In the business world, there’s a cliche that executives only look at their careers in 90 day increments since the pressure to deliver impressive earnings in the stock market is ever present. While some pressure can be helpful, this short term perspective can drive companies into unfortunate decisions such as failing to take an interest in values and succession planning. Reading “Built To Last” Successful Habits of Visionary Companies” by Jim Collins and Jerry I. Porras is an excellent corrective to the short term philosophy that is popular in much of the business world. By citing carefully researched case studies from companies such as Proctor & Gamble, Merck and Walt Disney, the book shares several key lessons on how to build an organization that lasts for decades if not centuries.

Past readings of Jim Collins will know that he prides himself on his robust, social science approach to business research. Just like “Good To Great” and “Great By Choice,” Collins focuses on publicly traded companies though he argues that these lessons apply in other contexts as well. The claim that principles from the business world can be applied elsewhere is not unique to Collins (e.g. this Wall Street Journal article Family Inc suggesting the merits of a weekly family status meeting). However, Collins has made efforts to explore how his ideas can apply in other contexts in the book, Good to Great and the Social Sectors.

The pursuit of grand goals – Big Hairy Audacious Goals (BHAGs) – is one of the most inspiring aspects of the book and a way to bring people together. As a mechanism to stimulate progress, BHAGs are quite appealing, especially when it is a concrete goal. For example, Boeing committed to build the 727, the first in a long series of successful commercial jets. Developing a prototype aircraft required “roughly a quarter of [Boeing's] corporate net worth.” Committing to such a daring project is hard to imagine now – few companies in the 21st century appear interested in taking such risks. Yet, that sense of daring and committment to nearly impossible goals is quality that “Built To Last” associates with visionary, long lasting companies.

Beyond earnings and goals, what is it actually like to work at the visionary companies described in “Built To Last”? Such companies take their people very seriously and tend to invest heavily in home grown management skills and build “cult-like cultures.” At first, the “cult-like cultures” point struck me as extreme. However, “Built to Last” argues that a belief in a company’s elite status is a key reason that IBM grew from a small seller of business machines in the 1920s to one of the world’s most successful companies. The belief in IBM’s self-concept predated the company’s success by decades – that belief helped the company keep going through its tough years. Companies profiled in the book also put their money into culture building: “In 1887, P&G introduced a profit-sharing plan for workers, making it the oldest profit-sharing plan in continuous operation in American industry.” Why build culture? Collins and Porras argue that such culture building activities are an essential way to “preserve the core” of a company over time.

The greatest lessons I’ll take from “Built To Last” is the long term perspective. It’s possible to build organizations that thrive long after the founder is gone. In a time when many people focus on selling companies fast to maximize profits, let’s remember that’s not the only way to run a business. You can build a firm that actually stands for principles like technical innovation (HP), outstanding customer service (Nordstrom) or advancing health (Merck).

We make decisions every day but how often do we reflect on the quality of our decision making? Are we following a robust process or simply acting on the first appealing option that comes along? These questions are some of the points covered in DECISIVE: How To Make Better Choices in Life and Work” by Chip Heath & Dan Heath. The Heath brothers have a highly readable style that weaves together stories and principles. At times, the book reads like a business school case study and I mean that in the best possible way. While I very much enjoyed the book, there were times when it felt almost too readable to qualify as a business book.

The Decisive model has four components which the Dan and Chip summarize with the acronym WRAP. W (Widen Your Options), R (Reality-Test Your Assumptions), A (Attain Distance Before Deciding) and P (Prepare To Be Wrong). While the Decisive model has a less than elegant name, it guides people through some of the standard weaknesses that tend to undermine decisions. The Widen Your Options section makes an excellent point about the value of adding options, especially in cases where a person or group is considering a binary decision (“Should I Do X or Not?”).

In my opening comment, I observed that the book is highly readable. It’s more than a question of style though. Chip and Dan use stories – from social science, from companies like Intel and other environments – throughout. There’s not a single financial statement or equation that in the book. Beyond that, each chapter ends with a “Chapter in One Page” summary that reviews the key principles of the book (e.g. “How do we escape a narrow frame? Think about opportunity cost.”). The book encourages action and the Decisive website includes workbooks, summaries and more.

A few specific tips from the book struck me as particularly helpful. One of the best ways to attain distance before making decision is to imagine you are advising your best friend in the same situation. DECISIVE also makes a great observation on how to make effective use of experts: ask for base rates rather than predictions. For example, instead of asking a lawyer for a prediction on how a given lawsuit will turn out, ask for an average (e.g. “What percentage of cases get settled before trial?”). Data is important but it is not the only consideration – the book also has advice for managing emotions in decisions: the 10/10/10 principle. This principle ensures that you consider your feelings 10 minutes, 10 months or 10 years from now – those future feelings should count just as much as current feelings (the Heath brothers illustrate this tip by suggesting an individual struggling with whether or not to say “I love you”: 10/10/10 suggests there’s not much downside here and much to be gained).

For the curious reader, DECISIVE is only the most recent entry to a growing list of books that explores thinking, psychology and decisions. Two other books in this growing sub-genre that are well worth a read are “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard H. Thaler and Prof. Cass R. Sunstein (makes good points about the merits of setting “default” choices) and “Thinking, Fast and Slow” by Daniel Kahneman (which covers several aspects of psychology and thinking).

For those interested in what exactly investment bankers do, “Monkey Business” provides a highly readable insider’s account of the industry around 2000. As I read the book, I kept making comparisons to Michael Lewis’s account of Wall Street in the 1980s, “Liar’s Poker.” Book books take the reader inside Wall Street by exploring a specific firm. Interestingly, neither firm of the firms described in these accounts exist today. I found “Monkey Business” to be a highly readable introduction to investment banking, albeit from the pre-financial crisis era.

In reading any biography or autobiography, I’m always fascinated by the question: “How did they get started?” In the case of “Monkey Business,” the story is straightforward – attend a top ranked business school (e.g. Harvard or Wharton) and the investment banks come to campus for recruitment. Even as math and other technical skills continue to rise in importance, investment banking continues to be a personal business and that shines through in the recruitment process, Troob and Rolfe are blunt in describing the strengths and, at times, rather embarrassing character flaws of the bankers who recruited them to Donaldson, Lufkin & Jenrette (DLJ). From what I have read and heard of recruiting elsewhere, campus recruiting remains the most popular way to enter the industry – it’s a high pressure series of interviews where there is fierce competition. That should come as no surprise as bankers are indeed well paid. In February 2013, the New York Times reported that “All told, the average pay package for securities industry employees in New York was $362,900 in 2011″

The day to day work environment at DLJ strikes the reader as a combination of interesting work, long demanding assignments and other assignments. The authors make occasional reference to consulting friends at other friends – such as when they benchmark their compensation – but the book is largely a report of their experience at one firm. I found it interesting to read about the interaction between the different levels of the organization: analysts, associates and firm leadership. Rolfe and Troob also point out that investment banking can be like the army: lots of waiting for action (e.g. at the printing office) between bouts of intense action. Not all work happens at the office – travel is a key part of the “Monkey Business” investment banking business.

When many people think of travel, thoughts of rest and relaxation come to mind. Business travel for bankers is far from that – not only do bankers cope with the pressures of travel itself but there is an expectation that one will keep up with the office back home. As analysts, travel also meant a great deal of logistical work arranging hotels, travel, cars and meetings. Learning how to deliver under such pressure is surely demanding but I expect it is a great way to build one’s discipline.

“Monkey Business” ends with the authors leaving their firm for other opportunities. In different ways, both Troob and Rolfe became disenchanted with various aspects of DLJ. Their decisions were at once personal – a desire to leave the firm for other opportunities and a sense that they did not fit in that world. The book is at once a cautionary tale, a highly entertaining autobiography and a light introduction to the investment banking business.

Income inequality is nothing new but PLUTOCRATS explains how the 21st century rich are impacting society and what their rise tells us about the global economy. As a business journalist who previously penned a book on the rise of Russia’s oligarchs, Chrystia Freeland has been observing these changes for a long time. Don’t let the cover of the book fool you – the book is not simply “lifestyles of the rich and famous.” Freeland uses the rise of the plutocrats as a lens to examine a variety of social and economic developments. If economic trends interest you, I highly recommend the book.

Why has our era seen a rise of plutocrats, an ever increasing number of millionaires and billionaires? The answer varies depending on the person and their social context: Russian and Chinese plutocrats often come into their fortunes through state connections rather than the popular American model of launching businesses that sell popular products (e.g. Microsoft, Apple etc). In Freeland’s view, one of the key traits of the very wealthy is their ability to recognize trends and revolutions and respond to them. For example, the fire sale of state assets in 1990s Russia represented a once in a lifetime opportunity to purchase natural resources, factories and companies. Russians who left for the West missed out on the party, a fact that was difficult to appreciate at the time. Respond to the technology and globalization revolutions successfully requires a certain combination of luck and skill.

For readers with a limited background in economics, Freeland’s discussion of rent seeking will be particularly compelling. As Freeland puts it, “in an age of super-wealth, we need to be constantly alert to efforts by the elite to get rich by using their political muscle to increase their share of the preexisting pie, rather than by adding value to the economy and thus increasing the size of the pie overall.” There’s a fundamental difference between the 19th century American “robber barons” whose efforts resulted in railways – a clear improvement for all of society – and those that simply extract wealth. Most of Freeland’s discussion of rent-seeking focuses on Russia, China and India. For example, close ties to the government are all but essential in China. “China’s rent-seekers prospered through privileged access to the two essential economic goods the state does control” land and capital… More than 90% of loans in the country are still made by state-controlled banks.” Without a very close relationship to the state, business success is all but impossible.

Freeland’s ends her book with a compelling conclusion inspired by the economic downfall of Venice. At one time, Venice prospered from trade and innovative economic structures (i.e. shared ownership of long distance trading voyages). However, “we think of social mobility as entirely good thing, but if you are already on top, mobility can also mean competition from outside entrepreneurs.” In the case of Venice, the state changed the rules of the game to favor the establishment and, in the process, killed the goose that laid the golden egg. The question for our time is whether our plutocrats will be successful in changing the rules of the game to suit their self interest or whether the rest of society will advocate for laws and other structures that foster ongoing growth rather than crystallizing the establishment.

Churchill’s leadership during World War Two made him one of the most remarkable leaders of the twentieth century. Recognition of Churchill’s contributions have also been much promoted by Martin Gilbert’s numerous books on Churchill, the Churchill Society and Churchill’s winning of the Nobel Prize for Literature, a rare honour for a statesman. Apart from a few hints here and there, most popular portraits of Churchill focus exclusively on his war leadership. That focus is natural but there is so much more to Churchill’s story; his military career, his considerable literary output and his inspiring speaking abilities. As I had the pleasure of hearing Martin Gilbert speak several years ago, I decided to brush up on my Churchill with his book, “Churchill: A Life.”

Churchill’s father was a politician by training but that was not Winston’s first profession. Churchill beghan in career was in the Army where he served in a variety of outposts in the British Empire including South Africa and India. Even at an early age, Churchill demonstrated great persistence, a quality that would serve him well throughout his career.  It took him several attempts to win admission to Sandhurst, the leading British military academy but he was eventually successful in his studies. After completing a few tours of duty, Churchill went on a wildly successful speaking tour and began his long career as an author and journalist. Reading about Churchill’s efforts to build his public profile reminded me of Michael Hyatt’s book PLATFORM. Even as a young man, Churchill thought about following his father’s footsteps into politics. With that goal in mind, he made the most of his experience to comment on British military and diplomatic policy.

Churchill’s contributions to politics and leadership outside of the World Wars are discussed in considerable detail in the book. One of the most enduring concepts he advanced was the notion of a minimum income, a cause which has been taken up in Canada by Senator Hugh Segal. Churchills political views were complex and different to classify according to modern categories. On some issues, he was certainly a Conservative in every sense of the word but he sometimes found himself at odds with others in the party. Churchill also understood the value of building and maintaining relationships with those who held different views – in the early 20th century, he founded the “Other Club” where MPs of different parties could meet without public comment. By the 1940s and 1950s, he was an advocate of diplomacy with the Soviet Union. Churchill always looked for ways to engage with his opponents.

World War Two may be considered the apex of his political career but one needs to remember he was already in his sixties by the time he became Prime Minister. Gilbert paints a vivid picture of Churchill’s life during the war – constant travel, regular communication with Roosevelt and Stalin and so on. At times, the book provides so much detail that one gets lost in it. I suppose Gilbert found it a challenge to condense his considerable scholarship on Churchill – he has written over a dozen books on the man. That said, reading the details, mode of transport and conditions of every single international trip can be overwhelming. In this great detail, Gilbert reveals plenty of interesting details such as Churchill’s efforts to establish a democratic Poland and subject Russian influence in Europe to certain limits. Unfortunately, many of these strategic efforts were frustrated by Stalin in some cases and disagreements with the Americans in other cases.

In sum, I would recommend the book for someone with an interest in Churchill’s contribution to British life. There is much to be learned from Churchill’s flexibility, his incredible energy in many different projects and his reasoned attitude to his foes. If you have an interest in the defining conflicts of the twentieth century, it would be hard to do better by reading about a man who lived through, led and wrote about those epoch defining times.

I first heard of Steven Pressfield through Seth Godin who periodically mentions Pressfield’s book The War of Art. In looking through Pressfield’s work, I decided on The Profession. The back blurb of the novel was excellent:

The year is 2032. The third Iran-Iraq war is over; the 11/11 dirty-bomb attack on the port of Long Beach, California is receding into memory; Saudi Arabia has recently quelled a coup; Russians and Turks are clashing in the Caspian Basin. Everywhere military force is for hire. Oil companies, multinational corporations and banks employ powerful, cutting-edge mercenary armies to control global chaos and protect their riches.

Energy and energy politics has been an interest of mine since I read “The Quest: Energy, Security, and the Remaking of the Modern World” by Daniel Yergin. Unlike some other near future authors, Pressfield assumes that oil will continue to be of vital importance in the twenty first century. The fight for oil wealth ultimately founds the backdrop for the stories of mercenaries who start out defending the security interests of their clients only to seize power for themselves.

As a long time science fiction aficionado, I found Pressfield’s speculation on the near future interesting. Pressfield’s future combines highly advanced communications on the one hand and legacy technologies on the other hand. The long legacy of the Cold War, Gulf War and Iraq War are still felt in the novel in the form of old Soviet aircraft, aging firearms and other equipment. The Profession also contains interesting speculations on the future of blogs, media companies and the news media. By mixing the past and speculations on the future, Pressfield creates a believable and unsettling world.

The military and the profession of arms are the starring concepts of The Profession and several of Pressfield’s other novels. The novel paints a complex picture of the military; a community defined by its own language, training and traditions. Pressfield also does well in getting inside the mind of a mercenary. In both the novel and our world, few people start their careers as mercenaries – most start in traditional armed forces and later transition to mercenaries for one reason or another. The prospect of a highly successful and capable figure like the novel’s General Salter becoming a mercenary is disquieting. After reading the novel, one thinks about civilian oversight and control of the armed forces in a different light.

The future of the American republic is the final theme I will consider. The novel has a pessimistic perspective on the question. General Salter serves as the novel’s Julius Caesar whose actions change the republic beyond all recognition. In suggesting martial law and suspension of constitutional government, the novel reaffirms that old expression, “Eternal vigilance is the price of liberty.” Democracy does not preserve itself – it needs constant reinforcement and support to thrive.

For my next book, I will be returning to the world of biography. I will be reading “Churchill: A Biography” by Martin Gilbert. I have been looking forward to reading the book for some time. The book is over nine hundred pages in length so it may take some time before I complete it.

Peter Drucker is one of the most widely read and followed management thinkers. In light of his impact on the business world, I thought it was time to read one of his books. I choose, “The Effective Executive” based on the recommendation of Mark Horstman at Manager Tools who argues that professionals ought to,  “Read this book once a year.” It’s a short book but well worth reading, especially for knowledge workers in large organizations. Even though the book was written in 1967, the core lessons of the book continue to resonate. One world on terminology – Drucker uses the word “executive” to mean knowledge worker or professional, not only those with executive job titles (e.g. Vice-President, CFO, CEO etc) or executive responsibilities. In this review, I will explore Drucker’s comments on time management, contribution and decision making.

There’s an old saying that what gets measured gets managed. The second chapter of the book has the simple title “Know Thy Time.” Drucker bluntly argues that time-wasting activities and bureaucratic activity are all but impossible to escape in organizations. Simply tracking how time is used can yield significant benefits. To go a level deeper, Drucker recommends, “The first task here is to identify time-wasters which follow from lack of system or foresight… A crisis that recurs a second time is a crisis that must not occur again.” After all, solving a crisis situation is usually stressful and is rarely the most productive way to work. The book has much more to say on time management but time tracking and crisis prevention are two critical insights that I found particularly valuable.

Contribution – what can I contribute to the organization? – is a theme that Drucker explores in a thoughtful way. As he puts early in the chapter, “… the man who focuses on contribution and who takes responsibility for results, no matter how junior, is in the most literal sense of the phrase, ‘top management.’” The most important actionable recommendation in this section is directly at knowledge workers who are invariably experts in a specific domain of knowledge. The effective knowledge worker must know their domain but also make the effort to connect to the broader organization. Drucker illustrates the principle using an accountant example:

“If cost accountants, for example, asked these questions, they would soon find out which of their assumptions – obvious to them – are totally unfamiliar to the managers who are to use the figures. They would soon find out which of the figures that to them are important are irrelevant to the operating people and which figures, barely seen by them and rarely reported, are the ones the operating people really need every day.”

Knowing one’s profession is necessary but not sufficient to be effective in Drucker’s view.

The final chapters of the book explore decision making, an important aspect of leadership. Reading this section reminded me of President Obama’s comments on decision-making in a 2012 article in Vanity Fair:

Nothing comes to my desk that is perfectly solvable,” Obama said at one point. “Otherwise, someone else would have solved it. So you wind up dealing with probabilities. Any given decision you make you’ll wind up with a 30 to 40 percent chance that it isn’t going to work. You have to own that and feel comfortable with the way you made the decision. You can’t be paralyzed by the fact that it might not work out.

The thought of operating in such a probabilistic environment may be daunting to those accustomed to simpler decisions but it is not impossible. Drucker’s decision making advice can make a great deal of difference. For example, Drucker recommends looking for the generic rather than the symptomatic in decision making. If one can address fundamental problems with decisions, the impact of each decision will be much greater and the effective executive will have far fewer fires to put out. Drucker also points out that threats can worsen and opportunities decay when no decision is made – it is important to recall that circumstances can continue to change even while one works through the decision making process. Drucker’s decision making process deserves further exploration than I can provide here but it is certainly valuable.

This is the second book I finished in 2013 as part of my goal to read 25 books by the end of the year. Since I have a tendency to focus on non-fiction reading, my next book will be a novel: “The Profession” by Steven Pressfield.

I finished reading “Benjamin Franklin: An American Life” by Walter Issacson today – it was an engaging read that informs the reader on Franklin’s life and times. My first encounter with Franklin was reading his Autobiography a few years ago and I’ve been meaning to learn more about the Founding Fathers and their struggles. In the fall of 2012, Tim Ferris recommended Benjamin Franklin: An American Life in a webcast. I should note that Franklin’s personal and family life is far from admirable but I don’t think that should cause a reader to ignore his other achievements. To my delight, I received the book for Christmas (thanks Mary!) and much enjoyed reading it over the holidays.

Unlike some of the other Founding Fathers, Franklin was a keen businessman. Despite his identification as a middle class shop keeper, Franklin actually built up a substantial publishing empire with affiliates and relationships across the colonies. Issacson describes in vivid detail how Franklin learned the technology of printing and the challenges of the trade. While Franklin was more than happy to challenge the establishment in print, he understood that radical publishing alone could not sustain his business. Franklin was enthusiastic in seeking printing business from the government and printing popular texts with a strong demand. In his 40s, Franklin decides to retire from business (though he establishes a partnership agreement that effectively yielded him a +$100,000 income for close to 20 years) and pursue public life.

In reading Franklin’s Autobiography and Issacson’s biography, I was struck by Franklin’s varied civic interests. As a young man, he establishes a reading and debating club called the Junto:

I should have mentioned before, that, in the autumn of the preceding year, [1727] I had form’d most of my ingenious acquaintance into a club of mutual improvement, which we called the Junto; we met on Friday evenings. The rules that I drew up required that every member, in his turn, should produce one or more queries on any point of Morals, Politics, or Natural Philosophy, to be discuss’d by the company; and once in three months produce and read an essay of his own writing, on any subject he pleased.

Our debates were to be under the direction of a president, and to be conducted in the sincere spirit of inquiry after truth, without fondness for dispute or desire of victory; and to prevent warmth, all expressions of positiveness in opinions, or direct contradiction, were after some time made contraband, and prohibited under small pecuniary penalties.

Throughout his life, Franklin was a keen founder of civic organizations. Whether it was scientific inquiry -  it is easy to forget that Franklin’s reputation as one of the foremost scientists and inventors of his time – , organizing a militia or promoting education, Franklin was happy to get involved. Issacson points out that Franklin loved to craft details, create rules and generally leave nothing to chance in his schemes. Franklin’s success in civic organizing stands in stark contrast to Robert Putnam‘s thesis in Bowling Alone that found 21st century civic engagement is declining. Franklin’s organizational genius in establishing public organizations inspires me to renew my engagement in volunteering.

The final section of the Issacson’s book considers how Franklin’s image has changed and evolved over American history. His reputation in the 19th century suffered significantly as the Romantics were not impressed by Franklin’s pragmatic views, toleration and middle class views. My own view is that Franklin speaks to people in different ways. His rise to diplomatic and business success through hard work, connections and some measure of luck is sure to inspire. His measured approach in diplomacy and politics – he favored stories that gently made his points rather than harsh personal attacks – is something badly needed today.

Note: this is the first of 25 book reviews I plan to publish on this blog in 2013. I am declaring my 2013 goal to read (and post reviews) of 25 books in 2013 by December 31.