“Jeez, don’t they realize that in this day and age, “personal success is everything”, only a fool would put shareholder value ahead of his own personal gain.”

Obviously a graduate of the Ken Lay/Enron school of management, this blossoming product genius also gave the Apple iPod Nano a 1-star rating.  We’re in pretty good company I guess.  He did, however, give “Speak English Like an American” a 4-star rating, which will likely make this ethics terrorist hard for the TSA profilers to catch.

There’s also no doubting this genius’ power of reading comprehension.  He asks “Did they read the classic “the mythical man month”? Probably not.”  Well, at least not other than the mentions in Chapters 9 and 28 anyway.  But thanks for double checking us pal…

Sorry – we just couldn’t pass up the opportunity to point out exactly why it is necessary to talk about ethics.  If, like us, you feel it’s necessary to rip on those who are morally bankrupt, feel free to comment on his review of our book here.

The Art of Scalability

The Art of Scalability

Don’t get me wrong, I’m not jumping on the “I hate Tim Ferriss” bandwagon simply because he is a seemingly overly self promoting, ego centric, self involved individual (fyi – I can’t stand those types of people).  In fact, I think his book has a number of well disguised great points in it.  I also admit that I suffer from a bit of book envy – his has been on the NY Times bestseller list for over a year and the best our book has done is to reach number 256 on the Amazon best seller list for a couple of hours (you should still buy it by the way – it’s calling you – you “need” it)

The first point that I love is that Cash is King, though Tim really doesn’t call it that.  Good job Tim for restating and obfuscating something taught (but ignored) in finance classes the world over.   Way to repackage an important lesson!  Unfortunately, Tim doesn’t seem to understand that if everyone simply goes for the high paying low work “cash today” jobs our last bastion of supremacy – the high tech startup community – would cease to exist.  Name one company that changed the world in terms of products or software that did so without having to sacrifice cash today for a huge shareholder reward tomorrow.  Sure, there are companies like 37 Signals that do an incredible job at balancing their business and personal lives but 37 Signals isn’t going a Microsoft in the’ 80s, an eBay in the ‘90s, or a Google, Facebook or Salesforce in the ‘00s.    It’s a great idea and it fits the needs of many people.  But if absolutely everyone takes the lower risk, high cash route our innovation and startup engines would crater.

I also love Ferriss’ notion of mini-vacations.  Even in the startup community these can be useful to try to keep employees from burning out and keep companies rejuvenated.  Finally, I like his notion of not allowing other people to control your time.  We absolutely all should be looking for simple solutions to complex problems (the Wikipedia definition of life hack) and looking to simplify our lives and eliminate time drains.

My primary concern with Ferriss’ book is the tone and manner of his approach.  At one point he describes his experience winning a kickboxing championship by finding a loophole in the rules that allow him to simply push an opponent out of the ring and win.  He claims that this action is neither immoral nor unethical.  True, they weren’t against the rules – in fact he studied the rules in order to know how to game the system.  In a game whose spirit it is to test skill, he used the rules against the more skilled player.  By “gaming” (note: not “cheating”) the weight system, he put himself at a comparative advantage.  Great – Tim knows how to screw the spirit of the game by using the rules to his advantage.  While I am a huge believer in cutting through bureaucratic red tape and in testing the rules and eliminating or fixing them when they don’t make sense, I would never suggest breaking the spirit of a relationship or system.  There’s an implied consent to abide by the spirit of engagements (such as tournaments or client relationships) regardless of what the “rules” say.   Breaking that spirit doesn’t make you smarter – it just makes you less honorable.  I’ll make a distinction between honor and ethics here.  Honor is abiding by the spirit of a relationship.  Just ask yourself – would you be comfortable doing business with someone like Ferriss, or would you be worried that he might test the limits and boundaries of your contract given his approach to kickboxing?

My next concern with Ferriss’ approach also has to do with spirit; the spirit and tone of his presentation.  He sounds like he is all about himself.  He comes across as a person who loves himself, believes he is a deific gift to mankind and in general reeks of the same self loving stench as some investment bankers (not all of them mind you – but some of the ones with whom I’ve dealt in the past).   As my partner and I have written time and time again – “Leadership Isn’t About You”.  It’s about the team.  If you preach selfishness, as Ferriss does in his book, you by definition can’t be selfless.  If you aren’t selfless in your leadership, you will sub-optimize your results.  This doesn’t mean you won’t be successful – it just means that you won’t reach the maximum potential.

I absolutely believe we should all look for more “life” in our work life balance.  Work from home, get more done in less time, look to bend the rules or eliminate those that don’t make sense, and understand that cash is king.  We should also hope, however, that there are still some enterprising people out there willing to sacrifice to make huge advances.  So too should we pray that there are leaders who understand that a great team led well can equal more than the sum of its individuals and that these leaders are willing to give selflessly in their role.  Finally, I hold out hope that not everyone will violate the spirit of engagements as Tim would seem to preach.  I believe it is this approach and mindset that is at least partially responsible for the corruption that we see in corporate America, the real estate and dot com bubbles and the failure of the banking industry.  Don’t be a life hack.  Work smarter, play more, get more done – but don’t be a blemish on the face of humanity.

The Art of Scalability

The thing that irked me was that while they technically might have “departed” on time, from a customer’s perspective they didn’t come anywhere close to that. Teams fall prey to this all the time. The first thing an operations team puts in place is something like Nagios to monitor the CPU, memory, and disk of all the servers. As we discuss in our post Monitoring Strategies, the first measurement to put in place should be something to measure from the customer’s perspective and answer the question “Is there a problem?” The most important thing to know is are my customers being impacted and how. The answer to that will determine who gets paged, how you should react, etc. After answering that then you need to figure out “Where is the problem?”, “What is the problem?”, and “Why is there a problem?”.

Failure to heed this and you’re at risk of falling into the airline metrics trap. You’ll be satisfied that you’ve kept all the servers up and running 99.99% of the time but your customers may have only been able to access the site 95% of the time because of software, networking, database contention, etc. The result is unhappy customers despite you meeting all your stated performance metrics.

The Art of Scalability

A BLS news release published in June 2008 looked at the number of jobs that people between the ages of 18 and 42 held. On average, men held 10.7 jobs and women held 10.3 jobs. Both men and women held more jobs on average in their late teens and early twenties than they held in their mid thirties. Holding 11 jobs over 24 years averages to holding each job slightly over 2 years each. If you wait for an annual review to provide feedback the employee is likely half done with their tenure at the company.

We argued in a recent post Lower your standards and build a better team that the standards for hiring should be lowered. The reason is that we are unable to predict future success based on past performance in a different environment (different employer, different culture, etc) and academic prowess isn’t likely to be a good indicator of job performance. A couple hour interview doesn’t net a better result. Said more simply, we should hire more people but make the cuts way faster. This is especially true when employees, great or poor performers, are likely to leave in 2 years.

Give feedback and rewards quickly. Why should salary increases occur only once per year? When someone performs well or takes on additional responsibility, give them positive feedback and reward them. Today’s employment environment calls for fast hires, fast feedback, and fast cuts.

The Art of Scalability

I settled on trying to pass along four things that I wish I had learned in school – before the Army and before becoming a civilian.  These aren’t four things that I wasn’t taught mind you.  I may have been taught some of them, and at any rate the burden for learning should really be placed upon the student – especially in college.  These are four things that I wish I had recognized, retained or learned on my own; four things that would have made my Army and civilian life much easier.  Here they are as I discussed them with elements of the USMA Class of 2010:

1)      Moral and Ethical Challenges Occur Frequently – More So Than You Might Think

It doesn’t matter if you are in the Army and parts for your dead-lined vehicle magically appear overnight or you are reviewing the use of company assets and find that people are using company assets for personal use – potentially in violation of company policy.  Sometimes even people who are on balance “good” make ethical mistakes.  And make no mistake, there are morally bankrupt people committing unethical acts at an incredibly high rate all around us.

Most of us, quite honestly, are ill prepared to address ethical issues upon graduation.  Many schools barely touch the subject.  Even the service academies, with their strict honor code, too often paint topics as black and white rather than the spectrum of blacks, whites and grays that occur in the real world.  As we’ve written in the past, the journey to moral bankruptcy isn’t one giant leap, but a series of small steps.  Draw lines in the sand early in your career so that you know you are heading in the wrong direction as you progress.  Build a support group of people who will tell you the truth and help guide you should you start to go astray.

2)      Smart People and Terrible Teamwork Equals Crap Technology

Intelligence is only one of many independent variables (inputs) resulting in the dependent variable (output) of overall team performance.  Behaviors of individuals within the team are another equally important independent variable.  Leadership and culture are important moderators of this equation.  It is possible to have brilliant jerks, incapable of getting along with anyone, who completely destroy the output of the team.

We should reward people on their accomplishments and their ability to work as a team.  Intelligence is great, but we simply don’t pay people for being smart.  Who cares if you are smart if you can’t either get something done or alternatively destroy team morale and throughput?  Consider using this 2×2 matrix presented within The Art of Scalability to evaluate the individuals in your team for both behaviors and accomplishments.

3)      Leadership is about EQ – Not IQ

Our frequent readers will also remember this from our postings abroad.  As Malcolm Gladwell has indicated within his book Outliers, all of the evidence points to the notion that the most successful leaders have some minimum IQ.  But IQ alone is not sufficient to be a successful leader.  The greatest leaders have high emotional quotients, often considered a combination of social intelligence and emotional intelligence.

Two of the world’s foremost experts on the topic of leadership and social and emotional intelligence, Richard Boyatzis and Annie McKee have written two wonderful books on this topic:  Primal Leadership and Resonant Leadership.  In keeping with our theme of 2×2 matrices, here is Richard and Annie’s representation of commitment and emotional quotient.  The Y axis indicates how mindful the leader is of himself/herself (emotional intelligence) and how mindful they are of others (social intelligence).  The X axis indicates their overall emotional tone towards others.  Successful (aka Resonant) leaders have on balance a positive emotional tone and are in touch with themselves and their teams.

4)      It’s All About Performance

See my brief discussion of the model for success.  Superior performance, I argue, is measured as improving long term stakeholder wealth.  This might be emotional wealth in the case of some non-profits or financial wealth in the for profit world.  This means getting things done on time, on budget, in an ethically appropriate manner, with the right quality and meeting the expectations of stakeholders.  Time and experience are just moderators to this equation; they only help performance.  Independent variables are intelligence, drive, commitment, behaviors, etc.  Look to build the right teams with the right behavior at the right time.  Don’t get tied up in how much “experience” people have.  I’d rather have a dedicated person with 5 years of experience than a lazy person with 20.

The Art of Scalability

The people in your organization that you should be finding and smothering with praise are the ones who stay late at night or over the weekends making sure things are right. These are the real heroes and should be treated like it. The ones you have to call in to put out a fire are great but they are more opportunist than heroes in my book. Additionally, what message would you rather send, put out a fire and get rewarded or prevent a fire and get rewarded? I’d chose the latter.

There is one thing way worse than the opportunist who waits for fires so they can be the hero, that is the firefighters who are arsons. This phenomenon is known as “Hero Syndrome” in which people crave heroism by creating situations that they can solve. The people who write sloppy code or let junior engineers write bad code and let it get into production so they can be the hero and fix it, they suffer from the Hero Syndrome. Someone who ignores preventative maintenance and waits for things to break should not be rewarded, they should be counseled.

Go find your safety inspectors and reward them. And while your firefighters might have earned a pat on the back, ask the hard questions of why the problem wasn’t found earlier before it impacted your customers.

The Art of Scalability

We’ve also added some resources for professors who would like to use the book as part of their class. The page can be found on the Resources for Professors page.

The Art of Scalability

Good, or cognitive conflict, helps teams open up the range of possibilities for action.  Diverse perspectives and experiences work together to attack a problem or an opportunity from multiple angles.  Brainstorming sessions and properly run post mortems are all examples of controlled cognitive conflict with the intent of generating a superior set of alternatives and actions.  Team norms have been shown to have a positive effect on developing cognitive conflict; a culture of acceptance and respect for diverse opinions is more likely to generate more alternatives.   Emotionally and socially intelligent leaders also may help create positive cognitive conflict within teams.  But research shows us that cognitive conflict if left unresolved can escalate to affective (bad) conflict.

Bad (or affective) conflict results in physical and organizational trauma.  Physically, it can leave us drained as the sympathetic nervous system (the same system partially involved in the fight or flight syndrome kicked off by the hypothalamus) releases the stress hormones epinephrine and norepinephrine.   Our blood pressure and heart rate increase, and the adrenal cortex releases 30 different hormones to deal with threats.  Over time, constant affective conflict leaves us drained.  Organizationally, teams fight over ownership and approaches.  Organizations become fractured, and scholarly research shows that the result is a limiting of our options from a tactical and strategic perspective.  The fighting closes our minds to options, meaning we sub-optimize our potential results.

Why is all of this important?  By understanding the sources and results of conflict, we as leaders can drive our teams to have healthy debates and we can quickly end value destroying affective conflict.  Our job is to create a healthy environment suitable to the maximization of shareholder value.  By creating an open, caring and respectful culture we can both maximize cognitive conflict and minimize affective conflict.  By setting clear roles and responsibilities we can limit the sources of affective conflict.  And by hiring a diverse group of people with complementary skills and perspectives we can minimize group think, maximize strategic options and grow quickly!

The Art of Scalability

Our first piece of advice is to seek legal counsel early; pay a little money to an attorney and get some peace of mind. Don’t just read a blog, even ours, and think you can go it alone. Educate yourself but seek experts when needed.

Types of Intellectual Property

A top priority should be to avoid infringing someone else’s ideas and the first step to accomplishing this is to understand the three types of intellectual property: patents, trademarks, and copyrights. These are all governed by federal law.

Copyrights are granted to people for any expressed form of an idea or information that is substantive and discrete. Under the Berne Convention copyright is automatic even without application once it is produced in a “fixed medium”, such as a drawing, document, or electronic file. Copyrights are issued by the U.S. Copyright Office. One of the limitations of the copyright protection is “fair use”, the definition of which is not always clear but allows the use of your work by others for such things as parodies and news.

Trademarks are protect words, names, symbols, sounds, or colors that distinguish goods and services from those manufactured or sold by others. Trademarks are issued by the Trademark Office of the U.S. Patent and Trademark Office (PTO). Unlike patents, trademarks can be renewed forever as long as they are being used in commerce.

Research

The next step in protecting your startup is to do some research. Use tools such as the Google’s patent search or the search engine at the PTO site to look for patents and applications that are close to your idea. If there are patents that appear to be close to your idea change your idea, design, and implementation now. If you think there could be any doubt call in an expert, someone very experienced in the field and with the relevant patents, or call a patent attorney to receive a legal opinion.

Patent vs Trade Secret

Once your sure you’re not infringing the next decision is how to protect your own intellectual property. Copyrights and trademarks are usually pretty straightforward decisions. Things get murky when deciding between a patent and a trade secret. Trade secrets are intellectual property that is not widely known outside of the company. This can take the form of formulas, processes, or methodologies. A great example of a trade secret is the formula for Coca-cola. The reason this can be a difficult decision is that as soon as a patent is filed it becomes public record and your competitors will gain insight into your business. If you are eventually awarded the patent you gain the sole right to use your idea. If you keep your idea a trade secret but your competition determines how to reverse engineer your product and begins using your idea, you have no recourse.

Patent Application

Once you decide to proceed with a patent the application process can be very long often taking years to complete. The process of receiving a patent starts with an application that includes a specification, a summary of the invention, all claims being made, and a declaration of invention. This application along with the filing fees initiates the process. A reviewer from the PTO studies the application and investigates prior art. The reviewer can issue a patent or reject some or all the claims. If any or all of the claims are rejected the applicant can resubmit the same or modified application. If rejected a second time there is an appeal process that includes the Board of Patent Appeals and Interferences and eventually the US Federal Circuit Court of Appeals.

Conclusion

If you’re unfamiliar with intellectual property this may all seem a bit overwhelming. The two critical things to take away are 1) spend the time upfront to educate yourself and your team and 2) seek expert help when confused or you arrive at a critical decision. The investment in both will be well worth it in the end.

The Art of Scalability