder the following questions:

  1. Can the business make money while I am away?

  2. Can it be delegated, or automated with machines?

  3. Could I train someone else to run it?

  4. Could I make the process of delivering on $100 in sales, the same process as delivering on $1 million in sales (aka scale without more time involvement)?


While a business that answers “no” could possibly make you money, it will continue to require greater and greater amounts of your time and threaten your quality of life. No business like this will be jump-started effortlessly, nor will it ever be able to run itself. This is a major concern for new businesses: money and time must be separated! Strategically feeding chunks of your earnings to your growing business, delegating by hiring and/or employing automated machines, will ultimately increase your overall cumulative profit.

The 3rd Pillar: Accepting That You Must Be Better Than Everyone Else

To be successful, building your business must be your #1 priority. If it is not, this isn’t the end of the world – however, you are then forced to accept the fact that you are unlikely to ever become a multimillionaire. Even with all advantages in the world, you will not succeed if you do not believe in yourself. If you only remember one pillar from this book, make sure it is this one!
Beliefs drive our actions. If you believe that you are extremely attractive, it will increase your confidence and make you behave in a more attractive manner. Similarly, adopting the blind faith of a moron in yourself, combined with the pragmatic practicality of a rocket scientist, will make you sure-footed and productive, for better or for worse.

The mentors in your life (from school or otherwise) told you that the best possible thing to do after high school is to attend a good college, but never explained that becoming rich is something you can strategize without college or a typical 9-5 job. (Click here to purchase our summary of The Education of Millionaires which discusses skills for success, such as marketing yourself, not typically taught in college.)

Most people do 2 incorrect things for building wealth:

  1. Stop themselves before they begin (they don’t believe they deserve it and thus never attempt it).

  2. Try to become rich while remaining average (they do not tackle challenges, preferring to “play it safe” within their comfort zones).


If you seek greatness, you must first accept the fact that greatness begins at your job. Put in the work, and you will not only reach greatness, but also recognize it within yourself. An essential part of work is evolution; you must always think about and invest in improving:

  • Your brand

  • Your marketing

  • Your product

  • Everything you do


You need to outwork your competition, and this involves time and money. Learn new skills and learn to hire capable employees, things that other, more cautious, business owners are hesitant to entertain. Being confident without a deep understanding of finances will undoubtedly result in bad decision-making.

The 4th Pillar: Knowing Every Little Thing Is 100% Your Fault

We blame others to avoid injuring our own egos, oblivious of the time we waste by doing so. In your business, you will always pay the price – it doesn’t matter whose “fault” it is. The only way to prevent such setbacks is to hold yourself 100% accountable, keeping control away from other people or variables as much as possible. By encouraging you to act proactively, this mindset grants you pure and unrestricted power over your own future, which can then be applied in the seeking and establishment of success. To do so:

  1. Identify what could negatively impact the business.

  2. Identify solutions to problems within your scope.

  3. Identify people that have supported your goals and ask them (1) how to fix problems, and (2) point out problems which remain neglected. People a few steps ahead of you can save you from costly errors like lawsuits, website crashes, and security leaks.



The 5th Pillar: Adopting the Abundance Mindset

People tend to either have a scarcity mindset or an abundance mindset with regards to money.

  • Scarcity: We all know someone with a scarcity mindset – they get good grades in high school, attend a decent college, and pursue a good job. However, they tend to set self-imposed limits on their income, find money-making confusing, chaotic, or impossible from some situation, and ultimately fear losing money so never take risks.

  • Abundance: People with an abundance mindset – the mindset successful entrepreneurs sport – believe the amount of money they can generate is limitless. They extract lessons from failures and thus welcome any “missteps”. They understand what mindsets and traits wealthy people have (e.g. perseverance, curiosity, and ambition). Most importantly, they know that if you play the game enough times, you’ll develop an intuition for the “right” choices. (Click here to purchase our summary of Mastery, which discusses developing an intuitive feel after significant immersion.)


Mentally write yourself a $1 million check. Any time you must decide between investing in your business or saving, remind yourself that there is $1 million coming your way. Switch from “How can I save more?” (scarcity) to “How can I make more?” (abundance).

The 6th Pillar: Forgetting “What If” And Focusing on “What Is”

Since birth, we have been taught to think in terms of “What if?” Thus, failure feels final. Mistakes? Unacceptable. Yet this is counterproductive. Moving forward involves taking steps which will undoubtedly contain challenges. It is impossible to predict all these problems. But that is fine, for the most effective way to learn is to experience and outwit difficulties. Yet some people lay out elaborate (but purposeless) plans, inspiring perfection paralysis: never making a move since the “perfect” journey to wealth is never fully ready.

Humans are much more motivated by avoiding pain than by achieving gain; if your current situation is tolerable, you will not have a strong motivation to abandon it. The fear of leaving it may be paralyzing. The only way to overcome this fear is to have an even greater fear of never reaching your dreams! Action will almost always lead to mistakes, but without it, you’ll never reach success! We must embrace what is (our current reality) not what if (our future).

The 7th Pillar: Mapping Out Actions That Achieve Goals

Countless people want to start their own brick-and-mortar stores, but are clueless about choosing the perfect part of town for it. To them, creating the plan becomes more important than creating the goal itself.

Step 1. What is your big goal? At a bare minimum, you must have an income goal and a defined way of achieving it. Make a list of everything you want, research every item on the list, and add up the estimated costs. Then, define what you will sell, how much to sell it for, and who your target market is.

Step 2: What are 5 smaller goals you must achieve to reach your big goal? Next, think of the 5 biggest factors that go into generating your income goal.

Step 3: Break down each of your 5 goals into even smaller tasks. To avoid a single lofty goal, define actions to take. The final goal is a result of many smaller actions amalgamating, a mile comprised of inches.

The 8th Pillar: Focusing Solely On What Gets You Paid

To maximize your money, every moment should be spent focusing on what gets you paid. No matter who you are, you are just one person who can only learn so many skills and put in so many hours each day. There is a stark difference between a person who works 10 hours per week, and one who strategically directs their employees’ 400 hours per week. By identifying only the actions that get us the greatest return on investment, we can get paid faster and thus increase our income.

When we are frustrated with our income and have no idea how to increase it, we should write out our goals and identify which specific ones are not directly creating the return on investment we need. Then we can either delegate our resources away from these unprofitable avenues, or hire someone else to do them.

The 9th Pillar: People Give Money To People That Get People

Money is not merely power over other people; it is also the exchange of power between people. The value of money derives from others’ perception of its value and, in turn, power. Stop focusing on money and focus instead on understanding the people that give money its value (and how to get them to give you their money).

The sole factor of how successful you are, is how good you are at influencing or controlling others’ decisions. You will, in turn, constantly have others attempting to control you; how you react, judge, and influence people in return should be the most important task you assign yourself. In short, if you are trying to get rich, you are trying to gain control over other people.

You don’t have to be likeable or social, but you do have to understand people and how to persuade them to your side. (Click here to browse our summaries of books discussing persuasion techniques.) Wealthy entrepreneurs know that emotions drive people. Where mediocre entrepreneurs provide and sell products, wildly successful ones provide and sellemotions. (Click here to purchase our summary of The Four, which discusses how Apple, Google, Amazon, and Facebook wield customers’ emotions to their advantage.) When you get ahold of people’s emotions, they will flock to you; everyone will want a piece of what you have. At the end of the day, people just want to feel positive, happy, and accepted. There are 2 things to focus on:

  1. Selling is everything. Business doesn’t exist until somebody buys something. (Click here to browse our summaries of books on sales techniques.)

  2. Being comfortable with people. Understand that you probably will make a fool of yourself at some point; that’s okay. You just need to get comfortable interacting. (Click here to browse our summaries of books on socializing more effectively.)

The 10th Pillar: Finding Competitive Friends And Suitable Mentors

Humans are pack animals and everybody wants recognition. When we find a group of people we want to be included in, we begin conforming and behaving like them to better “blend in” and be part of the group. You will therefore act like the people with whom you spend the most time. If you befriend people who are making or shooting for millions of dollars, you will develop a strong urge to do the same. You will want to be their equal; if they act competitive in their niches, you will too. Most niches have forums, Facebook groups, clubs, or meetup groups for like-minded people. It’s not the money, but the attitudes, ambition, and goals that matter when seeking like-minded people.

You also need an appropriate mentor who is above you, but not so far above you that they cannot interact with you or understand your position. There are tons of entrepreneurs making hundreds of thousands of dollars a year that do not coach or mentor because they are too busy running their own businesses. You must take the initiative and contact them personally – intrigue them enough to win their mentorship. They are doing what you want to do, have made similar mistakes as you, and have taken similar steps as you are taking.

The Secret Pillar: Making the Decision To Be Wealthy At Any Cost

Everyone “wants,” something, but very few have the fortitude to successfully and effectively execute these goals. The only person who controls your chance of success is you, however clichéd that may sound. Some people will pull you down to their level of mediocrity by doubting you, by telling you precisely how you are likely going to fail. Others will exclaim that your goals are too risky, seemingly out of a sense of “caring” for you, and will try to persuade you that a life of mediocrity isn’t so bad! These people, subconsciously or not, donot want you to succeed. For if they did, they would have to face the truth of their own idleness.

Before applying the other pillars, you must adopt the secret 11th pillar (which can be activated at any point along your journey): Making the decision to get rich. No matter what.Make it now, and the rest will follow.

Bonus: Starting Your Own Business The “Right Way”

  1. Cash-flow businesses have very little overhead but require heaps of time to start and run. They generate money the quickest.

    Pros: High profit margins, no initial investment.

    Cons: Time-intensive and difficult to advance past a certain point.

  2. High-investment, scalable businesses explode out of nowhere, making millions of dollars and appearing in the news (like a new app).

    Pros: Highly sellable, automatable, easy to scale.

    Cons: Expensive to start, not usually created by the founder, and can be unprofitable for years.

  3. Long-term investment businesses require much money to start, but can yield 10-20% annual return.

    Pros: Safe and consistent, easy to earn passive income over extended periods of time, and sellable at their initial value if well-maintained.

    Cons: Expensive to start, and impossible to scale.

Armed with the knowledge of the 10 Pillars, you can now enjoy the luxuries of those who get rich fast!

Harnessing The Fear of Failure

The “800-pound gorilla” in the room is your fear of failure. Getting rich requires thick mental armor – not so thick that you dismiss valid criticisms, but thick enough for the inevitable subtle mockery when you stumble, and the nasty envy when you succeed. You will always have colleagues, “friends”, even family, who will subconsciously try to bring you down to their level. They will pretend to care. They will tell you how concerned they are at your risky career trajectory.

All these “concerns” are really just them projecting their own insecurities onto you. They know deep down they could never do what you’re doing. They also know that if it works, they will have to take a good hard look at their own choices, and perhaps even confront their own cowardice. They are crabs in a bucket and will do whatever it takes to subconsciously hold you back from escaping the bucket. They will plead with you to take the “smart” stable path. But don’t worry – if you do confront your fear of failure, you can rest easy knowing that plenty of smarter people than you are cowards who will never become rich.

People will disguise fear of failure by stating how they’re unwilling to fail publicly, by caring what the neighbors think, by worrying about a lack of stability, or by taking a strange pride being a “starving artistic”.

The Search

If your goal is to become rich, remember that, and don’t be emotionally tied to a job. If you do have a job, simply use it to absorb and learn, and then promptly quit. When you do search for an industry to make your riches, ignore the friends and family who secretly would be happier if you weren’t successful, and keep your ear to the grindstone. A rising tide raises all ships, and a new growing exciting industry can help hide some of the startup risks. Find your niche by focusing on your “inclination, aptitude, and fate.

The Fallacy of the Great Idea

Plenty of people will sit around waiting for the perfect idea to get rich. This is just another excuse, just their fear of failure manifesting itself again. What really matters is meticulous execution of an average idea.

 

 

Obtaining Capital

There are 3 primary methods for obtaining capital:

  1. Sharks (credit cards & loans): Try to avoid these.

  2. Dolphins (venture capitalists): These dolphins only want to “flip” companies every few years. They are not evil, but rather beholden to their institutional investors, who demand a return after a few years.

  3. Fish (small investors): This is your best bet. Get individuals such as business partners, friends, or family to invest. It might take longer to grow your wealth, but you’ll be much happier along the way.


Never Give In

While lovers and friends will encourage you to take a job, never give in and never give up. Only when you are completely poor and hungry should you consider doing that. Do not underestimate the value of never becoming a “wage slave” beholding to the system.

Chapter 8. The Five Most Common Startup Errors

  1. Mistaking Desire for Compulsion”: You must have the obsession and compulsion, not just desire, to make become rich no matter what.

  2. Over-optimism Concerning Cash Flow”: You don’t need to be an accountant but keep an eye on the cash flow. Businesses fail from running out of cash because they grew too fast or did not manage expenses. Only pay yourself the bare minimum.

  3. Reinforcing Failure”: Failure is usually recognized too late. Face it head-on and learn.

  4. Thinking Small & Acting Big”: Always think big. But when you make a few million dollars, don’t act big by gorging on hookers, cocaine, and alcohol. Think big, but to act small to protect your wealth.

  5. Skimping on Talent”: You will very likely get rich if you simply choose the right talent to do the work for you. Remember: the Pharaoh got all the credit, but the pyramids were actually built by the hard-working and talented architects, engineers, craftsmen, and enslaved construction workers.

 

Career Dilemmas

 

When it comes to deciding becoming an entrepreneur, the time in one's career matters significantly. Power, money, influence, autonomy, and altruism are some of the core motivations common amongst founders.

 

Three assets that one has to work with are:

 

1. "Social Capital": The degree of resources available to an entrepreneur in terms of business relationships and personal reputation.

2. "Human Capital": One's network and experiences. Early founders should identify their weaknesses and aim to fill in those gaps by taking on partners (employees, cofounders, advisors, etc.).

3. "Financial Capital": The amount of cash the founding team has invested, or how much they can find from outside sources.

 

Three liabilities holding one back are:

 

1. "Golden Handcuffs": The allure of a stable job. which can be considered “a heroin drip of a salary which must be disconnected.

2. “Legal Handcuffs": Clauses such as non-competes with former employers.

3. “Family Handcuffs": Emotional attachment to a state, or a spouse demanding a stable salary

 

There are three pieces which should be aligned:

 

1. "Career Circumstances": Is one's career at a stage in life when entering the entrepreneurial roller coaster is a wise decision?

2. "Personal Circumstances": one's spouse supportive? Does the founder have children? Is there a financial safety cushion?

3. "Market Circumstances": Is there a rush to be first to market? Are customers willing to pay for your idea? is the founder able to adapt to customers' needs or is she too attached to the original idea?

 

Assessing The Health Of Your Business

 

The first step in Profit First is to determine exactly how healthy your business is today. The cold hard truth is likely going to hurt, and that's okay. You can ignore it and keep running your business as you are, or you can face reality. You should be free to focus on the big obstacles, not the little fires, in your business.

 

Profit First is fully cash-based, based on real money in checking accounts. For the past year, measure: revenue, profit owner's comp, taxes, and operating expenses.

 

Figure out exactly how many dollars went to each, and figure out the exact percentages (revenue will be 100%, and the rest will add up to a total of 100%).

 

At the start of your business (up to about $250k/year in revenue), you want 5% profit, 50% owner's comp, 15% taxes, and 30% operating expenses. You should not be struggling to live comfortably as you are growing your business. Once you get to over 1 million year in revenue, those numbers should be 10% profil 10% owner's comp, 15% taxes, and 65 operating expenses.

 

Figure out how far you are from your ideal numbers. You're now focusing on how to make your business better, not bigger (that occurs naturally)

 

 

Putting Profit First Into Motion

 

Entrepreneurship should have rewards; it should no be all personal sacrifice. First, get your accountant and any financial professionals on board with Profit First and when people push back because it's not "normal". tell them that just because nobody else operates this way, doesn't mean it's a flawed system. And whatever you do, don't make "fake" small plates accounts in Excel. You must actually use the real bank accounts.

 

If you realize your expenses are too high (a likely scenario), that's okay. You can probably cut 10% to 20% of your expenses tonight if you had to, which is going to be easier than trying to magically get sales, once you start using this system. Remove waste; if you can't pay your bills, then you aren't running efficiently enough.

 

Destroy Your Debt

 

Most people focus on the top line (revenue) and rack up too much debt. Don't fix the crisis - fix the root of the problem. You want to create a permanently healthy business, not do a crash diet.

 

Until your debt is gone, when distributing your 50% of profits, put most of it towards your debt instead of a personal reward. Paying down the debt will be its own reward. Don't make decisions based on your best month; that's how debt piles up; use a rolling average.

 

Most often, you have too much debt because you have too much labor costs. Build a leaner team, and realize you will probably have to lay some people off.Critically evaluate each person's job role, and ask if it's mandatory. Never give everyone a pay cut; that just makes morale suffer worse than laying off a few people.

 

In a Debt Snowball, you pay down the smallest debt to build some emotional momentum, and then plow all that money on the next smallest debt, until you're debt free

Find Money Within Your Business

 

There's money in your business if you know where to look. First, focus on improving efficiencies to increase your profit. If your profit percentages were to fluctuate (like most companies), if you were to start increasing profit margins from 10% to 20%, your competitors would notice. They would determine what you did to improve, and would duplicate it for themselves.

 

However, it you keep your profit percentage constant from the start, then you are naturally looking for more efficiencies from the very beginning of your business's life, and there are no major changes for them to duplicate. You've always been consistently more profitable than them, as you've found efficiencies along the way.

 

Work on efficiency first, before you try to improve sales, because efficiencies is easier to find and sales are volatile. Ask yourself: How could you double your results with half the effort? Look for the big-ticket items that actually answer that question. Someone will figure out how to make things more efficient eventually why don't you be that person?

 

Profit First: Advanced Techniques

 

If you need more granularity for your business, add additional accounts. You can have additional small- plate-accounts for reimbursed expenses, materials, subcontractors, employee payroll, equipment, sales tax, or even outside investment, depending on your unique business needs.

 

This process you developed for your business must be documented and written down for your own benefit. For each employee that you decide to take on, you should expect them to bring in an

additional $250,000 / year in revenue for your business.

 

Finally, never borrow from one account to pay for another, especially the tax account. Go ahead and

rename it "GOVERNMENT'S MONEY" if that helps you keep your grubby paws off it.

 

You can’t do it alone.

 

Investors typically care as much as the people in a startup as they do the product idea. They will look at the management team as a major consideration regarding whether or nor to invest.

Entrepreneurs need to organize their own strengths and weaknesses and supplement skills with other teammates.

 

- Successful entrepreneurs typically have a unique blend of: creative idealism and a dispassionate analytic mind.

 

- Founders should ideally encompass having big ideas, with the diligent execution necessary to make those ideas a reality.

 

- People are drawn to entrepreneur’s excitement and passion. That passion is an entrepreneur’s best networking tool.

 

- Competition is the business arena can be crucial. It spurts an entrepreneur to improve you skills and forces you to be more innovative.

 

 

You must do it alone

 

There are going to be enormous challenges of confidence and self-belief along the entrepreneurial journey. Many entrepreneurs must face the psychological challenge of being seen as a failure if their venture does not succeed.

 

To counteract such challenges requires an inordinate amount of stubbornness and self-assuredness. The entrepreneurship roller coaster consists emotionally of extreme highs and lows, and is not for the faint of heart. Self-doubt and loneliness will plague every entrepreneur, and your self-confidence and courage must be sufficient to quell such doubts.

 

- If the entrepreneur doesn’t fully believe in his idea, he will have difficulty convincing investors and customers of the idea.

 

- An entrepreneur should enjoy the creative process, while also being extremely diligent and organize.

 

- Entrepreneurs must learn how to balance handling the responsibility of the journey alone, while also being good team players.

 

- If you look for flaws in any startup’s business plan, you will be able to find them. To overanalyze is risky, since you can get paralyzed by all the risks. Do not become too cautious to seize the moment.

 

The Solo-versus-Team Dilemma Reasons for solo-founding:

 

Maintain more control (equity) for longer. Less complexities and potential issues later. Nobody to slow down the decision-making process. Founders typically "underestimate the cost and complications" of co-founders "Co-founder" status can make people feel entitled to more as the company grows.

 

Reasons for co-founders: If a founder needs psychological or emotional support, co-founders can provide it. Solo-founders typically underestimate the amount of work required. Co-founders can help with the tremendous workload required. Can fill in gaps in knowledge or experience. Can help grow the startup quicker.

 

 

 

Manage risk.

 

Contrary to popular belief, many entrepreneurs are not actually risk-seekers. Entrepreneurship in the long run might not necessarily be more risky than taking a stable job, a stable job could mean that you are missing out on a great opportunity. Sometimes it’s riskier not to get involved in a startup, if the startup is truly promising.

 

- Feeling early momentum building can give an entrepreneur boundless energy. Energy to face tremendous financial risk and typically a huge amount of personal debt.

 

- Entrepreneurs must be adaptable enough to recognize business opportunities which may not be in line with their original vision for their product.

 

- Entrepreneurs must be extremely careful about not taking on too musk risk. They must learn to be frugal with their startup’s cash flow, lest they run out of money.

 

- When evaluating a new venture, consider all your assets including your passion, experience, and you existing personal network.

 

Learn to lead.

 

- Entrepreneurs should constinously learn and study business(?), management, and sales through reading.

 

- When you already have an offer from one investor, pitching to other investors turns the tables, they will now compete for your attention.

 

- Facing real struggle and adversity can be integral for becoming strong enough to succeed.

 

- Leaders must get people “fired up and exited” while simultaneously making sure the people are effective at their jobs.

 

- Leaders will never be liked by everybody, but it is not important to be friends with your employees.

 

- Leaders must take an egoless approach to ferreting out their own strengths ans weaknesses via self awareness.

 

- Leaders must be able to delegate and empower their employees while still bearing all the responsibility themselves.

 

Take Care of the People, the Products, and the Profits

 

There are times when you need the personality traits of a kind, benevolent "Peacetime CEO”. But during a war, your company needs a wartime general. Be tough on employees but try to make your company a good place to work. Meet regularly with employees face-to-face, and recognize that things always go wrong.

 

Even in a startup, it's important to train your new employees, set expectations, improve productivity, and increase employee retention. Remember you're looking for investment from their salaries. Be wary of hiring people from your friend's company. If your husband left you, would you want your best friend to date him?

 

Large-company executives who are hired in a small company may not necessarily be a good fit. They may wait for problems or emails to come to them, as opposed to initiating action. They may be too bureaucratic-minded, or the cultural fit may not be ideal. There's a huge difference between creating a new company and running an existing company.

Cultural integration may be just as important as interviewing for skills. Daily contact and integration is important with any new employee. As CEO, you may not know the right skills to look

for in candidates. However, try to list the strengths and weaknesses you want, and interview potential new hires with your entire team there. At the end of the day, though, it's a lonely decision since only york have all the information.

 

Be wary of taking a consensus when making decisions of who to hire. Consensus will likely lead

to hiring because of a lack of obvious weakness. rather than specific strengths,

 

Good "quality systems" will only tell you if you've made a bad product, not necessarily if you've made a good one. When evaluating performance, anything you measure will create incentives and behaviours. Always be aware of how the actions you're measuring will change employees' behaviours.

 

Teaming

Encouraging the unconventional in place of the ordinary, Jobs wanted his troops to be “Pirates! Not the Navy.” Teambuilding consisted of an atmosphere of belonging and togetherness, celebrating product milestones and the introduction of new team players. Small, product-driven teams coalesced with Jobs’ minimalist Buddhist beliefs; groups larger than 100 people would risk Apple becoming another boring “vanilla company.” Expectations ran high for all team members, from engineers to accountants. Sixteen-hour days were common, and dedication was measured by the extra time an employee was willing to devote.

Jobs stirred a spirit of camaraderie, with members of each group feeling that they worked for their own miniature company with their own product. Jobs served as the “ringmaster of the circus” – although he gave orders, he just wanted to be considered first among equals. He disliked the far too common business atmosphere where the boss calls the shots, and employees remain silent in fear of losing their jobs.

An important mentality in business is recognizing a bad decision and moving on. For example, Jobs wasted a great deal of time and money on the “Twiggy” project for Mac until Elliot stopped him. Acknowledging that it was for the best, Jobs did not become upset.

A good work environment sets the stage for how well a team functions. Jobs was quick in building an ‘atrium’ with amenities for employees to relax. Elliot believed the ‘pirate’ attitude at Apple to be superior to other companies, where “wild ducks… fly in formation.” Money never went to Jobs’ head; enriching and creating superior products remained his main focus.

The Law of the Small Team

Large, complex problems are best handled when broken into smaller, simpler tasks assigned to autonomous teams that work in short cycles, receiving and responding to feedback quickly.

This system allows for frequent updates to existing products. For example, the Swedish Gripen fighter jet updates its operating system every 6 months. Tesla also remotely updates their cars with automatic braking, partial autopilot, and robotic parking.

The Law of the Small Team is a mindset, not a manual, and each organization must develop their own method. When doing so, consider these 10 practices:

  1. Work in small batches: Breaking work into small cycles to allow for rapid changes from feedback.

  2. Small cross-functional teams: Teams of around 10 people allow for better communication.

  3. Limited work in progress: Do not let projects remain “in progress.” Do not start another project until the current one is completed. This reduces the number of abandoned projects.

  4. Autonomous teams: Let teams decide how to accomplish tasks on their own.

  5. Getting to “done”: Ensure teams are fully finishing tasks each cycle. If they are not, the task may be too large or the team may not be functioning properly.

  6. Work without interruption: Let teams work uninterrupted to avoid breaking their flow.

  7. Daily standups: Hold short, daily meetings to share progress between teams.

  8. Radical transparency: All work should be visible to everyone to find and fix issues most efficiently.

  9. Customer feedback each cycle: Feedback is crucial for meeting customers’ needs next cycle.

  10. Retrospective reviews: Reviewing lessons from the last cycle helps properly plan for the next cycle.


Agile management argues that a team’s makeup is less important than how that team functions together. Agile teams must consider 5 key dynamics:

  1. Psychological safety: Can we take risks on this team without feeling insecure or embarrassed?

  2. Dependability: Can we count on each other to do high-quality work on time?

  3. Structure and clarity: Are our team’s goals, roles, and execution plans clear?

  4. Meaning of work: Is what we are working on personally important for each of us?

  5. Impact of work: Do we fundamentally believe that our work matters?


Complex hierarchies stifle the customer’s voice, while small teams can directly contact customers and much more easily respond to their desires. Twentieth-century team initiatives were inspiring in their vision, but they could not cope with large-scale problems. Meanwhile, Agile’s pragmatic, down-to-earth systems allow teams to work efficiently and solve problems faster.


Tapping Talent

Finding extraordinary people includes (1) looking at their past accomplishments, (2) gauging their interest in a project, (3) evaluating their IQ, and (4) ensuring they are both a pirate and team player.

During job interviews, Jobs focused more on how the prospective employee would respond, rather than what was said. If the applicant was deemed fit to work at Apple, no time was wasted in putting them to work. Trying unconventional hiring techniques is sometimes the best way to find people’s underlying talents.

Steve was marked by his Buddhist “beginner’s mind” (discussed in Mastery) – the ability to evaluate people without preconceived notions. He only hired “A-people” who could conquer the most difficult challenges.

Jobs could sense true talent even when not someone was not immediately successful. For instance, when Jonathan Ive was not meeting Jobs’ expectations, he was on the verge of being fired. However, Jobs instead embraced him and gave him the encouragement and support that he needed to succeed. Jobs’ interviews often were more like courting. Interviewees were asked to respond to visions of new Apple products instead of basic technical questions. Jobs often probed people to find a hidden pirate waiting to be released.


Rewards for the Pirates

Through proper rewards and recognition, leaders can instill pride and satisfaction in their employees. When a leader makes a “direct, active, personal connection to the company’s product,” dedication increases.

Jobs tried to instill this passion by constantly reminding employees that their work was crucial to the company’s success. He personally gave Mac engineers medals, hundred-dollar bills, and personalized Macintoshes with the employee’s name carved in a plaque.

Apple’s 3% turnover rate – the lowest in the tech industry – stemmed from Jobs, the company’s greatest cheerleader, who instilled a “sense of trust, purpose, and vision” in all his employees. There were retreats every 3 months, free products, and weekly product reviews.

Team Sports

The Product-Driven Organization

Proper structuring is essential to the operation of any organization. Jobs self-imposed a considerable hurdle by giving too much power to someone with different values: PepsiCo president John Sculley. While Jobs taught Sculley to navigate the complex technological world of Apple, Sculley served to settle the conflict between the warring products of Apple II and the Mac.

The real problem lay not in the products, but rather the increasing rivalry between employees of the two different factions. Steve directed all his attention towards the Mac and its employees, and the Apple II team suffered from negligence and marginalization.

Through his unforgettable speeches and unequivocal passion, Steve was undeniably the face of the product. However, the decline in the sale of Macs due to its price drove Jobs and Sculley apart. This disagreement reached its zenith when the two failed to agree on whether the Mac should be directed towards consumers or businesses. Even though Elliot warned Sculley that the split was the root of the problem, Sculley applied his practices from PepsiCo to Apple, ignoring and neglecting intrinsic critical differences in how Apple worked.

A storm erupted when Sculley moved Steve, whom he considered too inexperienced and volatile, to a new position in order to direct him away from the Mac group. Disheartened, Steve resigned. Apple’s various groups and products hindered the development of a “cohesive product strategy.” It eventually became clear that a product-based organization such as Apple should create products for consumers, not businesses. Sculley possessed clarity and persuasion in making his philosophy understood, traits which Jobs lacked.


Maintaining Momentum

In times of crisis, it is important to keep driving onwards until a new road appears. Sculley came from a company where “the next product” was only more of the same. Apple’s downward spiral began when profits became more important than innovative products.

Jobs, meanwhile, was never idle; he continued to generate new ideas and planned to recruit Apple employees. Upon his discovery of Jobs’ plans to take key people from Apple, Elliot stopped Jobs in his tracks.

Despite overwhelming challenges, Jobs continued to work on the NeXT computer, his substitute for the Mac. Jobs left strong mark on Apple after leaving; his story was kept alive in the company, affecting employees who had never even met him.

In order to maintain momentum, when NeXT and Pixar became too costly, he made the difficult and risky decision to downsize. His calculated risk paid off, though, when Disney allowed Pixar to produce the blockbuster Toy Story. While the conciliation of different visions requires resilience, if pushed, it can create something ingenious and wondrous.


Recovery

One should never lose hope at the sight of failure. While Pixar enjoyed great success fromToy Story, NeXT’s functioning relied heavily on Jobs’ personal investment. Jobs’ zeal and ability to recognize opportunities helped him convince Apple to buy NeXT and hire Jobs as an advisor. His unwavering passion spread to customers; it became clear that Jobs was the missing puzzle piece to Apple’s success, and it didn’t take much convincing nor time to promote him to CEO.

While generating profit never motivated Jobs, in order to ensure the survival of the company, he agreed to concede in certain decisions. Apple was to only sell a few core products, and engineers were tasked with convincing Jobs that their product should make the final cut. Jobs decided to alter the membership in the board of directors. Understanding the company, its vision, its customers, and its CEO, were requirements that board members now had to meet. In the mind of Jobs, a business focused on numbers instead of passion would be doomed for failure.

 

Concerning the Going Concern

 

When you start promoting people or giving raises, be aware of the risks. You may be unintentionally furthering internal bickering and office politics. Don't address behavioral issues between employees when both are in the same room. Make sure the company's mission supersedes

individual ambition. Look for a "me prism" versus a "team prism" in interviews when the interviewee is discussing her previous job.

 

People want specific titles for their own pride, and to know their roles & responsibilities. Titles are

cheap, but by giving them out easily you may be setting a bad precedent for the future.

 

Smart people may be bad employees. Smart people who are not a good fit will likely be one of the

following types:

 

(1) Heretic. An immature rebel who thinks he'd be a better CEO.

(2) Flake. Someone who may be too deeply involved in drugs or emotional issues.

(3) Jerk. Someone who has too abrasive a communication style.

 

Hiring "senior people” (old people) are like performance enhancing drugs - they will be either

really good or really bad for your company. They come in with extensive knowledge, but on the other hand this is YOUR company with YOUR culture, don't be intimidated by their experience.

 

Set high standards for employees and pay them to figure out how to achieve those standards.

Having good communication skills is vital for any CEO. When meeting with employees, let them do most of the talking so you can draw out the issues they are having.

 

Don't hire somebody for their future value to the company once it's scaled; hire them for their skills

today. The only question you need to answer is: can they do a good job at the current scale, not the future scale of the company. Managing at scale is a learned, not innate, skill. There are no great overall executives - there are only great executives for a given company at a given job.

 

Filling Your Empty Seats

 

Entrepreneurs are hopeless romantics, with undying faith in their own vision. However, when looking to hire that exact sentiment yields sub-optimal hiring decisions Entrepreneurs foolishly hire anyone who believes "in your grand plan."

 

When hiring, one must aim to be "extremely rational and pragmatic." Focus on finding great employees, not merely "good" employees. Having great employees will free you from the burden of daily stressors and emergencies, and will attract other great employees.

 

Most importantly, great employees are actually free! If you pay them $200k/year, and they generate $500k/year in value for your business, then in essence they actually cost you nothing. Find people smarter and better than you. Put your ego aside and realize that you want to be the dumbest person in the room.

You don't want to be . able to solve a problem that your CFO has been struggling with. Hire for character. For example, do not train employees to be friendly; hire friendly people. Don't try to force a certain culture. Realize it will evolve from the type of people you hire.

 

Great employees have different goals than good employees. They want, in the following order:

 

1. To work only with other great people.

2. To be a part of something great and challenging.

3. The opportunity to move up in the company.

4. The growth opportunities allowing them to become who they are meant to be.

5. Money is less important than the preceding four items, but you should always pay them above their market value (if they're great, they're free, right?).

 

Sons of Proteus

New environments have broken down the way teams operate because, like viruses, they are more difficult to manage than they seem, and they do not exist in a vacuum. The world’s increasing interconnectedness has allowed insurgencies to gain significant attention with little effort, making them difficult to control. To deal with these new threats, the Army tried to utilize tried-and-true methods such as hanging maps on the walls of the Task Force headquarters in Balad. However, this proved to be ineffective, as it failed to take into account that maps in Balad could not “depict a battlefield in which the enemy could be uploading video to an audience of millions from any house in any neighborhood or driving a bomb around in a car on any street.”

This also explains why it was difficult to understand the organization itself. As the environment changed, so did the organization, as it could “transform itself at will.” Using whiteboards to keep up with changes only goes so far.

Clock Work

In the military, hierarchy and command flow are all-important, but this top-down management mentality also exists in the private sector, perhaps most famously in Frederick Taylor’s ‘scientific management.’ Taylor revolutionized the steel industry by breaking the traditions that had long stagnated the industry, standardizing production to maximize efficiency.

However, the drawback to this was that it “drew a hard-and-fast line between thought and action: Managers did the thinking and planning, while workers executed”. Only having one part of the puzzle can lead to confusion and slower efficiency. To succeed, General McChrystal notes that “in order to win, we would have to set aside many of the lessons that millennia of military procedure and a century of optimized efficiencies had taught us.”

From Complicated to Complex

Small factors in a ‘complicated’ system can greatly affect an environment. Consider these two examples:

  • A fruit vender named Tarek self-immolates, and gathers massive strength as a martyr.

  • Mathematician Edward Lorenz works with an algorithm to figure out weather and is surprised that his results changed wildly when he used data that was only a few decimals off.


In the above examples, complexity was difficult to define because it dealt with things such as living organisms, ecosystems, and national economies.

‘Complex’ and ‘complicated’ are different things. Resolving complications requires straightforwardly connecting the dots between many parts, but complexity consists of many interlocking parts that do not follow a rigid structure. The struggles of the Army Task Force in Afghanistan were in part due to trouble speedily connecting smaller factors: technologies that helped the Task Force with transportation, communication, and data management made its operating system nonlinear and unpredictable.

Old managing systems struggled because of their set-up. The environment of the government and military had evolved “from a ‘few to few’ to a ‘many to many’ market”. Managers now had to work with large groups rather than only other managers to affect changes or improvements. This change in speed allowed those who were in AQI to quickly work around the Army because of social fabric of the group.

To fight this, a reevaluation of management was in order. However, engineering solutions in line with a many-to-many environment wasn’t enough because by 2004 the merely ‘complicated’ linear connections in Taylor’s factory model became rapidly obsolete.

Doing the Right Thing.

After years of struggle, AQI succeeded, but how? The Task Force failed to understand AQI’s atypical group structure, which was “held together by a property that we could not identify”: resiliency. Resiliency often spells success in complex environments because it is impossible to plan for every small possibility (discussed in The Resiliency Advantage).

To demonstrate how planning is only sometimes effective, General McChrystal points to England and Scotland’s ‘never again’ approach of bulking up their natural defenses after severe flooding. This proved ineffective when the next flood came from behind.

Resilience thinking is a new field that attempts to understand the challenges of complexity. It involves eschewing our natural tendency toward prediction (discussed in The Black Swan) and strong, specialized defense in favor of systems which need to be:

  • Robust: “Strengthening parts of the system.”

  • Resilient: “Linking elements that allow them to reconfigure or adapt in response to change.”


The Task Force built a machine that was robust, yet slow, monolithic, and too specialized. The army’s rigid hierarchy slowed down execution and stifled soldiers’ ability to quickly adapt to their foe.

From Command to Team

The great difference between teams and commands can be seen in United Flight 173 and Flight 1549. On Flight 173, Captain Mc Broom made a crucial error of focusing on softening a rough landing after several technical issues arose after takeoff. As a result, he lost track of the fuel gage, and the plane crashed.
In contrast, the captain and crew of Flight 1549 managed to land the plane on the Hudson River by quickly adapting to the situation and dividing up the assignments. The author notes that airline crews in 1978 operated under a command structure, whereas in “2009 effective airline crews were meant to function as teams.” Examples of adaptation and teamwork include:

  • The rescue of Captain Phillips after being taken hostage by pirates. Navy SEALs waited and adapted as they could to rescue him.

  • Dr. E.J. Caterson and his team adapting to save a Boston Marathon Bombing victim’s knee.


These situations beg the question of why the command structure was replaced. If planes were safer, why were they crashing? The answer was that accidents must reflect higher rates of human error. Thus, the aeronautics industry had to either adhere to a stricture structure or focus on adaptation not mitigation. Similarly, the Task Force now had the clear goal of reshaping its structure to be more team-like.

Team of Teams

In 2003, the Task Force was following the classic military command structure, which segments things into categories that cover everything but do not overlap. This led to several system-wide failures, such as big black bags of unused information piling up because they’d become obsolete in transport.

Intelligence and soldiers were connected through a choke point where the command structure broke down. The management system and culture that created the choke point, had to be fixed. One example was the organization “Brigham and Women”, which used aTeam of Teams command consisting of “adaptive small teams operating within the old-fashioned rigid superstructure.”

Yet the small group size, which allowed people to know each other intimately, was an issue for the Task Force which needed to connect a larger network.

Seeing the System

The segmented structure of the Task Force and the superstructure surrounding it hurt their ability to adapt to AQI’s moves because the separate silos of information rarely, if ever, crossed. Focusing on components rather than the overall picture leads to fundamental problems being overlooked.

The need-to-know logic is flawed since it assumes that a person, bureaucracy, or algorithm is aware of who actually needs to know certain information. It’s no longer practicable to only understand parts of the process. When NASA also struggled with such problems during the Space Race, a new manager was brought in who dismissed the former organization and allowed cross-functional communication. He also brought in outside contractors. Instead of relying on one person to know what was going on, this system operated on the idea that understanding the whole was necessary to understand the constituent components.

Brains out of the Footlocker

To effectively deal with the new environment in this war, the Task Force needed to dismantle its old, “deeply rooted systems of secrecy, clearance and interforce rivalries.” They needed to break down physical barriers such as the set-up of workspaces, as physical space affects human behavior and mindsets.

  • In 1941, Bell Labs designed a campus whose space promoted interaction.

  • In 1970 IBM converted its cubicles to an open space where anyone could sit.

  • In New York City Hall, office space was converted into a bullpen.


Chaotic open offices encourage interaction between otherwise distant employees, quickening the spread of information. However, there is something else that must be broken down: organizational culture. To break down both physical and operational barriers, General McChrystal started by cc’ing people in e-mails about information that would affect their department in any way. More importantly, he created the “Operations & Intelligence Brief” or the O&I, which connected members from a variety of different agencies.

Despite some pushback, this allowed the Task Force to share information widely, be generous with their people and resources, and give faster and more robust intelligence to intelligence agencies, thus making them the preeminent information source for these agencies and thereby increasing participation.

 

 

Beating the Prisoner’s Dilemma


The Task Force – after starting to break down these walls – faced the classic Prisoners’ Dilemma:

  • You and your partner have been caught in a crime.

  • You are both given the same deal.

  • If you say nothing, you serve one year.

  • If you rat, you’re free, and your partner gets 2 years.


If both partners rat on each other, they actually do more harm to themselves than if they’d simply stayed silent.

Task Force’s problem was “a real-life prisoner’s dilemma”. However, each agency’s fear of working against their interests by sharing intelligence could be allayed with trust. To make agencies more willing to share information, the Task Force needed bonds like the ones in team structures. They had to be as strong as bonds between the individuals on operational teams.

To create these bonds, a new system was introduced to allow members from different teams to meet one another. In this “embedding program”, individuals would be transferred to different groups for 6 months. This cross-pollination fostered connections and trust, and also allowed them to see the difficulties in different departments. Because the groups would see the exchanged operator as a representative of their unit rather than a one-off example, they could now understand and reach out to each other more easily. The positive impressions formed when the operator returned to his unit would spread, thus deepening ties.

However, cooperation is needed for this system to work. To deal with increasingly important interfaces, a strong linchpin liaison officer (LNO) would be sent to bolster relationships with partner agencies. Two rules arose from this: “1) if it doesn’t pain you to give this person up, pick someone else; 2) if it’s not someone whose voice you’ll recognize when they call you at home at 2:00 am, pick someone else.” These exercises made the usefulness proportional to the effort put into it. This was the case in Afghanistan and Iraq when missions gone awry necessitated quick new plans.

The repercussions of separating teams are immense, as was the case in G.M., where switches on one of their cars could be flipped that would disable the airbags and stop the engine at high speeds. After this, a new CEO was brought in to break up the former silos and re-work the team structure for better communication.

This new CEO, Allan Mulley, believed that everyone on the team must be interdependent. Research from M.I.T. suggests that the collective intelligence of groups has less to do with the individual intelligence of members than the connections between them, and that the two critical determinants are ‘engagement’ within a team and ‘exploration’, or frequent outside contact. In other words, a team of teams with decentralized control.

Hands Off

As a manager, McChrystal notes that “being woken to make life-or-death decisions confirmed my role as a leader.” Yet the rigid occluded structure of the Army made the
seemingly instantaneous communication up and down the hierarchy actually result in slow decision-making.

The command structure could be useful, but waiting for McChrystal’s approval would not result in better decisions; the priority needed to be reaching the best possible decisions most rapidly.


The Ritz-Carlton hotel’s HR and customer relations is a great example of this. While employees have the freedom to spend up to $2,000 to satisfy guest issues that arise, there is the rule that “instant guest pacification is the responsibility of each employee. Whoever receives a complaint will own it, resolve it to the guest’s satisfaction, and record it.” Micromanagement is too costly with increasing interdependence and unpredictability.


In the Task Force, General McChystal found this approach useful, telling subordinates “if something supports our effort, as long as it is not immoral or illegal, you could do it.” This new rule helped push authority down and increased decision quality.


Leading like a Gardner

Heroic leaders, while popular, are not practical in nature. Leaders are expected to be knowledgeable beyond the limits of technology and the human brain.


General McChrystal found that working like a gardener created an environment which allowed people to make their own decisions rapidly and resiliently. He found this better than being a rigidly strategic ‘chessmaster’ (discussed in 
The Age of Agile).

General McChrystal had to create an environment conducive to allowing each person to flourish. He changed how he approached people by greeting anyone he worked with by name, giving them his entire focus for the meeting, and thanking them at the end. He also made “I don’t know” an allowable answer, as it is better overall to admit naïveté and ask for help.


Symmetries

Abu Zarqawi evaded the Task Force in January 2006, but because of General McChrystal’s change to a less rigid superstructure, cross-department intelligence, and teams of teams, he was confident that Zarqawi’s days were numbered.


In April, a small tip lead to several raids on an AQI meeting space. Several mid-level operatives were caught from the second raid, including a man called Allawi, whom the Task Force singled out. He eventually yielded information on a spiritual advisor who attended to Zarqawi. After several weeks, the advisor prepared to meet with Zarqawi. The Task Force followed him, ordering an airstrike, which would have been an impossible feat in 2003 or 2004 due to a lack of communication and adaptation. The mastermind of the AQI’s terror was now annihilated.


This success proved that via the ability to adapt, control and understand this new environment, the U.S. could succeed. While these new systems may look unnatural because of society’s regressive pre-conceived notions, they are undeniably effective.

Evolution:

  • Say No by Default: It’s easy to say yes to every feature, every optimistic deadline, and every mediocre design. Learn to say no in order to prioritize. Don’t be rude, just be firm and honest.

  • Let Customers Outgrow You: “When you stick with your current customers hell or high water, you wind up cutting yourself off from new ones. Your product or service becomes so tailored to your current customers it stops appealing to fresh blood. That’s how your company starts to die.”

  • Don’t Confuse Enthusiasm with Priority: Great ideas give you a rush of enthusiasm. Calm down and don’t drop everything. Focus on what must be done. Fancy features and grander ideas can wait.

  • Be At-Home Good: Many companies make products that look good in the store are useless. Do the opposite: make a product that shines at home.

  • Don’t Write It Down: “How should you keep track of what customers want? Don’t. Listen, but then forget what people said. Seriously. Your customers will be your memory. They’ll keep reminding you.” The requests that really matter are ones you’ll hear over and over again.


Promotion:

  • Welcome Obscurity: You are unknown to the world right now and messing up is no big deal. Use this time to take risks and make mistakes, and don’t worry about embarrassing yourself.

  • Build an Audience: Don’t reach out to find customers; build an audience of people who want to return, letting them come to you. It will save you significant time and money.

  • Out-teach your Competition: By teaching your customers instead of buying them, you form a closer connection; they’ll trust you more as a result.

  • Emulate Chefs: Successful chefs share all their recipes and cookbooks, and you should too.

  • Go Behind the Scenes: Even boring jobs can seem fascinating if seen in the right light, and people are curious about how things are done. Showing how things are done builds trust.

  • Nobody Likes Plastic Flowers: Don’t fear showcasing your flaws, and you will seem much more genuine than a “professional” in a suit & tie.

  • Press Releases are Spam: Mass press releases are rarely effective. Everyone does it, it’s impersonal, and does not do your product justice. Focus on something more memorable like a note or call.

  • Forget about the Wall Street Journal: Ignore the large companies, for they are flooded with too much to notice you. Go for niche bloggers or smaller outlets.

  • Drug Dealers Get It Right: “Emulate drug dealers. Make your product so good, so addictive, so ‘can’t miss’ that giving customers a small, free taste makes them come back with cash in hand.” Give a bit of your product away for free, as long as you follow up with something they can purchase.

  • Marketing is Not a Department: Marketing is everywhere, from answering the phone to sending emails to writing words on your website. Don’t bother with a department dedicated to what everyone already does.

  • The Myth of the Overnight Sensation: You will not be a big hit right away, and you will not get rich quick. It’s going to take work. Start now.

Hiring:

  • Do it Yourself First: “Never hire anyone to do a job until you’ve tried to do it yourself first. That way, you’ll understand the nature of the work.”

  • Hire When It Hurts: Hire only when you really need to. When you lose someone, try to last without them as long as possible, for you rarely need as many people as you’d imagine.

  • Pass on Great People: Never hire people you don’t need, even if they’re great. You’ll start inventing projects and titles just to keep them.

  • Strangers at a Cocktail Party: Rather than hiring a ton of people, thereby having everyone feel uncomfortable and new, hire just a few and create an environment that feels safer.

  • Resumes are Ridiculous: Put your faith in cover letters, not résumés. They are more specialized and more accurately represent what the person knows. Anyone can make a half-decent resume.

  • Years of Irrelevance: “How long someone’s been doing it is overrated. What matters is how well they’ve been doing it.”

  • Forget about Formal Education: There are plenty of highly intelligent people who don’t excel in a classroom and don’t have stellar GPA’s.

  • Everybody Works: In a small team, everyone has to be working. Delegators are dead weights.

  • Hire Managers of One: Hire managers who can come up with, and execute, their own goals without daily check-ins or heavy direction.

  • Hire Great Writers: Clear writers think clearly, communicate well, empathize, and are wise enough to know what to omit. “And those are qualities you want in any candidate.”

  • The Best are Everywhere: Distance hardly matters. Search for people everywhere, and don’t hesitate looking for talent in unexpected places.

  • Test-Drive Employees: Hire for mini projects to see how they make decisions, how well you get along, and what questions they ask.


Damage Control:

  • Own Bad News: Someone is going to tell the story; it might as well be you who controls the narrative. Don’t cowardly sweep bad news under the rug.

  • Speed Changes Everything: Getting back to people quickly is the most important thing when it comes to customer service.

  • How to Say You’re Sorry: A good apology accepts responsibility, shows that you understand the details regarding the incident, and that you have a plan for preventing the situation in the future. People can sense if an apology is genuine.

  • Put Everyone on the Front Lines: Let everyone have a turn “front of house” and “back of house”. Let everyone hear complaints to manage them better.

  • Take a Deep Breath: When you rock the boat, there will be waves. Prepare, and resist the urge to panic. Breathe, and give things time to calm down.




 

 

Culture:

  • You Don’t Create a Culture: Culture is created by consistent behavior. Others will create the culture for you; don’t force it.

  • Decisions are Temporary: Future anxieties rarely come to pass as often as you’d think, so don’t cause unnecessary problems due to your worries.

  • Skip the Rock Stars: Don’t worry about landing a group of rock-star people, worry about making a great environment. Many people are waiting to do good work, so give them the chance.

  • They’re Not Thirteen: When you treat your employees like children by constantly focusing on approval, praise, and permission, you get children’s work in return.

  • Send People Home at Five: Don’t expect people to make work their life. In fact, having people with busy lives makes them work harder so that they can go on to their children or families sooner.

  • Don’t Scar the First Cut: Don’t enforce policies about things the first time they happen. Policies are only meant for repeat situations.

  • Sound Like You: Don’t try to sound “big and businesslike”; it makes customers feel like you’re talking at them instead of to them. Sound your size.

  • Four Letter Words: Words you should never use in business: Need, Can’t, Easy, Must, Just, Only, Fast.

  • ASAP is Poison: “Stop saying ASAP. We get it. It’s implied. Everyone wants things done as soon as they can be done. Reserve emergency language for actual emergencies. For everything else, chill out.”

 

Changing the Organizational Culture

An organization’s culture is a set of goals, processes, and beliefs that run deep within the business. Adapting a culture to new Agile practices is a difficult undertaking, but it can be done.

To do this, one should begin with leadership tools, the vision and role modeling of those in charge. After that comes management tools – the Agile systems the company uses. When necessary, power tools like coercion and punishments are used, but in Agile this should scarcely happen. When trying to change an organization, leaders often fall into these traps:

  1. Focusing on maximizing shareholder value.

  2. Manipulating share priced via share buybacks.

  3. Cost-oriented economics.

  4. Backwards-looking strategy.


The Trap of Shareholder Value

Today’s businesses focus on maximizing stock market prices and shareholder value, which G.E. CEO Jack Welch dubbed “the dumbest idea in the world.” Managers in these types of business are not judged on a product’s quality or long-term gains, but on whether they meet shareholders’ expectations.

It seems safer to appease shareholders with cost cutting, boosted stock prices, and attractive short-term earnings each quarter. Meanwhile, the real business components such as factories, products, and customers suffer.

Creating the appearance of progress boosts shareholders’ confidence, but it does not encourage long term growth and can corrupt organizations. Fundamental core aspects are cut for not providing obvious short-term value to shareholders. This old management style cannot cope with modern globalization and new technologies.

A goals of shareholder value thinking is solving the alleged “agency” problem: the risk that managers would act selfishly, rather than in the interests of their company. However, shareholder value thinking has not solved this problem, but actually aggravated it.

The Trap of Share Buybacks

To attract shareholders, corporations buy back their own stock shares, reducing the number of shares and boosting earnings per share. Essentially, companies will use their cash to buy shares back from investors, so that the remaining shares go up in value. The Economist referred to this as “corporation cocaine.” Between 2004 and 2013, companies in the United States, Canada, and Europe bought back $6.9 trillion ($5 trillion from the United States alone).

This is essentially stock-price manipulation, but companies think it makes sense to extract value this way. Unfortunately, diverting resources to boosting stock prices hinders a firm’s capacity to innovate and generate fresh value for customers, as it siphons away resources that could be used for these purposes.

This practice has no place is an Agile company. While share buybacks generate short-term profits for shareholders, using that money on market creation and providing value would create actual long-term success. Value generation is far more profitable than buybacks.

The Cost-Oriented Economic Trap

Providing value to customers generates more profits than focusing on internal efficiencies, as customer outcomes are key to long term success. However, CFOs continue to emphasize cost-cutting because it improves short-term profits and share prices. This success is illusory — cost-cutting ultimately leads to less efficient and productive companies. Agile managers should understand these methods, but not employ them.

One mistake managers make when cutting costs is offshoring. Whole industries have been shipped overseas in hopes of saving money, but limiting personal interaction between manufacturers, managers, and decision makers within the company renders them unable to respond to customer feedback.

Managers offshore to quickly generate short-term profits. Offshoring is about 30% cheaper, but there are hidden costs that managers overlook like shipping. The consulting company Archstone found that 60% of offshoring decisions fail to consider these other factors, often only focusing on direct labor costs.

Furthermore, not all of offshoring costs are monetary. Years of outsourcing have left the United States unable to efficiently create new, high-quality products. GE used to outsource their production, but then moved back to the United States to make cutting-edge water heaters and refrigerators. GE’s move back to the U.S. lowered material costs, labor, and transport time while improving quality and efficiency.

 

Riding In The Front Seat

 

Companies are only constrained by the owner's ambitions. The downside is that everything is also your responsibility, from every trouble with a production line to every rejected sales call.

 

Most leaders believe they are better than average; this is mathematically impossible. In order to become the best leader possible, you must (ironically) question your own leadership abilities.

 

In past generations, there used to be a boss at the top of a pyramid, executing his will. "A boss leads by authority, fear, and command." Yet now, millennials “value self- expression, not compliance."

 

The gender and racial dynamics of companies have drastically shifted. By 2050, so-called "minorities” will actually be majorities in the workforce.

 

You must learn to delegate. When interviewing a billionaire, the man claimed to have achieved his enormous success by “quitting” as much as he could. At the start, you need to do everything yourself, from accounting to product development to garbage removal. However, your goal is to delegate as fast as possible, so that you are only spending your time leading.

 

Remember: you're the coach, not the player.

 

How to Lead Even When You Don't Know Where You Are Going

 

CEO's need to focus only on what needs to be done, and let go of the noise. The most difficult CEO skill is managing your own psychology. CEO psychological meltdowns happen with every CEO, but it's like fight club - you're not supposed to talk about it. There's no smooth path and you can only learn by being a CEO.

 

Everything is hard when you have no idea what you're doing. Yet at the end of the day everything is

your responsibility. You must not take things too personally, but you must take things personally enough to improve. If you internalize too much, you will literally become sick from the stress.

 

The ideal CEO is urgent but not insane. It's a lonely road that you can't share with many people.

There are always many things which can go wrong, but the goal is to focus on what you're aiming to achieve above all else. Don't quit and don't drink your troubles away. Face the pain of the sleepless nights and cold sweats. Both strong and weak people feel fear-brave people just push on regardless.

 

Successful CEO's make better decisions simply because they have superior knowledge. Nobody will remember if you made the right decision (it's expected) but they'll always remember the wrong ones. Unfortunately, good or bad decisions in a company are magnified 1000-fold.

 

You'll never completely remove the fear, but you can leam to ignore it. Making easy decisions will, over time, make you more cowardly. Never be so confident that you stop improving.

 

Peacetime CEO's must maximize the current opportunities and think of the big picture, while Wartime CEO's must hit a target with a single bullet at all costs. A fleck of "dust on a gnat's ass. Ones & Twos: Ones are the CEO's who would prefer to focus on strategy over the day-to-day decisions (think Bill Gates).

 

Twos have clear goals and stick with properly executing them, but aren't strategic thinkers. Reading a useful book on strategy would be a task a One would prefer, but would make a live anxious that he's not executing his company's plan. Most founding CEO's are Ones, and if that's the case then you need to employ some Twos to handle the day-to-day. The ideal CEO is an amalgam of both.

 

Follow the Leader

 

Leadership is simply defined by the quantity, quality, and variety of the people who follow you. CEO's need to articulate a vision, have the right kind of ambition, and the ability to achieve such a vision. And yet selfish, ruthless, callous CEOs are not actually successful because few people will follow them. 5 Employees must believe you care more about them than your own ambitions. You must make employees feel like it's their company too.

 

Hands In The Air

 

Starting your own business is terrifying. "You are going to come face-to-face with daily uncertainty." Fear stops many people from ever trying. You can't stop the fear from arising. Every single entrepreneur has felt that fear. Courage, however, is simply proceeding anyway. What you fear is an illusion; it's no more real than any other emotion (better described in The Good Psychopath's Guide to Success).

 

Our ancient primitive brain evolved hundreds of thousands of years ago to be on constant alert for physical threats. Yet modern recorded history has only been around for the past six thousand years.

 

The issue is that our biological brain has not caught up with modern times; we are still on constant alert for physical threats. When feeling anxiety and fear, you must tell your brain that it's just a telephone call, not a lion. We tend to have "disproportionate fear responses." It's not even the rejection you fear; it's the anticipation leading up to the event which causes the most pain.

 

Methods to dealing with fear include:

 

Realizing you do not have to be courageous 24 hours per day. You typically only need to be courageous for the 20 seconds it takes to call that big customer. If you can't convince your brain that it's not dangerous, turn your brain off temporarily. Hold your breath or shut your eyes for a few seconds.

 

Focus all your attention on the present task. When facing a last-minute shot, Michael Jordan did not

think about the result of the game; he focused 100% on the shot at hand. We become a "frantic mess" by focusing too much on the outcome.

 

Make failing into a game. Aim to get rejected by a certain number of clients before the day finishes.

If you imagine success and failure as a pendulum, most people only wish to experience a narrow range in the middle. They do not wish to experience the large swings (which are actually necessary to taste true wealth).

 

Entrepreneurs should aim to have wild swings. It is irrational to think you can have "success without failure, love without heartache."

Seek failure maniacally, in order to achieve success. You first realize that failure is not that bad. You then realize that failure is necessary.

 

Finally, you start to want the giant swings of the pendulum, so that you can swing towards extreme wealth and success.

 

Nuclear Winters & Golden Ages

In business, there are 2 approaches: those that produce golden ages of industry, and those that cause nuclear winters. With Agile, everyone is constantly connected with everything, everywhere, with no obstructions between creators and customers. Organizations can progress toward instant, intimate, frictionless value for customers, themselves, and society. When employees work on something worthwhile with others who share their passion, they produce more value for customers. Shorter work cycles let employees see the fruits of their labor and better respond to customer desires.

A workforce without Agile mindlessly follows orders. They stagnate in the face of changing markets and technologies, more concerned with maintaining the status quo and protecting their existing business. They hold onto outdated strategies and fall into the aforementioned traps, limiting growth and ultimately dooming the corporation.

Our evolving world requires new views of business and management. Agile businesses are thriving in this world while old strategies rapidly become obsolete.

This is not the first time corporations had to change to survive. First it was canals, then it was the railroad, then steel, after that came mass production. Since the 1990s, computers and communication have driven innovation. Each technological leap revealed new ways of running organizations.

Today, investors salivate over possibilities of tax relief and bringing back several trillion dollars held overseas for their shareholders. A new approach to business is required. Agile is better and more practical for workers, corporations, and consumers. Agile’s unique vision consists of 7 critiques on existing stodgy businesses:

  1. Practical critique: Keeping pace with a changing, customer-focused world is crucial for success.

  2. Financial critique: Solely focusing on shareholder value is ineffective.

  3. Legal critique: Share buybacks are effectively stock-price manipulation and must be stopped.

  4. Economic critique: An economy based on extracting value will end in the corporation’s failure, but an economy focused on creating value for customers will last long-term.

  5. Moral critique: The institutionalized self-interest embodied in extracting value from a corporation and its investors via share buybacks is unethical.

  6. Political critique: Stock-price manipulation and growing income inequality have become normal.

  7. Philosophical critique: Society and business have confused goals and results. Shareholder value is a result, not a goal.


While the Age of Agile represents a vast social agenda, one of its key aspects is keeping things small. With small teams, the Agile dynamic focuses on humans creating delight for others and creating a new mindset, resulting in a more prosperous economy and society.

 

 

 

 

Reward Dilemmas: Equity Splits and Cash Compensation

 

Avoid free riders who get a large share of equity but don't put in enough time or provide enough value. When deciding on equity splits, consider not just past contributions, but also future contributions. When co-founders split equity equally to avoid difficult discussions, this is a red flag for investors.

 

Not getting an initial equity split in writing (e.g.just shaking hands), is another red flag for investors, and on average yielded lower valuations. The equity negotiation may be the first challenge that the team faces; a "trial by fire" to overcome. It's statistically better for the huccess of the company to take longer to decide on the equity split. By setting the initial equity split in stone at the start, one risk is that founders' future contribution and dedication may change, and yet their original equity remains intact. Vesting schedules (time-based or milestone-based) help mitigate this risk.

 

The Three R's System

 

Alignment and Equilibrium Roles, Relationships, and Rewards must be balanced. It's extremely valuable to have, in writing, clear delineation of all three "R"s. As a company grows and needs a more hierarchical structure, having a clear hierarchy from the beginning can ease that process.

 

Serial founder teams can get to know each other extremely well in terms of motivations and commitment levels. Those are difficult to discern in fresh hires. The relationships between teammates can sometimes prevent avoiding tackling tough issues, thus furthering an underlying tension.

 

Wealth-versus-Control Dilemmas

 

Every decision previously discussed boiled down to wealth versus control. To gain the resources necessary to grow quickly and maximize wealth, control (equity or titles) must be given up.

 

Founders tend to be overoptimistic, and will typically underestimate the vast amount of resources necessary to grow a company. Control-oriented founders avoid giving up CEO. Control-oriented founders were typically solo- founders. Solo-founders received lower valuation than co- founder teams on average. Solo-founders hired young inexpensive employees whereas co-founder teams hired expensive specialists. Solo-founders financed their company with debt before going to VC's, whereas co-founder teams raised a large amount of VC capital early.

 

There may be an optimal (yet rare) hybrid approach. Such an approach would raise money from VC's but only after growing a strong valuation from angels. The founder would hire experienced advisors instead of depending on VC's to provide advice. He would give up CEO position and initiate the succession himself, but only after the company grew to a sizeable valuation. He would hire a heterogeneous team but pay them a significant amount of stock options instead of hard-to- acquire cash or direct equity.

 

Yet the risk of attempting such a hybrid approach is that attempting to secure the rare "Rich and King' outcome may result in the entrepreneur becoming neither rich ner king.

 

 

 

 

 

Your Freedom Financial Plan

 

Simply earning money is not enough. You must also understand (1) how money moves, (2) how to invest, and (3) how to make money multiply itself. Read everything you can about finances, brush up on terminology, and then look inwards.

 

Decide on your budget, review your income, and track your spending. While a budget focuses on expenses, a financial plan focuses on generating new wealth for your lifestyle.

 

Smile For The Camera

 

Don't follow others' goals or ambitions. Don't follow social pressure to keep up with the Joneses. It's your roller coaster ride.

 

Do not be the man who, at the end of his life, realizes that he missed the point. The man who has too many houses and not enough relationships. Yet you also don't want to be the man who has a nice family but gave up his dreams of changing the world. Always ask yourself which path you would regret more. Minimize future regret.

 

Imagine your own obituary and make sure it reads you want. Make sure that your ambitions make your smile wider, your day brighter. Your friends and family will tell you that you're crazy. That they care about you and that this is too dangerous. That you should be lucky to be employed at all in this economy! You must have the fortitude to say no. They will recount examples of people who tried and failed. People who lost their houses. Whose families suffered. They will claim they care about you. That they want you to be safe, so give it up. You must have the fortitude to say no. Then you'll stick with it for a while. They'll be concerned how long you've been at it with minimal

results. How much longer until you see reason and find a stable job? You must have the fortitude to say no. Eventually they'll move on to "helping" someone else.

 

Many entrepreneurs quit when the summit is so close within their reach. You must push on. Do not lose sight of who vou were when you started and vour original reason for starting your business. Your goal in life should be to productively reach your full potential.