terça-feira, 10 de novembro de 2015

Best Business Books 2015


Best Business Books
A version of this article appeared in the Winter 2015 issue Of strategy+business.

Don’t judge a book by its cover. Judge it by what smart people have to say about it. That’s the theory behind this, our 15th annual Best Business Books special section.
To kick things off, journalist Bethany McLean, a financial storyteller of note, assesses three compelling tales driven by charismatic CEOs. As a result of either (1) coincidence or (2) great planning, the trio personifies the classic narrative arc of business literature: a rock star who can do no wrong, a business debacle, and a gritty turnaround effort. Personal stories likewise lie at the root of this year’s crop of best books on leadership. James O’Toole, a perennial contributor to this section, focuses mainly on the stories of (1) a celebrity billionaire who is a household name and (2) a behind-the-scenes operator who could walk through Rockefeller Center in anonymity. (Guess who has the most compelling leadership lessons?) When asked to look into books on technology, section newcomer Steve LeVine, author of a recent book on the search for a better battery, latched onto three volumes that speak to one of this year’s hottest buzzwords: disruption. We turned to two longtime contributors — (1) Catharine Taylor and (2) Theodore Kinni — to report on the best books in marketing and management, respectively. Not surprisingly, this year’s marketing volumes have a lot to do with the use and abuse of data. Perhaps surprisingly, a more old-fashioned, classical discipline — character — informs this year’s best management books. It is fitting that as we enter the U.S. presidential election season, economics writer Marc Levinson focuses on three books that highlight the political aspects of economic study. And Ken Favaro, a frequent contributor to our pages, looks to two unlikely spots — (1) Hollywood and (2) the groves of academe — for inspiration on how to manage strategic innovation. I guarantee you’ll find these pieces (1) inspiring and (2) entertaining.

Best Business Books 2015: Narratives

Best Business Books

An Expensive Breakdown in Communications

by Bethany McLean
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
Nicholas Carlson
Marissa Mayer and the Fight to Save Yahoo (Twelve, 2015)
There’s no shortage of analysis about what makes executives successful. And no wonder: Investors bet billions of dollars on those mysterious qualities. But the analysis often suffers from what scientists call “sampling on the dependent variable.” The lens of success is not the lens of failure. Would the same traits in a different person, in a different company, at a different time, lead to the same result? Are Steve Jobs’s notable quirks, from his trademark black turtleneck to his tyrannical treatment of employees (which are emulated by many wannabe entrepreneurs in Silicon Valley), part of what made him successful? A recipe for disaster in every other case? Or totally beside the point?
Three of this year’s best business books are narratives that tell compelling journalistic stories about famous technology executives and their storied engineering-driven companies. Jacquie McNish and Sean Silcoff’s Losing the Signal: The Untold Story behind the Extraordinary Rise and Spectacular Fall of BlackBerry, Nicholas Carlson’s Marissa Mayer and the Fight to Save Yahoo, and Ashlee Vance’s Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future all feature extraordinary reporting and behind-the-scenes drama. But they also show that the rules don’t always apply; that media and peer adulation is often misguided; and that notable traits, both ones that we associate with stunning success and ones that we associate with go-to-jail-now failure, are not by themselves predictive of anything. Or at least, not predictive immediately.

 

From Addiction to Afterthought

It’s difficult to tell the story of a company when it is still in the middle of its narrative arc. But history has come pretty close to reaching a verdict on BlackBerry, the Canadian company formerly known as Research in Motion (RIM), whose devices were once considered so addictive they were known as “CrackBerries.” The company made mobile corporate email a necessity, and became the world’s largest seller of smartphones, with almost US$20 billion in revenues at its peak in 2011. But just four years later, the best it can hope for is survival. (In its most recent quarter, the company reported revenues of just $658 million.) “In the technology sector, failure is often a precondition to future successes, while prosperity can be the beginning of the end,” McNish and Silcoff, both journalists at the Globe & Mail, note.
The simple story is that the BlackBerry, which was a great innovation in its time, was rendered irrelevant by the iPhone. But the story that the authors tell in this book — the best of this year’s narratives — is more complicated. The company was created by an unlikely duo. Jim Balsillie, who grew up in a working-class neighborhood, was of both Scottish and Metis (Canadian aboriginal) descent. He was a driven and paranoid salesman whose favorite book was The Art of War and who once scored himself face time with important CEOs at a dinner by surreptitiously switching place cards. He was “terrified,” write the authors, that “carriers or competitors would one day toss the company over a cliff.” Mike Lazaridis, born in Istanbul to Greek parents who immigrated to Canada when he was a young boy, was the technical genius. His conviction that he could pull off the almost miraculous “came down to faith, a deep abiding confidence in himself and his company,” the authors write. Outside work, the two had nothing in common, and were not friends. “We don’t do that here,” Balsillie warned an executive who tried to make the management team more cohesive outside the office. “We don’t hang out together.”
Balsillie’s tactics often bordered on the dishonest, and his treatment of employees was outright abusive. “Be brief and don’t look him directly in the eyes,” one executive would advise before meetings. “You don’t know if he’s going to hug you or maul you.” Both men mercilessly pushed the engineers to deliver the impossible. The company’s internal processes and controls were a mess.
And it all worked fabulously until it didn’t. Or as McNish and Silcoff quote Mike Tyson: “Everyone has plans until they get hit.” Lazaridis’s driving principle was that mobile communications devices needed fewer features in order to optimize battery and network usage. That strategy was obliterated when the iPhone, laden with amazing features, changed consumers’ expectations. “Strategic ambiguity is death to a company,” Balsillie said in a 2009 speech. “It paralyzes organizations.”
In a version of the eternal chicken-and-egg question, it’s not clear whether executive dysfunction or technological obsolescence comes first. RIM couldn’t adapt in part because Lazaridis and Balsillie’s unlikely partnership had fallen apart owing to seemingly external events that devastated and distracted both men. Chief among them was a stock options backdating scandal caused by RIM’s sloppy controls. “You name all the great things that RIM was able to do, this thing just sucked it all out,” Lazaridis told the authors. “I mean, why bother building a great organization if this can happen to it?” In conclusion, Losing the Signal makes for painful reading as the company once again races to put out a product that can compete with the iPhone on a schedule that the engineers once again tell the bosses isn’t doable. And this time, it isn’t.

Looking through a Portal

Back in 2006, when RIM was still on top of the world, a Yahoo employee wrote a critique of his then 12-year-old company and its strategy. “We lack a focused, cohesive vision for our company,” he wrote. “We want to do everything and be everything — to everyone…we are reactive instead of charting an unwavering course.” It was dubbed the “Peanut Butter Manifesto,” because the executive argued that the company’s resources were spread too thin. Whereas RIM lost its focus, it’s not clear, judging from Nicholas Carlson’s Marissa Mayer and the Fight to Save Yahoo, that Yahoo ever had one. “Ultimately, Yahoo suffers from the fact that the reason it ever succeeded in the first place was because it solved a global problem that lasted for only a moment,” writes Carlson, a correspondent at Business Insider whose long feature on Mayer served as the basis for this book.
Yahoo was founded in the early days of the Internet, before the advent of search engines, when two Stanford students, Jerry Yang and David Filo, started Jerry’s Guide to the World Wide Web, a simple listing of sites. Companies desperate to get their names in front of users threw advertising dollars at Yahoo — a result that eventually became detrimental. “Fish had jumped out of the water and into the boat, so no one inside the company had bothered to learn how to do things like bait a hook or throw a line in the water,” Carlson writes. After the first dot-com collapse, Yahoo was reinvented as a media company under the leadership of Hollywood veteran Terry Semel. But a slightly more professional, advertising-driven strategy that appeared to be working was actually masking a serious problem. Just as BlackBerry didn’t see the iPhone coming, Yahoo failed to detect the threat that Google, based just a few miles away, would pose to its search business.
Yahoo, which one of its short-lived CEOs describes as a “complex monstrosity built without a plan,” managed to maintain an impressive market value through all the turmoil, thanks to the remarkably prescient investment the company made in 2005 in the Chinese phenomenon Alibaba. When the activist hedge fund manager Dan Loeb gained seats on Yahoo’s board in 2012, his crew brought in a star CEO to stage a turnaround of the core business.
The summer 2012 entrance of Marissa Mayer onto the scene is when Carlson’s narrative becomes about the present, not the past. Mayer has always enjoyed fantastic press. As one of the few prominent female executives at Google, she was once dubbed “Goo-Girl.” Like her male counterparts in the Valley, Mayer seems to have a preternatural faith in herself. Carlson describes how her presentation skills wowed Yahoo’s board, so much so that they overlooked her lack of experience with a profit and loss statement. When she took over, she talked about all the right things, from cutting Yahoo’s stifling bureaucracy to the importance of “pushing the teams at breakneck speed,” from adding Google-like employee perks to promulgating the fashionable idea that failure is a really good thing, as long as you fail fast. (Failure, it should be noted, is still failure.)
But even though Mayer checked all the boxes, Carlson conveys a sense that she had several drawbacks. “If this was a superhero story, it would be clear by now that, despite a few setbacks, Mayer was going to save the day,” he writes. “But this isn’t a superhero story.” Although Mayer rose high at Google, she was eventually sidelined. Among insiders at both Google and Yahoo, she became notorious for a “brutal combination” of traits. Coworkers described her as icy cold and often unwilling to look people in the eye. She was terribly late to a critical meeting with the CEO of an advertising agency whom she needed to woo. Henrique de Castro, a widely disliked former Google executive whom she hired as her number two, left after 15 months, and earned $109 million. Mayer “appeared to believe she was always right,” Carlson writes. “Mayer would respect people who stood up to her and told her she was wrong, but she wouldn’t change her mind.”
Carlson’s book suffers as a piece of analysis because he lacks clarity on his central character, sometimes to the point of parody. (Mayer didn’t cooperate with the book and Carlson didn’t interview her.) He presents Mayer as angelically self-sacrificing during her time at Google. She “knew she was fighting a turf war but she didn’t think about it in terms of power,” he writes. “She was just taking on as much as she could take on, and assumed everyone who mattered agreed it was for the best.” Really? Perhaps. Yet she threatened to quit when a rival got promoted before her. Carlson is also unclear as to whether the managerial flaws he documents so well are even the problem, or if the structural challenges Yahoo faces are to blame. “There was nothing especially abhorrent or uncommon about Mayer’s behavior as an executive,” he writes. “She was headstrong, confident, dismissive, self-promoting and clueless about how she sometimes hurt other people’s feelings. So were many of the most successful executives in the technology industry.”
Well, hello, Elon Musk!

A Supercharged Entrepreneur

Musk, the founder of Tesla Motors and a relentless evangelist for new technologies, has often been portrayed as a kind of business superhero. And in his well-reported story of Musk’s rise, Ashlee Vance, a Bloomberg Businessweek reporter, paints a nuanced, if ultimately admiring, portrait. Like the executives in the other two books, Musk lacks some of the people skills many analysts believe are necessary for great leadership. “Many of us worked tirelessly for him for years and were tossed to the curb like a piece of litter without a second thought,” a former employee tells Vance. Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future includes a chilling episode in which he fires his longtime assistant. Like Mayer, he believes in failing fast, doing faster, and not worrying much about processes or controls. Musk’s approach is to “set overly optimistic deadlines and then try to get engineers to work nonstop for days on end to meet the goals.” And he doesn’t brook much dissent. “The kiss of death was proving Elon wrong about something,” writes Vance.
And yet, at least to date, Musk has been able to deliver. Self-made — he had a difficult childhood in South Africa before attending college in the U.S. — Musk is a stunning success “who has managed to make radical ideas the basis of his companies.” After helping create PayPal, he poured everything he had (and then some) into two new ventures that most observers viewed as folly: SpaceX, the first privately owned company to get a rocket into orbit, and the electric car company Tesla Motors. Musk is also the chairman of a solar company called SolarCity, which is run by two of his cousins. Vance, who got access to Musk and many of his confidants, quotes a host of Silicon Valley luminaries — including Google founder Larry Page and venture capitalist Peter Thiel — gushing about Musk. “Elon is one of the few people that I feel is more accomplished than I am,” said Craig Venter, who decoded the human genome.
Maybe one thing that sets Musk apart is that (in defiance of the Mike Tyson quote) he managed to keep his plans after being punched. He lost an internal battle at PayPal and was pushed out. His infant son died, his marriage fell apart, and his startups came within inches of failure. “It hurt really bad,” Musk tells Vance. “You have these huge doubts that your life is not working, your car is not working, you’re going through a divorce, and all of those things.”
“Most people who are under that sort of pressure fray,” a friend of Musk tells Vance. “Their decisions go bad. Elon gets hyperrational. He’s still able to make very clear, long-term decisions. The harder it gets, the better he gets.”
Musk also seems to have a sharp understanding not just of technology, but of what it is that makes a business. “There’s this level of engineering and physics that you need to make judgments about what’s possible and interesting,” Vance quotes Larry Page as saying. “Elon is unusual in that he knows that, and he also knows business and organization and leadership and governmental issues.”
The problem with believing that these are answers to the riddle of success is that Musk’s empire is still very much a work in progress. Vance is a veteran correspondent in Silicon Valley, where hype and hucksterism are common. He describes himself as a “cynic” about Musk’s enterprises at first. But around the middle of the book, he switches from wonderfully insightful analysis of Musk himself to simple adulation. Vance’s discussion of the business prospects of Musk’s companies often reads like it was dictated by the public relations department. He quotes Musk bragging that “Tesla could eventually be more valuable than Apple and could challenge it in the race to be the first $1 trillion company” without any dissent. Vance doesn’t pay much heed to the concerns of those who aren’t on the bandwagon. Although Tesla boasts a market capitalization of $30 billion, it has generally reported losses. Nor does Vance make anything of the extent to which his new hero of capitalism is dependent on government funds and subsidies. (Among other things, a $7,500 federal tax credit to buyers helps make Tesla vehicles slightly more affordable.) At this stage and in the industries in which Musk is competing, such support might be necessary. But surely these factors should be acknowledged.
Like Jobs’s flaws, Musk’s flaws might be incidental, or they might be his contrarian keys to success. But it’s also possible that in 10 years, you’ll read another narrative in which Musk’s flaws are viewed through a more critical lens.
Stay tuned.

Author Profile:

·         Bethany McLean is a contributing editor at Vanity Fair and a coauthor of The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio/Penguin, 2003). Her most recent book,Shaky Ground: The Strange Saga of the U.S. Mortgage Giants (Columbia Global Reports), was published in September 2015.

Best Business Books 2015: Leadership

Best Business Books

Leading by Biographical Example

by James O'Toole
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
George Bodenheimer (with Donald T. Phillips)
Every Town Is a Sports Town: Business Leadership at ESPN, from the Mailroom to the Boardroom (Grand Central Publishing, 2015)
Richard Branson
The Virgin Way: Everything I Know about Leadership (Portfolio/Penguin, 2014)
According to the late Warren Bennis, leaders are molded in “the crucible of experience.” Presumably, then, those who have emerged successfully from that fiery process (metaphorically speaking) are the best equipped to offer advice on how to lead. At least that’s what the book-buying public seems to conclude, as it clamors for leadership books penned by prominent businesspeople. Those ever-popular volumes fall into two general categories: memoirs by executives in the context of the organizations they led, and “how-to” manuals based on what executives have learned about leadership. In my view, the former tend to be far superior to the latter.
This year’s crop of leadership tomes offers examples in both categories. While none stands out as an absolute must-read, to paraphrase former defense secretary Donald Rumsfeld, you go to press with the authors you have, not the authors you might want. So here are my picks for this year’s best books by leaders on leadership.

The Network Executive

For my money — and I am surprised by my own conclusion — the best current leadership book is George Bodenheimer’s Every Town Is a Sports Town: Business Leadership at ESPN, from the Mailroom to the Boardroom. Before picking up the book, I had never heard of Bodenheimer (he was the longtime behind-the-scenes head of television sports network ESPN) and seldom watched anything broadcast on his network. But I suspect that even readers who watch only Masterpiece Theatre and don’t know an RBI from an ERA will find the book a worthy and engaging read. That’s because its author comes across as a thoughtful, caring, humble, and wise executive. Indeed, Bodenheimer seems like the kind of leader most of us would follow willingly.
The book falls squarely in the memoir category. It begins with the author’s first day at the fledgling network in 1979 (where he literally worked in the mailroom), then takes us through the development of all phases of the business over the next 35 years, ending with his retirement as cochairman of Disney Media Networks. (ESPN’s parent company, ABC, was acquired by Disney in 1995, midway through his tenure.) Refreshingly, Bodenheimer doesn’t presume to be an authority on leadership; he never succumbs to telling others how they ought to lead. Instead, he simply and clearly describes what he and his colleagues did over the years, the good, the bad, and — hey, ESPN is in the entertainment business! — even the silly of leadership. (At ESPN “crises” sometimes consisted of deciding whether to air or bleep out basketball coach Bobby Knight dropping “thirty-one F-bombs.”) In essence, we observe Bodenheimer maturing in Bennis’s crucible, gradually becoming a leader by analyzing what his bosses do right and do wrong over the years, and by learning from his own experience. For example, he came to understand that the way to develop young leaders was to put them in deep water and trust them to figure out how to swim to safety.
The book deals with all facets of business leadership: developing strategy, changing business models, encouraging innovation, creating organizational structure, motivating others, understanding the nitty-gritty of sales, dealing with outsized egos (imagine managing the likes of mercurial host Keith Olbermann), planning for globalization, coping with mergers and acquisitions, and, in particular, shaping corporate culture. These essential tasks of leadership are realistically presented in the context of the ESPN organization — that is, leadership is not treated as a theoretical abstraction, a personality trait, or a set of rules or best practices. And that’s as it should be, because no one is a leader when working alone. Instead, people become leaders in the context of organizations or when dealing with challenges that require the coordinated efforts of others. Because every action Bodenheimer takes, and every decision he makes, is in the context of leading ESPN, readers can see clearly — and assess for themselves — the practical value and validity of what he describes.
Readers are unlikely to discover anything groundbreaking in Bodenheimer’s book. Instead, they will find countless practical examples of how one leader applies state-of-the-art thinking about leadership. We see him practicing what many experts today preach: listening carefully to employees, learning purposefully from mentors, delegating authority, building cohesive teams, creating and reinforcing a people-centered culture, fostering innovation, building stakeholder relationships,  coaching micromanagers to trust their people, engaging in constant and candid communication, and focusing on profitable growth. Through it all, he drives home his primary tenet: “Leadership is about people.”

The Startup Master

The Virgin Way: Everything I Know about Leadership, by Richard Branson, falls into the “how to” category. Branson, recognizable for his majestic mane and ready smile, comes across as a sensible, thoughtful, and rather charming chap (albeit markedly less humble than Bodenheimer). The self-made billionaire offers sound leadership advice, much of which jibes with Bodenheimer’s emphasis on the importance of listening, delegating, and nurturing teamwork and people-oriented corporate cultures. But Branson, a serial entrepreneur who has created lasting businesses in telecommunications, music, air travel, and financial services, appears to have learned more about organizational leadership through research (undertaken, I suspect, by an uncredited ghostwriter) than in the crucible of experience. That’s unfortunate, because the book is absorbing when Branson, one of the more interesting characters in modern business, draws lessons from his own successes and failures. Surprisingly, the preponderance of examples he cites are about others, many of whom may be overly familiar to business readers (do we really need to hear again about Steve Jobs’s Jekyll and Hyde personality?).
Although much of what Branson says about operational leadership feels secondhand — in fact, he admits to having had little day-to-day managerial experience — he has mastered the ins and outs of entrepreneurship. Thus, when he turns to his own considerable experience with business startups halfway through the book, the advice becomes compelling, credible, and useful. His chapter “Big Dogfights” vividly brings to life how entrepreneurs think and act, offering practical, strategic insights about reducing risk when entering established markets (two hints: take on lumbering Goliaths like British Air, and don’t waste dough on advertising).
Branson is candid about the reasons for his failures, including Virgin Cola (he failed to realize how hard it was to overcome Coca-Cola’s brand advantage) and Virgin Megastores (he didn’t anticipate the rapid rise of new media). He also draws useful lessons from near disasters (Goldman Sachs tried to rush Virgin into buying a bundle of subprime mortgages). From the latter, he concludes that “orchestrated procrastination” is often wiser than the “decisive” — read “instinctively impulsive” — leadership style so many entrepreneurs relish practicing.
Branson personifies a type of leadership that many corporate veterans might find hard to emulate. Soon after launching any new venture, he turns it over to someone else to run. By necessity, then, hiring the right talent is his first priority. Branson doesn’t look to employ administrators; instead, he wants everyone who works for him also to be entrepreneurial, while more skilled at management than he is. His troops are granted great leeway to run their businesses; they are free from restrictive controls, short-term profit targets, and rules in general (Branson’s mantra: “Change the policy — to no policy”). He writes of his people, “on occasions too numerous to recall, I have often paused to wonder just who was leading who on any particular project.” But he concludes that it didn’t matter even if he was the one being led, as long as the job was getting done. Branson also waxes eloquent on the subject of creating robust corporate cultures, which he likens to coral reefs: “They both take a long time to grow…and they are a fragile living entity that if abused can be destroyed very easily and quickly.”
Most readers know Branson thanks to one or another of the well-orchestrated stunts he has personally pulled to garner publicity for Virgin products, such as driving a Sherman tank into Times Square and pretending to fire away at Coke’s iconic sign. However, in these pages Branson reveals a side of his personality that is less well known (and more admirable): passionate advocacy of “social enterprises.” Although not himself a social entrepreneur, he has established centers in Jamaica and South Africa to support men and women in the developing world who want to start businesses that both create needed jobs and provide goods and services that foster community development. He encourages social enterprises in advanced economies as well, claiming there are 70,000 such organizations in the U.K. — a figure that, if overstated, is nonetheless indicative of a major global trend. Moreover, he argues that large, established corporations like his own need to hop on this new wave and engage in ethical “good business” practices. To that end, he boasts that Virgin is a founding organizer of “the B Team,” a consortium of prominent business leaders “in search of a Plan B for business that balances the pursuit of enterprise with the needs of societies and the environment.” Given his prodigious energy, he just might pull that off.

The Social Entrepreneur

Social enterprises such as those Branson advocates have existed in one form or another since the 1970s — think of Ben & Jerry’s, Patagonia, the Body Shop, and Tom’s of Maine. Nonetheless, Daniel Lubetzky’s Do the Kind Thing: Think Boundlesslessly, Work Purposefully, Live Passionately may be the first how-to leadership book specifically aimed at social entrepreneurs. Lubetzky, founder and CEO of Kind, a company that makes snacks marketed as healthy, articulates an important central message: Business leaders need to start thinking in terms of “and” and not “or.” In other words, given the world’s manifold social and environmental problems, companies can no longer operate under the assumption that they can, or must, choose between doing good and doing well. From now on, they’ll have to do both. That argument is far from original, but Lubetzky illustrates how he applied it to the challenge of creating a business of making snacks that are “both healthy andtasty, convenient and wholesome, economically sustainable and socially impactful.”
Like Bodenheimer and Branson, Lubetzky stresses the need for leaders to create human-centered cultures, and to build trust in their organizations. But he adds a new dimension to the topic by dealing with two central and important concepts the other authors ignore: ethical transparency and employee ownership. Lubetzky earns creativity kudos for choosing to package all his products in clear wrappers to symbolize the company’s openness to sharing almost everything about its products and practices with its stakeholders. Unfortunately, he is not fully transparent himself about Kind’s internal workings. He neglects to report the percentage of employee ownership of his company. That’s an important issue, because sharing wealth with employees is one of the most complicated practical issues entrepreneurs face, as well as being a major ethical challenge (witness the mess Gravity Payments’ Dan Price made of the noble goal of paying all his people at least US$70,000 a year).
Lubetzky has an oddly corporate background for an entrepreneur, having been a lawyer at Sullivan & Cromwell and a McKinsey consultant. Nonetheless, I believe budding social entrepreneurs, most of whom find such establishment firms anathema, will relate to his message and find the book inspiring and useful. At times, Lubetzky succumbs to the memoirist’s temptation to assume that both his experience and the insights he proffers are more unusual and profound than they actually are (“Empathy…is a vital if underrated leadership skill”). Also, I must disclose that the copy of the book I was sent for review came with a generous sample of his products. Since my conscience would not allow me to consume them, I did the ethical thing and gave them to my family. They have asked me to report that they enjoyed the snacks immensely.

Author Profile:

·         James O’Toole is director of the Neely Center for Ethical Leadership at the University of Southern California’s Marshall School of Business.

Best Business Books 2015: Disruption

Best Business Books

The Machine Age

by Steve LeVine
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
Just as at the beginning of the Industrial Revolution, outsized angst over the imminent disappearance of jobs is a rampant concern in our age. When intelligent humanoid robots strip labor away from the vast majority of the working-age population, the apprehension goes, society as we know it may not make it. The Atlantic foretold this prophecy in a cover story titled “The End of Work”; Foreign Affairs exclaimed simply, “Hi, Robot.” It is demoralizing, to say the least. In the summer science-fiction chiller Humans, a teenager wonders why one should aspire to a career in medicine when future robots will do the job better.
A minority of our thinkers are pushing back: Martin Wolf, the ordinarily decorous chief economics columnist at the Financial Times, can barely contain his scorn on this subject; certainly, no super robot race is imminent, Wolf grumbles. At Quartz, my colleague Tim Fernholz thinks that the panic is far overdone — not only are robots not frightening, but we need as many as we can get to help us become more productive.

Doing the Robot

No one can predict with certainty the outcome of the torrent of fresh automation washing over us. But this is no faddish debate. As Martin Ford makes clear in his impressively researched and, yes, frightening Rise of the Robots: Technology and the Threat of a Jobless Future, the evidence is ample that artificial intelligence is already occupying jobs previously thought doable only by humans. That Ford writes in a terse, understated style and himself comes from an engineering background — he was chief technology officer of a Silicon Valley software company — makes his message all the more worrying. His book is my pick for the best business book of the year on technological disruption.
The degree of robots’ eventual societal penetration and disruption is a matter of conjecture. By one estimate, almost half of all U.S. jobs are at risk, and Ford agrees that the scale will be profound. His favorite verb is vaporize. And he wields it, along with its synonyms, like a taunting wizard, to describe the destiny for whole segments of white-collar employment. Robots are a death warrant for any job whose core requirement is experience or judgment. Lawyers, journalists, Wall Street analysts? Vaporized. Evaporated. Disappeared. The same goes for pharmacists, radiologists, even computer programmers — Ford quotes a 2013 study that asserts that the number of U.S. engineering and computer science graduates that year exceeded available jobs by 50 percent.
In embracing the grim side of the debate, Ford tilts against the economic orthodoxy. Most analysts believe that technological breakthroughs, although they destroy some jobs, end up creating far more by spurring new industries and platforms. The theory of creative destruction explains why cars displaced buggy-whip manufacturers — and why far more positions were created in auto plants, gas stations, auto rental firms, and body shops.
Ford flatly calls the theory outdated. This time really is different, he says, namely because of technology. Although many people worry that artificial intelligence may surpass the human mind, the more telling development is that computers are becoming much better at performing predictable tasks. Although we don’t think of white-collar work this way (especially those of us who are white-collar workers), many professions are reducible to small, repeatable components. And that makes them vulnerable to obsolescence. A paradox of the information age, Ford writes, is that “as work becomes ever more specialized, it may, in many cases, also become more susceptible to automation.”
Ford mischievously reprints a few paragraphs of sparkling prose about a Dodgers–Angels game (the Dodgers won 7–6), complete with a colorful quote from right fielder Vladimir Guerrero. But we learn this piece was “written” by StatsMonkey, a software program created by students at Northwestern University, who went on to start a Chicago company called Narrative Science. The company’s cofounder forecasts that by 2026, 90 percent of news articles will be written by machines.
It gets worse. It’s a myth, Ford writes, that computers can perform only as they are programmed. A technique called genetic programming, reflecting evolution and mutation, can create music, write programs, and even “think” outside the box. One huge player to keep an eye on: IBM’s Watson, which famously defeated Jeopardy! champion Ken Jennings in 2011. Since that triumph, IBM has doubled Watson’s capabilities. Next, Ford argues, robots equipped with virtual reality technology will start vaporizing face-to-face jobs (for example, those of university professors and administrators, and even white-collar managers).
In The Innovators (on which more is written below), Walter Isaacson cheerfully argues that all will end well because we humans will collaborate with the machines threatening our jobs. But Ford ridicules a prime bit of evidence of that claim — that joint human-and-computer chess teams are beating solo machines, and if they can work together, anyone can. First, Ford thinks that such chess team superiority will be short-lived, as computers are eventually bound to trounce traitorous machines collaborating with humans. Second, he argues, such shows of human–machine chess competition are theater — most companies are interested in much more prosaic uses for computers, such as navigating millions of legal records for big cases, a thankless (but very expensive) task traditionally handled by brand-new law school graduates.
Healthcare may in part be an exception to the coming professional bloodbath. Smart machines will be able to rapidly assess hundreds of thousands of medical cases and histories in order to diagnose a case, but it will require a technician to operate those machines. And considering the growing population of retired baby boomers, doctors will be in higher demand than ever before. But we could soon be seeing robots donning white coats. Earlier this year, after Ford’s book was published, IBM said it had “been giving Watson eyes,” making it able to examine CT scans, X-rays, and mammograms, and cross-reference the results with patient records to emerge with a solid diagnosis.
What is society to do in a jobless future? Like many others, Ford advocates a guaranteed national salary for every adult. To traverse the politics, this move could be labeled a “dividend,” the same term that Alaska uses for the annual oil profits sent to every resident of the state. It would be designed not to discourage work; some people would tend to be laggards, but only those who would be so under any other system. Those who were naturally more productive would continue trying to find a place for themselves.

A Group Effort

Ford describes a future in which technology dominates humanity. In The Innovators: How a Group of Hackers, Geniuses, and Geeks Invented the Digital Revolution, Isaacson — author of a best-selling 2011 biography of Steve Jobs — looks to the past and describes how humanity reached this juncture. His narrative of the information revolution starts with Charles Babbage, the 19th-century inventor of the Difference Engine (the first whack at a computer), picks up with the creation of the transistor at Bell Labs in 1948, and winds up at Google.
Along the way, the author says his intention is to dispel the belief that big invention is mostly the province of sole inventors. He wanted to show that technological disruption is actually a team sport. “Only in storybooks do inventions come like a thunderbolt, or a lightbulb popping out of the head of a lone individual in a basement or garret or garage,” he writes.
Isaacson, president of the Aspen Institute and a biographer of lone geniuses such as Ben Franklin and Alfred Einstein, only partly succeeds. This is because he ends up arguing against himself. Some of the biggest leaps of the information age may not have been made by a single person. But a lot were created in pairs or extremely small groups that effectively made them “lone” — the great breakthroughs were built on the work of others who came before, but in the end did not involve casts of thousands.

Notwithstanding his unnecessary diversion into the lone inventor theory, the book is fast-paced and compulsive reading. Isaacson is a remarkably fluent writer. We’ve heard it elsewhere, but the story of the megalomaniac Bell Labs physicist William Shockley remains one of the most breathtaking incidents of personal vanity in U.S. biography. At Bell, John Bardeen and Walter Brattain collaboratively built the first transistor, which sent Shockley (their supervisor) nearly out of his mind with envy. For months, Shockley worked feverishly — yes, all by himself — to produce a better approach. He became so unmanageable that, finally, just to mollify him, Bell agreed that any photo of Bardeen and Brattain would include Shockley. For the most famous portrait of the three, Shockley elbowed his way into Brattain’s office chair, and sat there like a mandarin, with the others looking on. The tragedy comes later in Silicon Valley, where Shockley lured a group of Bell men to make semiconductors. Shockley’s pathologies, including intense paranoia and a drive to take all the credit, drove them away. The outcome was that his protégés founded Fairchild Semiconductor — the inventor, along with Texas Instruments, of the microchip — and then Intel. Shockley himself vanished into relative obscurity.
Among the most bracing facts in the account of the microchip are these: The first prototype of the microchip cost US$1,000 in 1959; by 1968, the cost was $2. The same went for devices containing the microchips. The first blockbuster TI desk calculator was $150 in 1967. In 1975, it cost $25; by 2014, Walmart was selling one for $3.67. (This data merits a Post-it Note on the keyboards of those who loudly criticize today’s expensive battery and electric car technology.)
Isaacson argues, as have others, that the alienation of the 1960s was a primary cultural factor leading parades of young people to electronics. Amid these stories, we get the shining core of the book, a long chapter on software in which Isaacson builds on his brilliant prior telling of the creation stories of Bill Gates and Paul Allen at Microsoft, and Jobs and Steve Wozniak at Apple. This chapter alone is worth the price of the book.

Currency Events

Isaacson’s narrative does not get to bitcoin, but a libertarian streak also lies at the heart of the computer-generated money that’s the latest technology mania. In The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order, Paul Vigna and Michael J. Casey provide a much-needed account that finally explains something that, to me at least, has been a mystery: What precisely is bitcoin, and who on earth is Satoshi Nakamoto?
Vigna and Casey, both veteran reporters at the Wall Street Journal, take us into the world of young, tech-minded crypto-anarchists “repulsed by the excesses and abuses of the financial system.” Their people are angry about “intermediaries” who get rich by allowing people to spend their own money — an activity that ought to be free.
Who are the culprits behind these excesses and intermediations? Credit card companies and Wall Street investment banks, which charge transaction fees that may seem small but that add up to hundreds of billions of dollars in profits, and 0.5 to 1.5 percent of the GDP of many countries.
So it is that these angry folks on the margins glom onto Satoshi Nakamoto, an anonymous figure who one day in 2008 posts an announcement of a fail-safe cryptocurrency that can’t be hacked or abused. Nakamoto vanishes as mysteriously as he surfaces, but his invention — bitcoin — survives, leaving an irresistible creation myth for his growing followers.
Simply put, bitcoin is a way for strangers to buy stuff outside the usual economy. After reading this book, I am convinced of the sincerity of bitcoin fans, among whom the authors clearly count themselves — Vigna and Casey are not dispassionate observers. (Last summer, Casey left his position at theJournal to become a senior advisor at MIT’s Digital Currency Initiative.) But I’m not fully persuaded of the need for, or the imminent triumph of, bitcoin.
The authors bring no less an intellectual figure than Larry Summers — former Harvard president, former Treasury secretary, personification of the establishment — to their defense. Summers says that those who fail to grasp the torrent on the horizon “are on the wrong side of history.” The bitcoin concept may naturally sound “as outlandish to the modern mind as the idea of self-governance must have been to many in 1776,” Summers says. But the world has changed. Get used to it.
Yet Summers’s take seems exaggerated and, in some spots, the authors themselves can sound a bit unhinged. They ridicule “the seductive idea that every dollar printed is an interest-free loan flowing from the people to the state,” and lament that “controlling the nation’s money has allowed governments to control the apparatus of power.” Come again?
Disruptive technologies don’t have to vanquish incumbents in order to be significant. Often, they provide the greatest service by pushing existing firms to adapt and improve. On August 17, I received an email from a company called TransferWise that offered to shift money abroad for a 0.5 percent fee. Among TransferWise’s investors, it said, are Virgin America founder Richard Branson and venture capitalist Peter Thiel. In Kenya, millions of users of M-Pesa — the country’s cheap and wildly popular mobile payments network — can already send money electronically on their cell phones. A revolution in which bitcoin replaces the dollar, euro, and yen as a unit of exchange seems improbable. It is likely, however, that we’ll see credit card companies forced to lower their 3 percent transaction fees to a rate closer to 1 percent.
At the end of this engaging and vigorously reasoned book, the authors argue for a middle ground, in which bitcoin is part of the mix but neither the anarchists nor the traditional system wins. Ten years from now, when we go to get a checkup from our robot doctors, we may be able to pay in either dollars or digital currency.

Author Profile:

·         Steve LeVine is the Washington correspondent for Quartz. He is the author of The Powerhouse: Inside the Invention of a Battery to Save the World (Viking, 2015).

 

Best Business Books 2015: Marketing

Best Business Books

Capturing Attention – and Data – in a Digital Age

by Catharine P. Taylor
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
Anna Bernasek and D.T. Mongan
All You Can Pay: How Companies Use Our Data to Empty Our Wallets (Nation Books, 2015)
It often seems as though book authors, who work on that most analog of platforms, have been obsessed in recent years with the technology that may make their traditional product obsolete. This preoccupation with the digital future is particularly noticeable when it comes to books about marketing. Virtually all the good ones published over the past decade have focused sharply on the digital revolution. There’s simply been so much to learn about best practices, tools, and new ways of reaching customers. At times, it seems as if little else matters; certainly little else gets much attention.
Which is as it should be. A medium such as the Internet, which has been transformative for the consumer experience, was bound to be just as transformative for advertisers. More than 20 years after the advent of the World Wide Web, it’s hard to remember a time when marketers didn’t have digital strategies, or when most consumers used dial-up modems. It’s time to wrestle with the ramifications of a digital age that, if not fully mature, has certainly progressed through adolescence. In one form or another, all of this year’s best business books on marketing grapple with what has turned out to be not just a change in media consumption, but an overwhelming cultural shift. They go well beyond the basics of Internet marketing to help us reach a more sophisticated understanding of the opportunities — and perils — of deploying immensely powerful digital platforms to reach customers.

Grabbing Mindshare

Captivology: The Science of Capturing People’s Attention, by Ben Parr, isn’t positioned as a marketing book. But it does deal with the most fundamental struggle in marketing: how to get noticed. Thus, it’s an indispensable read and the most compelling of this year’s bunch. For all of today’s immense targeting capabilities, every marketer still lies awake at night wondering if anyone out there is paying attention to his or her company’s products and services. There is no such thing as a captive audience. Captivology is a well-timed antidote to this particular reason for insomnia.
Captivology is the best marketing book of the year not only because it contains deep insights, but also because it is immensely enjoyable. I got the feeling that Parr wrote it mostly out of his fascination with the topic, and his enthusiasm shows. It also helps that he is an experienced journalist. Parr worked at Mashable in various capacities from 2008 until 2011 — including serving as its coeditor — and also did an 18-month stint at CNET as a columnist and commentator.
Parr first became interested in the capturing of attention through his work as a managing partner at DominateFund, a Silicon Valley venture capital firm, a position he’s held since 2013. Early on, he realized that “what [startups] really wanted was our expertise in dealing with the press, developing marketing campaigns, building viral products, optimizing customer acquisition, and connecting with Hollywood,” he writes. “In other words, they were coming to us for help getting attention.”
The book inspired by this insight is a well-structured and exhaustively researched look at the hooks that grab us. Parr helpfully classifies them into seven triggers: Automaticity, Framing, Disruption, Reward, Reputation, Mystery, and Acknowledgment. I won’t detail how each works here, but after marinating your mind in Parr’s research, you will find yourself looking differently at your own behavior. Next time you find your attention swiveling toward an ambulance rushing down the street, you’ll think, “Ah, it’s the Automaticity Trigger!”
Parr’s book is so, well, captivating because it’s relatable. Despite being a member of the Silicon Valley intelligentsia — he gives a special shoutout to Facebook COO Sheryl Sandberg in his acknowledgments — Parr doesn’t write as though the whole world revolves around Palo Alto. Rather, he delves into studies from a range of disciplines over the last century that reveal the mysteries of human nature, using real-world examples. Steve Jobs garners praise for championing simplicity (the Disruption Trigger). But Parr also ropes in less obvious cultural signposts such as actress Vivien Leigh, cookbook author Betty Crocker, and even Anthony Weiner, the ex-congressman whose career was ended by some ill-advised tweets, to illustrate his points. In the chapter on the Reputation Trigger, Parr contends that Weiner ruined his reputation to the point of no return not simply by tweeting photos of his genitalia, but by initially claiming it was the work of hackers. According toCaptivology, why people do things is as important as what they actually do — and that’s a timeless insight.
Case in point: a fascinating study detailed in the chapter on the Reward Trigger. Male Harvard student participants were broken into two groups — unbeknownst to them, called Meaningful and Sisyphus. Each team was asked to build Lego Bionicles, and they received a small sum for each model they completed. In the Meaningful group, each completed Bionicle was placed in front of them, and the models piled up satisfyingly as they continued to build. But the moment the Sisyphus group completed a Bionicle, it was disassembled. The Meaningful group built far more Bionicles before quitting — and that gets to the heart of how and why rewards grab our attention. It was the combination of extrinsic rewards (the money) and intrinsic rewards (the feeling of accomplishment) that served as a powerful incentive. At root,Captivology works because it brings the technology-addled marketing mind back to the basics: figuring out what makes people tick.

Miles Away from Mad Men

Does It Work? 10 Principles for Delivering True Business Value in Digital Marketing follows a much more traditional news-you-can-use formula. But it is remarkably effective. The authors, Shane Atchison and Jason Burby, are global CEO and president of the Americas, respectively, of Possible Worldwide, a WPP-owned digital agency.
Because Possible, a rollup of several fledgling digital agencies, is only about four years old, keep in mind that Does It Work? is marketing too. The agency’s positioning dovetails with the book’s ethos: Great marketing is great only if it meets business objectives. “Possible is a creative agency that cares about results,” intones the first line of the company’s description on its website.
Fortunately, the book delivers. From the start, the authors write directly about digital marketing’s failures. The authors chastise advertising culture for doling out awards for highly creative, but ineffective, work. Atchison and Burby open with a data-driven takedown of “Dumb Ways to Die,” the 2012 Australian public service video that, as of this writing, had 107 million YouTube views, not including the countless spoofs, spinoffs, and sequels that made it a meme. It also, according to the book, won more awards at the industry’s most self-congratulatory annual event — the Cannes Lions International Festival of Creativity — than any other campaign in the event’s history.
The campaign’s goal was to make sure people didn’t do potentially lethal things in and around trains on Melbourne’s Metro system. But it didn’t work! The authors’ thorough look at the statistics showed there was virtually no change in dangerous incidents between 2012 and 2013.
That example — bolstered by a deep analysis in the book’s appendix — exemplifies the rigor with which Atchison and Burby suggest advertisers and agencies analyze their efforts. Throughout their discussion of the 10 principles in the title, which range from setting business goals to ensuring that your organization continually optimizes campaigns, the authors pound home the message that data-grounded focus is the key to making things work.
Does It Work? is at its best when discussing the (too-often forced) marriage between data and creativity. Professionals in the two disciplines have long eyed one another suspiciously, with the creatives prone to feeling that data geeks’ sole purpose is to hamper their creativity. Atchison and Burby argue that data should do the opposite. “We believe that data can deliver powerful moments of truth that can inspire creativity, encourage bold ideas, and allow you to hang on to your vision in the face of subjective opposition,” they write. A client who realizes that an edgy idea is rooted in data may be more willing to give it the green light.
One of the book’s stronger case studies shows how Netflix’s bold decision to develop the expensive (and, as it turns out, popular and critically acclaimed) series House of Cards was the product of just such a strong marriage. Before ponying up US$100 million for the first two seasons, the streaming service looked at user streaming data to uncover the popularity of its proposed director (David Fincher) and lead actor (Kevin Spacey), and the original, British version of House of Cards. Not only were all three popular, it appeared, but there was also a notable correlation among users who liked all three. Now that a successful fourth season has aired, there’s no doubt that Netflix made the right decision in picking up the series.
At times, Does It Work? tries to do too much. It’s difficult to discuss every aspect of measurement while also sandwiching in a principle or two about creating a good work environment and hiring great digital talent. At the end of each chapter, the book usefully includes a list of questions under the heading “Does It Work for You?” that help bring that chapter into focus. When readers feel they’re swimming in too much information, those questions should anchor them.

The Limits of Data Mining

Netflix’s successful mining of user data to construct the House of Cards phenomenon is the kind of effort that would send Anna Bernasek and D.T. Mongan, the authors of All You Can Pay: How Companies Use Our Data to Empty Our Wallets, scurrying into their doomsday bunker. So why does a book that rages against data mining — a standard marketing practice — make the best business books list?
It’s because, while the marketing industry holds up data as the holy grail of the discipline, consumers — thanks to repeated data breaches and Edward Snowden — are becoming ever more data-aware. All You Can Pay powerfully illustrates why so many consumers are waking up. Of the three books reviewed here, it’s certainly the most provocative, even if it’s not always right.
Bernasek, a veteran financial journalist, and Mongan, a lawyer, hold that the escalating amount of data that companies have about individual consumers is being used not just for increased customization of products, but also for increased customization of pricing. The mass market is over.
Healthy markets — such as what used to be the mass market — are relatively transparent; both sides have a good idea of what a fair price is. But the authors say the trend toward mass customization has been accompanied by an increasing asymmetry of information. Because of the data consumers incessantly (and often unwittingly) spew about their preferences and private lives on Facebook, Google, Amazon, and elsewhere, companies now know much more about consumers than consumers know about the companies. Ultimately, that means that companies know how much individual consumers can pay, and they charge accordingly.
“If you think companies won’t use the growing knowledge they have about you to extract higher prices, think again,” the authors write. “In many small and big ways, companies already take advantage of your trust. With more sophisticated data extraction and analysis, exploitation will only get easier, cheaper, and more pervasive.”
So-called dynamic pricing, the mechanism that makes umbrellas more expensive during a rainstorm and flights more expensive during the holidays, has been with us for decades. But the picture painted in All You Can Pay is far more insidious. Theoretically, if Amazon knew you were better off financially than your next-door neighbor, it could charge you more for a pair of Nikes. One of the book’s best passages is its analysis of college financial aid. In theory, tuition is transparent: It’s posted on every university website. But prices paid by students vary widely. The family of every student coughs up boatloads of financial information, and the college ultimately decides — in a process that is far from transparent — how much each student can pay.
While reading this book, it’s impossible not to wonder whether such price disparities will really trickle down to the aforementioned pair of Nikes or a bar of soap. At least in e-commerce, one-to-one customized pricing is technologically possible. But that doesn’t mean it will happen en masse. Some bad actors are willing to misuse data, but not everyone does so. All You Can Pay paints a compelling and obviously Orwellian picture of data overlords manipulating every transaction. But it goes too far in painting consumers as powerless and companies as defaulting to being evil, when given the choice.
In fact, until the very end, the book ignores the fact that consumers have more of a voice than they’ve ever had. Who hasn’t gone on a local Facebook group and asked what an appropriate price is for having a plumber unclog a drain?
Still, All You Can Pay is a must-read for marketers. Consumers are increasingly skittish about the use of their data. We all know there’s a quid pro quo about the Internet; we trade information about ourselves for access, content, and discounts on goods and services. A book such as All You Can Pay— which aspires to be a consumer rallying cry — should serve as a reminder to marketers to continually ask themselves whether they are being responsible in how they use their customers’ data, and what the blowback will be if they’re not.
These three books illustrate the diversity of issues marketers have to contend with, now that digital technology is fully embedded in their consumers’ lives. They also show that even in an age of limitless distraction, short attention spans, and content that is designed to disappear (hello, Snapchat!), writers can craft lengthy fact-laden arguments that can capture our focus.

Author Profile:

·         Catharine P. Taylor has covered digital media since 1994, writing for publications including Adweek andAdvertising Age. She also wrote the weekly Social Media Insider column for MediaPost for seven years, and is a frequent speaker on the impact of social media on advertising, media, and behavior.

 

Best Business Books 2015: Managerial Self-Improvement

Best Business Books

What a Character!

by Theodore Kinni
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
David Brooks
The Road to Character (Random House, 2015)
Fred Kiel
Return on Character: The Real Reason Leaders and Their Companies Win (Harvard Business Review Press, 2015)
In 1859, as Great Britain’s Victorian era steamed into its third decade, a Scotsman named Samuel Smiles published a book titled Self-Help; with Illustrations of Character and Conduct. In it, Smiles preached “the practice of the virtues of industry, frugality, temperance, and honesty,” copiously illustrating its transformative power with “the instances of men, in this and other countries, who, by dint of persevering application and energy, have raised themselves from the humblest ranks of industry to eminent positions of usefulness and influence in society.”
Self-Help was a hit in England and farther afield; the aspiring entrepreneurs of the Meiji Restoration made it a bestseller in Japan. The book catapulted 47-year-old Smiles to gurudom, and, as is the wont of gurus, he wrote several volumes that capitalized on the popularity of his boot-strapping thesis over the next four decades. Thus, Smiles played an instrumental role in launching the broad category of business books under consideration here: self-improvement books for managers.
In addition to the literary impetus Smiles provided to would-be gurus, he anticipated this year’s most notable managerial self-improvement theme by about a century and a half. In his book Character (1871), he wrote, “In the affairs of life or of business, it is not intellect that tells so much as character — not brains so much as heart — not genius so much as self-control, patience, and discipline, regulated by judgment.” Character building and its rewards are the principal focus of two of this year’s three best business books on the theme of self-improvement for managers. The third — the best of the bunch — reminds us to take the first two with a grain of salt.

miles Reincarnate

New York Times columnist David Brooks doesn’t mention Samuel Smiles in his bookThe Road to Character, but it turns out the two authors have much in common. Like Smiles, Brooks pegs character as the most important measure of a person. “If you don’t develop a coherent character,” he warns us, “life will fall to pieces sooner or later.” And like Smiles, he seeks to illuminate character with the life stories of a selected group of people. The greater part of The Road to Character is devoted to extended biographical sketches of a diverse set of well-known and lesser-known luminaries, including Frances Perkins, Dorothy Day, George C. Marshall, Dwight D. Eisenhower, and civil rights activists A. Philip Randolph and Bayard Rustin.
Brooks’s subjects struggle mightily to build a strong character, and they use their strength of character as a lever to change the world. Frances Perkins was a “small, cute, almost mousy young lady,” raised among the bourgeoisie of Boston at the end of the 19th century. She was educated at Mount Holyoke College, where she began to imagine something more fulfilling than the life of a Beacon Hill matron. That desire hardened into a lifelong vocation that eventually took precedence over her personal life and family in 1911, after Perkins watched workers jumping to their deaths to avoid the flames in New York City’s Triangle Shirtwaist Factory fire. “Her own desires and her own ego became less central,” writes Brooks. “The niceties of her class fell away.”
Perkins dove into the unladylike business of machine politics, lobbying and compromising as necessary to pass workplace protection legislation. New York governor Al Smith appointed her to the Industrial Commission, which regulated working conditions throughout New York State. There, she caught the eye of Franklin Delano Roosevelt, whom she initially found “shallow and a bit arrogant.” Perkins, the first female cabinet secretary, served as labor secretary throughout FDR’s entire presidential tenure. Brooks tells us that she was central to the creation of the Social Security System and the Fair Labor Standards Act, which mandated a minimum wage and overtime pay. She was a major force in the creation of New Deal agencies that put U.S. employees back to work during the Great Depression, including the Civilian Conservation Corps, the Federal Works Agency, and the Public Works Administration.
Brooks parts ways with Smiles over the purpose of character building. Where Smiles sees it as a driver of material success, Brooks sees it as the path to spiritual salvation. Brooks urges the development of “eulogy virtues,” moral qualities of the kind that people talk about at funerals, such as bravery, integrity, and loyalty. He suggests that people focus less on the “resumé virtues,” talents and skills that bolster careers.
Brooks argues that we place too much emphasis on resumé virtues because our “moral ecology” has shifted from the “little me” culture of humility, generosity, self-sacrifice, and selflessness that he says typified the “greatest generation” to today’s “big me” culture of self-promotion, self-esteem, self-actualization, and outright selfishness. (This may be true, but like me, Brooks is a 50-something white guy and a baby boomer. So perhaps he is imbuing the good old days with a nostalgic glow that is not altogether justified.)
In any case, the road to character, as Brooks portrays it, is a rocky one, and its rewards are intangible: self-understanding, joy, peace, and oneness with others. If a life like that sounds good to you, be sure to pay extra close attention to the book’s character-building insights and lessons, which Brooks sums up in a “humility code” in the final chapter.

Does Character Pay?

Whereas Brooks explores the intrinsic rewards of character, Fred Kiel seeks to tease out a more tangible payoff. In Return on Character: The Real Reason Leaders and Their Companies Win, the executive coach and cofounder of KRW International reports on his quest to determine whether the personal character of managers has any connection to better business results. And it is nothing less than a quest: “As I approach my seventy-fifth birthday, I have a dream,” writes Kiel. “I hope to inspire a movement where people demand character-driven leadership because it delivers higher value to all stakeholders — and because it’s the right thing to do.”
Toward this end, Kiel underwrote a seven-year descriptive research study that seems to have been conducted with much zeal (if a bit less financing and scientific rigor than is typical). To study leadership character, he first identified the four “universal principles” that define it — these are integrity, responsibility, forgiveness, and compassion. Then, he defined three or four behaviors that indicate the presence of each of these so-called Keystone Character Habits in a leader.
Next, by word of mouth and happenstance, Kiel recruited 84 CEOs (82 in U.S. companies and two in Canadian companies) who agreed to participate in the study after learning its parameters and purpose. These CEOs provided data about themselves and their behaviors via surveys, assessments, and interviews. To confirm the CEOs’ characters, employees from each of their companies (8,400 employees in all) filled out surveys about their CEO’s behaviors and the behavior of their company’s senior management team. Then, each CEO was asked to provide corporate financial information, which was used to calculate average return on assets (ROA) over two years, a requirement that prompted 40 of them to drop out of the study. Finally, leadership character was correlated with ROA.
What did Kiel discover? “There is an observable and consistent relationship between character-driven leaders and better business results,” he writes. “Leaders with stronger morals and principles do, in fact, deliver a Return on Character, or ROC. Organizational leadership that ranks high on the ROC character-assessment scale achieves nearly five times the return on assets that leaders who fall at the bottom of the curve achieve.”
At this point, a data scientist would probably feel compelled to issue several cautions about the conclusions derived from Kiel’s study. One caution might involve the very small sample of self-selected subjects and the distortions that size is likely to create. Another might involve the fact that a CEO is not the only — or even the primary — determinant of a company’s business results. So it’s hard to know what weight to assign the link between character and ROA.
Given the limitations of the study, you might wonder why I chose Return on Character as one of the year’s best business books on managerial self-improvement. The answer: I give it an A for effort and ambition. Kiel provides a foundation for further inquiry into the role and importance of character in managerial effectiveness at every level in every kind of organization.
Moreover, if the character of the people who manage a business is actually related to the performance of that business, there are significant ramifications for managers and the people who hire them. Such a finding might, for instance, bridge the distinction that Brooks draws between eulogy virtues and resume virtues. Managerial self-improvement might include a healthy emphasis on understanding and developing your character. Companies might start evaluating the character of new hires in a more rigorous way and seek out leaders who demonstrate integrity, responsibility, forgiveness, and compassion. Where might that lead?

A BS Detector

Of course, if leadership character isn’t actually linked to business performance, it could simply become one more reason for Jeffrey Pfeffer to indict the “almost limitless number of books, articles, speeches, workshops, blogs, conferences, training sessions, and corporate development efforts” produced by the so-called leadership industry. In Leadership BS: Fixing Workplaces and Careers One Truth at a Time, the Thomas D. Dee II Professor of Organizational Behavior at Stanford University’s Graduate School of Business proclaims the industry of which he is a stalwart member to be a failure by the only measure that really matters: how often it makes good on its promise to produce more effective leaders.
Pfeffer isn’t the first professor to bite the hand that feeds him, and he surely won’t be the last. But what makes Leadership BS notable is that he tries not to contribute to the problem. (Most indictments of the industry quickly cut to the chase, which is the promotion of the accuser’s own leadership effectiveness scheme.) Instead, Pfeffer demolishes some of the industry’s most popular ideas and shows managers seeking self-improvement how to winnow out content that won’t help them or their employers.
The idea of the authentic leader — and the books, seminars, and training programs that have sprung up around it — sets off Pfeffer’s BS detector. “The idea that one would and could be trained to become or at least appear authentic oozes with delicious irony,” he writes. More importantly, authenticity is the last thing leaders should aspire to attain. “Leaders do not need to be true to themselves,” he argues. “Rather, leaders need to be true to the situation and what those around them want and need from them.” I imagine David Brooks, with his insistence that character building requires conquering ego, nodding along.
Pfeffer similarly demolishes a number of traits that aspiring leaders are often advised to develop, including humility, honesty, trust, and a primary focus on the welfare of others. He’s not saying that these idealized traits are undesirable in and of themselves. Instead, he is a realist who studies and teaches the nature and use of leadership power. He’s saying that no matter what we say we want in leaders, what we hire for — and what we reward — in leaders is often the diametric opposite.
Finally, Pfeffer delivers the payoff for managers bent on improving their leadership fortunes. If you want to rise to become a leader and become successful as a leader, he counsels, you’d better be grounded in reality (who you hire and reward) rather than in some wistful vision of what leadership could be. Somewhere Machiavelli is clapping with admiration and delight.
And so am I. David Brooks’s Road to Character is an inspiring read that could make you a better, stronger person. Fred Kiel’s Return on Character is a hopeful one that suggests character-driven leadership might be more than a pipe dream. And Pfeffer’s Leadership BS, the best business book of the year for managerial self-improvement, will keep you from getting your hands stomped on during the long, sweaty climb up the corporate ladder.
Reprint No. 00378

Author Profile:

·         Theodore Kinni is a contributing editor of strategy+business. He has written, as a named author or a ghostwriter, 15 business books.

 

Best Business Books 2015: Economics

Best Business Books

The (Very) Political Economy

by Marc Levinson
A version of this article appeared in the Winter 2015 issue of strategy+business.
Dirk Philipsen
The Little Big Number: How GDP Came to Rule the World and What to Do about It (Princeton University Press, 2015)
In this, the sixth year of global expansion, the crisis of 2008 is slipping into history, and steady but unsatisfying growth has become the new norm. That’s been comparatively good news for companies, stock markets, and workers. The news has been less good for the economics book industry. The debacles of 2008 and 2009 gave rise to scores of well-written, passionately argued books that described those debacles’ origins, documented their fallout, and provided advice on how to prevent the next crisis. But the pipeline has slowed to a trickle. This year’s lot, it must be said, does not measure up to the standards of previous years. Nonetheless, some of the new books are provocative. And this year, several of the books that caught my eye revolved around politics. That’s not entirely surprising. The 2016 U.S. presidential campaign has long since started. Last year’s book of the year, Thomas Piketty’s Capital in the 21st Century, helped income inequality become a matter of persistent global political debate. And so we’ve seen a notable increase in books that aim to tell politicians what they should do about the greatest economic challenges we face, and that point out fissures over economics within countries, and within political parties.

Crystal Clear World Vision

By far the most thoughtful and insightful of this year’s crop is Martin Wolf’sThe Shifts and the Shocks: What We’ve Learned — and Still Have to Learn — from the Financial Crisis, and it is my pick for 2015’s best business book on economics. Wolf, who is British and based in London, is no card-carrying partisan in the U.S. political wars. As the chief economics commentator of theFinancial Times (and an especially trenchant one), he holds no particular brief for political parties, on either the right or the left. Wolf’s general view is that President Obama and his counterparts in other wealthy countries were far too timid in confronting the crisis and its lingering effects. His implicit message, although it is never stated in such partisan terms, is that, in the U.S., ideologically driven demands by congressional Republicans for federal spending cuts in the midst of a deep recession have made matters much worse than they needed to be. Austerity, he argues, has been similarly self-defeating in Europe.
Wolf brings a clarity to the discussion of economic issues that has been sorely lacking in the United States. One of the most lamentable aspects of U.S. public debate has been the tendency to politicize economics. Almost every argument or article is slammed by paid critics as “liberal” or “conservative,” and the comments of official spokespeople are likely to receive far more public attention than the nuanced research of economists. Wolf’s critique transcends such limitations. His great contribution is to look far beyond U.S. borders and treat the crisis as the international event it was.
Wolf starts by emphasizing two facts that were largely ignored in the political dickering between 2008 and 2011 in Europe as well as in the United States. One is the sheer scale of the catastrophe, a scale that public officials and central bankers were slow to recognize and to admit. This was no ordinary recession; 2009 was the first year since World War II in which the global economy shrank. In both the United States and the United Kingdom, Wolf points out, gross domestic product in 2011 was a whopping 13 percent less than it would have been had economic growth continued at its average rate from 1980 to 2007. The other important fact: Not all economic downturns are the same. As was documented by Carmen M. Reinhart and Kenneth S. Rogoff in their 2009 book, This Time Is Different: Eight Centuries of Financial Folly, economic downturns associated with financial crises tend to hit government finances much harder than garden-variety recessions. Tax revenues plummet, even as spending for bank bailouts, unemployment benefits, and income-support programs expands. In the United States, Wolf points out, “the fiscal costs of this event rival only those of the Second World War.” The U.S. annual budget deficit soared from US$161 billion in 2007 to $1.4 trillion in 2009.
Such severe conditions, Wolf insists, called for a very strong government response. Yet in almost all the high-income countries, governments were spooked by large budget deficits. And when they avoided additional spending, they helped drag out the very economic conditions that were depressing tax revenues. The governments left it to central banks to fight the downturn with easy money while tightening fiscal policy. This, Wolf asserts, has brought only a sluggish economic revival while potentially creating dangerous new financial excesses. “The decision to tighten fiscal policy after 2010 was almost certainly premature and unwise,” he writes. “It would have been better to rely more on fiscal policy and less on monetary policy.” In 2015, Barack Obama might agree with this statement, but David Cameron and Angela Merkel assuredly would not.
But now we are here. And here, Wolf emphasizes, is not a good place. Most major economies are growing more slowly than they did in the years prior to 2007, far too slowly to recover the output lost in the depths of the downturn. In the U.S., he points out, it would take 10 years of economic growth at a 4 percent annual rate to make up for all the output that has been forgone since 2007; the U.K. would have to grow at 5 percent a year for a decade to achieve the same. This is implausible, particularly because low rates of labor-force expansion and an aging population are likely to bring slower economic growth in the future. “It now looks as though crisis-hit economies might never regain pre-crisis trend levels of output or even their pre-crisis rates of economic growth,” Wolf warns.
This is a warning you won’t hear from your local politician. Nor is Wolf’s call to move the world economy closer to its potential by making “an attempt to get a bigger recovery now” receiving serious consideration anywhere, even though the alternative of keeping fiscal policy tight and monetary policy loose clearly is not doing the trick. Some central banks have made use of monetary policies that are quite radical, at least by conventional standards, but in no wealthy country is the government using its spending powers as aggressively as Wolf would like to see. On the contrary, the ruling orthodoxy everywhere has called for fiscal rectitude, and governments are striving to bring their budget deficits under control. This, Wolf argues, is likely to bring about “an enduring slump in high-income countries.”

Why America Takes It

Wolf’s argument is controversial, but it is rigorous and coherent, and it laments a kind of fatalism among policymakers. In The Age of Acquiescence: The Life and Death of American Resistance to Organized Wealth and Power, Steve Fraser, a historian who specializes in Wall Street and the labor movement, likewise finds the political response to rapidly changing economic conditions lacking. The Age of Acquiescence is a comparative history of the U.S. in the 1890s and the 2010s, two periods marked by falling worker incomes and rising income disparities. Back in the Gilded Age, the expansion of corporate power brought a popular reaction that led to the reforms of the Progressive Era, such as the income tax and antitrust laws, and a suspicion of big business that endured long enough to enable Franklin Delano Roosevelt to push through Social Security, the National Labor Relations Act, and a host of other measures intended to aid workers. Fraser aims to explore why, in the 21st century, the U.S. political system has offered negligible resistance to rising corporate power.
This could have been an important book, for the question Fraser asks is a substantial one. But The Age of Acquiescence is not up to the standards of Fraser’s previous work, which includes a biography of labor leader Sidney Hillman and a history of Wall Street. It contains no primary research, and the author’s secondary sources are heavily slanted toward historians who are sympathetic to his thesis. He shows comparatively little familiarity with recent economic research, either that on the Gilded Age — about which many economic historians have written — or that on recent decades. And many of his arguments are excessively polemical. He argues, for example, that the 1981–83 recession was “perpetrated” by Paul Volcker, as if the former Federal Reserve Board chairman deliberately ignored options that might have extirpated double-digit inflation painlessly.
Whereas Wolf expands the lens to take in a global perspective, Fraser is curiously myopic. He writes about the United States as if the rest of the world does not exist. His discussion of the weakness of the labor movement offers an example. Yes, U.S. unions are in steep decline. But the share of the workforce represented by unions has declined in almost all high-income countries, except those in Scandinavia, which suggests that organized labor’s fall is not just a matter of corporate pressure and weak U.S. government enforcement of labor laws, as Fraser would have us believe. It may well be that workers in the service and information industries, where much employment is now concentrated, don’t see a solution to their workplace problems in a union contract that sets staffing levels and protects less able colleagues from dismissal.
Fraser displays a longing for the good old days and a great deal of condescension toward the members of the U.S. working class who are his ostensible heroes. Fraser clearly thinks millions of working-class voters chose Ronald Reagan only because the Democrats ignored them: “Legions of working people…had been abandoned not only by the government but by the political machinery their forebears had created to help them cope.” He cannot admit the possibility that such individuals knowingly chose Reagan because they perceived that the New Deal order — the subject of another Fraser book — had grown sclerotic and rigid. Yet the questions Fraser raises — and his reminder of how the nation answered many of them a century ago — justifies our attention.

Better Measures of Economic Health

Dirk Philipsen’s The Little Big Number: How GDP Came to Rule the World and What to Do about It deals with another aspect of how the practice of economics meets politics: what to do about climate change. Philipsen, a fellow in ethics at Duke University, purports to be writing a history of national income accounting. The “big number” of his somewhat unfortunate title is gross domestic product, or GDP. The first half of the book offers a thorough explanation of how the statistical concepts behind GDP were developed, mainly in the 1930s and 1940s. But after pointing out many of the conceptual problems with GDP, he climbs on a high horse. “However useful its data may have been in capturing volume of output, GDP needs to be exposed as a measure that, in the twenty-first century, is both primitive and dangerous,” he proclaims. “GDP as primary guide to economic and social success is bankrupt.”
The limitations of GDP are obvious and have been known for many years. Unpaid housework is not counted in national income. Vehicle repairs following a car wreck make GDP bigger, but, unless they result in loss of work, the pain and suffering of the driver do not make GDP smaller. Each quarter’s GDP growth estimates are hugely affected by statisticians’ choices about how to adjust for blizzards, how to calculate the useful life of machinery, and whether to treat the cost of running a laboratory as an investment or a current expense. Simon Kuznets, the economist who developed many of the statistical series underlying GDP, frequently spoke of the concept’s limitations. The World Bank affirmed in 1982 that income statistics do “not measure items that are important to welfare in most societies,” and urged that they be used in conjunction with data on life expectancy, infant mortality, and literacy.
For Philipsen, the biggest shortcoming of GDP is the impact that this measure — or the pursuit of it — has on the environment and the climate. The quest for ever-higher GDP, in his view, rewards activities that are not sustainable (drilling for oil) and discourages activities that are sustainable (walking to work). “Today’s collective challenge is how to make intelligent and equitable use of what we have,” he writes. “Broadly speaking, the new objective needs to be quality, not quantity.”
It’s hard to quibble with such a desire. But improving the way we measure a nation’s economic health is harder than Philipsen suggests. The ways to extend or supplement our current GDP measure are almost unlimited. What they have in common is that they require weighting variables whose importance is highly subjective and quite individual.
For example, economist Richard Easterlin has observed, on the basis of extensive survey data, that “most people could increase their happiness by devoting less time to making money, and more to nonpecuniary goals such as family life and health.” Should we adjust GDP downward to account for the loss of happiness entailed in producing it? George Gilder, the popularizer of supply-side economics in Ronald Reagan’s day, pointed out that divorces “tend to expand the national income by increasing the use of housing, fast foods, day-care centers, and domestic help.” Should we adjust GDP for changes in the divorce rate? More recently, statistical services in a number of countries have tried to figure out how GDP might reflect the loss of species and the use of nonrenewable resources. This turns out to be all but impossible to do in any rigorous way: Given that planet Earth contains a very large amount of iron, it is not obvious that mining a ton of iron today affects the amount available tomorrow and, if it does, it is not clear how that effect should be quantified.
Each of these books aims to jolt readers out of complacency about economic growth, albeit for different reasons: that there is too little (as Wolf argues), that it is shared too unequally (as Fraser laments), or that it is too reckless (as Philipsen charges). Each is pessimistic about the ability of the political system to address the problems it highlights. But it may well be the case that the authors’ expectations are unrealistic. It may not be feasible to achieve the faster economic growth Martin Wolf would like to see. A variety of factors, including globalization and technological change, may have made it impossible for government to divide income gains as equally as Steven Fraser might like without driving capital away. Progress in addressing the causes of climate change is more likely to come in dribs and drabs than with the sort of sweeping reforms Dirk Philipsen thinks appropriate. The world of the 21st century is the only one we have, and it is futile to wish for another.

Author Profile:

·         Marc Levinson is the author of several books, including The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (Princeton University Press, 2006). He is working on a history of the 1970s.

Best Business Books 2015: Strategy

Best Business Books

The Search for Innovation

by Ken Favaro
A version of this article appeared in the Winter 2015 issue ofstrategy+business.
Cass R. Sunstein and Reid Hastie
Wiser: Getting beyond Groupthink to Make Groups Smarter(Harvard Business Review Press, 2015)
Brian Grazer and Charles Fishman
A Curious Mind: The Secret to a Bigger Life (Simon & Schuster, 2015)
About three-quarters of the way through his new book, A Curious Mind: The Secret to a Bigger Life (written with Charles Fishman), Brian Grazer hits the nail on the head. “This isn’t a science,” he says of the business of producing movies. “This is a creative business.” That pretty much describes any business, whether it’s making widgets or producing Apollo 13. Every business is the result of an original, creative innovation, and every business must innovate to sustain its hard-won success.
In survey after survey, business leaders say they want their companies to be more innovative. But companies aren’t innovative. People are. And this year’s best business books on strategy highlight two different approaches to developing the human capacity for innovation. In one, a Hollywood producer describes how curiosity made all the difference to his own life and career — and suggests that only curious leaders can build consistently innovative companies. In the other, two professors, Cass R. Sunstein and Reid Hastie, offer a more dispassionate approach informed by social science. A company’s ability to innovate, they argue in Wiser: Getting beyond Groupthink to Make Groups Smarter, boils down to how well its leaders work together in a group setting. Both are compelling, and A Curious Mind is a real joy to read. But Wiser may be the more important book because so much of scaling and sustaining a company’s success depends on its leaders working well together. For this reason, it is my pick as the best business book of the year on strategy.

Wise Groups

Wiser is a fine representative of the ever-expanding literature of behavioral economics. The authors mine personal experience, history, and social science for illuminating insights on how to do things better in groups. Wiser starts from the premise that groups of all sizes face significant structural barriers. (The first section of the book is titled “How Groups Fail.”) Why? Because when humans get together, they fall prey to “groupthink.” They censor themselves and one another, defer too much to the opinions of leaders, and tend to adopt the view of the group’s most extreme members. What’s more, they are ill-equipped to absorb and make use of new information.
These patterns are highly inimical and toxic to innovation. After all, great innovation generally requires inspiration from unexpected places. Henry Ford’s idea for the moving assembly line came from observing how slaughterhouses work. The idea for PageRank — Larry Page’s game-changing idea for the Google search engine — stemmed from an unrelated project he happened to be working on called the Stanford Digital Libraries Project. Neither of these ideas came from their originators’ immediately relevant expertise. In fact, relying on what you already know can hinder creative thinking. That’s why it took a car mechanic from Argentina — rather than doctors, hospitals, or medical device companies — to invent the Odon Device, which uses a plastic sleeve instead of forceps or suction cups to help with difficult births. “Conventional wisdom is the source of many problems and is ill-suited to solving them,” as Albert Einstein put it.
Sunstein and Hastie don’t simply lay out the barriers to effective groups. They also prescribe effective means of overcoming them. As confirmed rationalists — Sunstein is a law professor at Yale University and a former regulatory official in the Obama administration, and Hastie is a psychologist at the University of Chicago’s Booth School of Business — they are confident that we can iron out some of the flaws in human nature. A successful strategy and making the right decisions, they argue, involve understanding what pushes us toward ineffective thinking, and then using their prescriptions to prevent us from undermining group effectiveness. And that requires excellent group leadership. Because innovation in a group relies on the ability to make new connections among the diverse experiences of its members, leaders must create a climate in which individuals can free-associate and use both their total life experience and that of their fellow group members. The group’s leaders should set the tone by being inquisitive and self-silencing to let other information rise. They should continually prime critical thinking and reward group success. They should also force colleagues to change their perspective by setting up role-playing or by assigning people to be devil’s advocates during discussions. Conscious leadership can institutionalize effective ways of producing, evaluating, sifting, and aggregating information that can lay the groundwork for innovation.
The authors helpfully point out that leaders also have to understand that group decision making falls into two distinct steps, which require different approaches. In the first step — identifying solutions — divergence is necessary. The group has to be encouraged to explore boundaries, search broadly, and expand its thinking in order to find the best options for the problem at hand. But the second step, in which the group selects solutions, requiresconvergence, a meeting of the minds and a consensus on how to proceed.Wiser also includes a good section on how to harness experts. The authors advise leaders to get a statistical answer from a large group of experts rather than one answer from just a few, to use prizes and tournaments to elicit new ideas, and to avoid chasing the advice of pundits temporarily identified as champions.
Wiser is particularly useful because so many of the techniques the authors recommend for effective group decision making also apply to the process for group innovation. Generally speaking, innovations follow a similar path: problem → idea → strategy. More than a century ago, Henry Ford was obsessing over a problem — how to democratize the car rather than make a better car for the wealthy few who could afford it in the early 1900s (which was the primary focus of other auto companies operating at the time). As noted above, he hit upon the idea of a moving assembly line from slaughterhouse observation. Ford connected that idea to a number of others that could help solve his problem, in large measure by gathering information from inside and outside the confines of his factory. For example, he implemented a concept that had been used by a French painting company decades before: profit sharing with frontline workers. He set up a dealer network much like Isaac Singer’s sewing machine company had done nearly a half century earlier. Ford’s strategy of making one standard product (the Model T) in one color (black, because he knew black paint dried faster than paint of other colors) was designed to make the assembly line operate as fast as possible, thus reducing the cost of manufacturing of each car. Henry Ford started with a problem, made new connections that led to a novel solution, and then wrapped a successful strategy around his big idea, the moving assembly line.
So when groups come together to innovate, they should start with a shared view of the problem they are trying to solve. Their goal should be to generate novel solutions (ideas) by making new connections from the input they have to work with. The group can then move to building a strategy for taking the ideas to the market. Wiser offers a host of useful and timely tips on making this process go more smoothly.

Houston, We Have Innovation

At first blush, A Curious Mind would seem to be the polar opposite of Wiser. It’s a punchy memoir written by a prolific Hollywood producer. Together with Ron Howard, Brian Grazer, known for his distinctive spiked hairdo, has produced a host of quality blockbusters: Splash, A Beautiful Mind, Friday Night Lights, Backdraft, and many more. But although the voice and format ofA Curious Mind differ significantly from those of Wiser, Grazer and co-writer Charles Fishman attack the same big issue that Sunstein and Hastie do: How do you get the innovation and creativity you need to be consistently successful?
Grazer’s answer boils down to his life experience, and to a single word: curiosity. Psychologists, Grazer tells us, define curiosity as “wanting to know.” And to Grazer, the state of wanting to know is a path to personal and business success. It’s how you can jump-start your career, develop new products, and compete effectively in cutthroat industries. Eschewing research and academic studies, Grazer has spent most of his adult life in a period of constant learning, through a series of what he calls “curiosity conversations.” At the end of the book, he includes a 28-page list of the interesting people with whom he has sat down: journalists, scientists, artists, politicians, athletes, businesspeople. They include polio vaccine inventor Jonas Salk, Mexican billionaire Carlos Slim, science fiction writer Isaac Asimov, and criminal trial lawyer F. Lee Bailey. Grazer has consistently sought out a wide range of people over the years, in a range of circumstances, to inform his view of the world.
As Grazer chronicles his climb up the ladder in Hollywood from mailroom clerk to big-time producer, he describes how he has used curiosity as a management tool and as a way of innovating (developing new movies, in his case). Curiosity is the vehicle by which he learns how other people think and develops empathy; it helps him build up a “reservoir of experiences and points of view.” The simple act of asking rapper Eminem to tell Grazer about his life led to the movie 8 Mile.
And yet, as Grazer laments, curiosity isn’t discussed all that much in the corporate context (he notes that the words innovation and creativity appear far more often in the business press than curiosity). In Grazer’s view, successful business leaders have always been curious about how the business is doing and what challenges their managers and workers are facing. Think of all the anecdotes about company CEOs and owners walking the factory floor. Grazer gains similar insights from his own face-to-face meetings.
Tapping into the curiosity of others can also be a good management tool. Rather than telling people what to do (“I need you to call Russell Crowe”), Grazer finds it often makes sense to engage others’ curiosity (“What do you think would happen if you were to call Russell Crowe about this?”). By asking questions, leaders can create a culture of curiosity.
Grazer’s view on how innovation happens is central to A Curious Mind. Late in the book he claims that “it’s not important to know where good ideas come from.” But early on he writes, “I’ve always felt that ideas come from all corners of my brain.” Grazer instinctively latches on to the insight that won neuroscientist Eric Kandel the Nobel Prize in Medicine in 2000. Kandel proved that the human mind uses both analysis and intuition to generate thoughts and that neither side of the brain is better than the other in either process. That is, there is no such thing as the analytical left side or creative right side of our brains. Kandel showed that the brain “thinks” through a process called “search and combination,” in which memories or fragments of memories come together to spark a new thought or idea.
What does this have to do with strategic innovation? Well, it turns out that innovation doesn’t mean conjuring up something from the heavens that doesn’t exist today. “Creativity is just connecting things,” Steve Jobs said. “We have always been shameless about stealing great ideas.” Lasting businesses are forged when people creatively combine elements of what already exists in something novel — as Ford did with the slaughterhouse, black paint, a French painting company’s frontline profit sharing, and the Singer franchise network. As Ford himself said, “I invented nothing new. I simply assembled the discoveries of others.” Great innovators instinctively understand that this is how innovation really happens. “Immature poets imitate; mature poets steal,” as T.S. Eliot put it.
In fact, these quotes accurately describe the job of a successful movie producer. Grazer knows that curiosity expands your available array of elements of what already exists, which provides a spur to imagination. As he writes: “The more I know about the world — the more I understand about how the world works, the more people I know, the more perspectives I have — the more likely it is that I’ll have a good idea.”
Like Sunstein and Hastie, Grazer forcefully argues that leaders must train themselves and their colleagues to access, absorb, and analyze new and even strange information. The goal of his curiosity conversations, Grazer writes, is simply “to learn something” from people who work outside his own world of movies and television. This thirst for learning is shared by most innovative leaders. When Bill Gates was being interviewed on 60 Minutes, the interviewer noticed Gates had brought an enormous duffel bag onto the set. It was filled with books on a wide range of topics that had nothing to do with computers and software. Steve Jobs liked to wander through stores like Macy’s and Radio Shack, just to see what was in them. Napoleon was the most successful military strategist of his time because he was insatiably curious about why and how previous battles had been won and lost.
This pattern is more than a coincidence. Kandel showed that memory is stored in modular form on our brains’ “memory shelves,” which expand with the new experiences and knowledge that life brings. Leaders who have some routine for building and diversifying their memory shelves will have the most feedstock for making the creative combinations every innovation comprises.
The routine could be anything. It could be the institutionalized group processes that Sunstein and Hastie prescribe. It could be wandering through a variety of stores or reading books on a wide range of topics. For Grazer, who grew up with a reading disability, it is curiosity conversations — talking to people from any walk of life. The important thing is to have a routine that works best for you. 

Author Profile:


·         Ken Favaro is a contributing editor of strategy+business and the lead principal of ACT2, which provides independent advice to business leaders, teams, and boards, on growth, strategy, innovation, and organization.
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