Archive for the ‘Opinion’ Category

Bridgewater Associates and radical truth

by Bruce Kasanoff

We live in a world of lies.

For example, how often do you openly criticize your boss, or your CEO? Most people almost never tell the unvarnished truth, simply because doing so is considered rude or socially unwise.

But technology is pushing us hard in the direction of confronting the truth. The more we use digital devices, the faster our shift from a world of hunches to one of hard facts. In the northeastern United States, we pay tolls through E-ZPass, which has the capability to reveal that in your trip from New York to Boston, you averaged seven miles per hour over the speed limit. It’s just a matter of time before some revenue-hungry government decides to automatically send you a speeding ticket.

Security badges, smartphones, GPS units, computer logs, collaborative software, CRM systems, credit and debit cards all collect vast reams of data. But this is just the tip of the iceberg.

Ray Dalio knows where this is headed

Social networks will increasingly rank companies and the services they offer. Why? Because companies routinely manipulate the truth about their offerings. We have a word for this; it’s called marketing.

Social influence shifts the balance of power. It provides a mechanism for vast numbers of people to work together to help each other save money, time and effort. Think this won’t happen? My bet is the economy won’t get better for years to come, and that pretty much everyone will be willing to trade a little time for much better deals.

And so in every corner of our world, data will reveal the truth. It will show who works hard, and who doesn’t. It will show which companies can be trusted, and which cannot. It will paint an unvarnished picture of how you spend your life.

At the moment, almost no companies operate with a relentless dedication to seek out the truth. One exception – which happens to be in my own town of Westport, Connecticut – is Bridgewater Associates, an investment manager overseeing more than $90 billion in assets for its clients.

Founder Ray Dalio believes in radical truth. To work at Bridgewater, you must learn to be comfortable with the truth. In his lengthy and highly detailed Principles document, Dalio says, “At Bridgewater I want people who, above all else, value the intense pursuit of truth and excellence, and through it, the rapid improvement of themselves and Bridgewater.”

Dalio also believes that companies need to evolve and adapt in order to succeed. Radical truth makes this possible, while anything that obscures the truth hinders necessary adaptations.

He continues, “Since I believe that radical truth and radical openness are essential for this rapid evolutionary process to occur, I also believe that these need to be essential elements of our culture. I believe that radical openness enhances truthfulness (which is essential in getting at the best answers) because it prevents the secretiveness that breeds hidden agendas and stands in the way of open debate.”

Eighteen months to get used to the truth?

Dalio has observed that new employees take about eighteen months to get used to a culture that relentlessly seeks out the truth. At Bridgewater, it is a duty to point out when your superior is wrong, and it is utterly unacceptable to speak about a person behind his or her back. This means that when you see someone do something wrong or misguided, you need to tell them.

Many new hires bounce right out of the company. They aren’t comfortable with sentiments like this one, included in Dalio’s Principles, “At Bridgewater people have to value getting at truth so badly that they are willing to humiliate themselves to get it.”

Dalio continues, “It is more heroic than humiliating to objectively explore one’s own mistakes and weaknesses, so doing so should engender admiration – not humiliation. We need and admire people who can suspend their egos to get at truth and evolve toward excellence, so we ignore ego-based impediments to truth.”

Think about this. You’ve spent your career as a professional investor. After a long recruitment process, you start to work at Bridgewater. A few months in, your colleagues start openly questioning your judgment. They say you are not particularly perceptive, that you use outdated logic to form your opinions and that even junior members of your group are currently adding more value.

You might think: how about a little respect? I’ve been in this business for twenty years. Doesn’t that give me a little breathing room, a little respect?

Nope.

Dalio says, “I regularly get pressure to let great people avoid exploring their mistakes and weaknesses because they find it painful… we can’t compromise on this because that process of exploration is healthy for Bridgewater, healthy for them and key to our culture. I also believe that to allow opt-outs would legitimize two sets of rules and put our radically honest way of being in jeopardy. I want great people who embrace even harsh truths.”

Radical truth requires vast cultural changes

You don’t need me to tell you that most people aren’t ready to humiliate themselves to reveal the truth. I can’t name many executives who care more about the truth than their own egos, income or lifestyle. Few of my friends or relatives wish to confront the truth about their eating habits, fitness practices, or work ethic.

But radical truth is an inevitable consequence of technological innovation, and we need to start taking a harder look at corporate cultures like Bridgewater Associates. Like it or not, we are all headed in that direction.

We win: jobs, profits, politics and climate

by Bruce Kasanoff

(Part 1 of 2) The price of restoring our economy, saving our banks, and ensuring long-term prosperity is higher than most are willing to pay: the end of football, baseball and every other win/lose game.

From the time we are old enough to grasp a ball, we are taught that there are winners and losers. You want to beat the other guy. Ties aren’t good enough. Only winners matter.

This is why the world is so miserable right now. Everywhere you look, you see people who care more about winning than anything else. These are not bad people. As the saying goes, “We have met the enemy, and he is us.”

I want to win, too. So do you. But this mindset is like a cancer, mostly because the world has become too interconnected to tolerate a win/lose mindset. Most people lose. That’s why things seem so bad.

We need to stop teaching kids to beat the other kids. We need to stop spending our weekends rooting for the other guys to lose. We need to find a way to bring out our best, to challenge ourselves physically and mentally, without doing so at the expense of the other team.

The human race has never before had more robust solutions to the challenges we face. We are better than ever at raising food, finding shelter, staying safe, educating our young, curing disease and understanding the universe. To 99.9% of the people who ever lived, we are like magicians.

And yet, we somehow have convinced ourselves that our future is bleak. We can’t agree on solutions to our “problems,” and these problems terrify us.

This is such nonsense. We have so much promise, so many opportunities, so many blessings.

We have one curse, and that is a dominant mindset that says one side has to lose.

The alternative is a win/win mindset. It won’t come easy. If you doubt me, imagine a World Series that ends in a tie, and everyone is happy. That seems like heresy, but I’m increasingly convinced it is the only path to prosperity. More on this in my next post.

Coders beat CEOs

by Bruce Kasanoff

It’s time to acknowledge reality. CEOs are becoming irrelevant.

Power has shifted to the people who understand languages CEOs can’t speak: code.

IT innovators are starting to rule. We’re entering an era in which capabilities are more important than companies. Can you come up with a better way to process payments? In a few years, you can be processing millions of transactions. A better way to communicate? 10% of the world might race to your doorstep.

All the things that make big companies impressive – hundreds of thousands of people, global offices, sponsorship of professional sports – are unneeded baggage. Let someone else carry them.

Sure, when your company grows to employ 1,000 people you may hire a professional CEO. But he’ll be working for you, not the other way around.

Of course, most CEOs don’t yet understand what’s happening. People are still deferential to them. The money keeps pouring in, even if sales are slowing a bit. Their companies have existed for 10-100 years, and it seems obvious they’ll be growing for years to come.

Wrong.

Code is changing every industry. It’s just starting to take advantage of wireless, mobile, and trillions of sensors proliferating around the world. Almost nothing we do – nothing – makes sense given these new technologies: schools, healthcare, banking, and politics are all overdue for dramatic changes.

I’m not saying that tech people are ideally suited to run companies, or whatever replaces them. But I am saying that it is now more important to understand code (and what you can do with it) than it is to understand marketing, sales, human resources or how play nice with the Board.

That having been said, a few select CEOs have a distinct advantage. The ones who agree with this perspective, who know that code is the DNA of innovation, can adapt to this new world. They have the people skills and the credibility to win and keep powerful backers. They can attract capital and talent. People like this will always be formidable.

In this respect, I figure the old-fashioned 80/20 rule still applies. 20% of CEOs will profit from the sweeping changes ahead. If you are ambitious and really know code, the other 80% are the ones you’ll make irrelevant.

The next decade = less

by Bruce Kasanoff

Less.

That’s what we should expect in the next decade.

Regardless of your political beliefs, these facts are clear:

1.) Our economy is weak. Nothing is likely to change that for years to come.

2.) Government spending will decline for the foreseeable future. That means fewer jobs.

3.) New fees will be everywhere. Want to ride the school bus? That’s $125 a semester. In Connecticut, we have a gas tax on our gas tax.

4.) Our leadership is dysfunctional. If our political leaders worked for your company, you’d fire them all. But I don’t think the problem is just the people. We have been deferring a lot of very tough choices for so long that they are too tough for our system to handle.

How does marketing deal with a slump that lasts ten or twenty years? You can’t steal market share forever.

It’s time to help people thrive with less. For example, businesses that save people money are a good bet. Ditto for those that help them make what they have go further.

For example, imagine a Netflix-style book subscription for $9.99 a month. You pay one fee, read as many books as you like. This may sound financially unfeasible, but recurring payments like these turn into massive businesses with substantial negotiating power.

I know a lot of people who would happily cut off their cable TV and take the book subscription instead.

People talk about government waste, but the fact is businesses waste as much or more.

For example, instead of measuring customer satisfaction or even tracking the much better Net Promoter score, what if companies simply counted how many recommendations they receive? It’s possible to do this if you enable digital recommendations.

Companies spend money on advertising that few customers notice. They invest in “customer-focused” initiatives that deliver few on no benefits to customers.

Next time you’re tempted to do this, think: less.

Missing: customer experience lab

by Bruce Kasanoff

There’s a reason why the most innovative, dynamic and successful firms end up that way: they experiment.

Google Labs is where employees toss around half-based ideas and eventually begin to expose them to the world at large. The App Inventor, for example, is designed to allow non-programmers to develop Android apps.

Apple enjoys a constant flood of innovative ideas, thanks to the 416,849 and counting submissions to its App Store. Through iTunes, it learns how customers browse, buy and use not only music but also TV shows, movies, podcasts and even audio books.

Truth is, there’s a growing tension between being a reliable supplier of quality products – Wall Street, reviewers and customers all demand this – and being innovative enough to stay ahead of fickle tastes, advancing technologies and fierce competitive pressures.

But to handle unprecedented volatility, firms need to experiment, to peer deeper into the future, to retain the flexibility to change course both suddenly and successfully.

Many of the strategies I endorse, such as creating cross-disciplinary teams and shortening work plans to leave room for near-constant shifts in direction, would spell disaster for the portions of major firms that have to churn out millions of products this quarter.

These adaptive, collaborative practices demand a lab, and not one that is locked away in the corner of your business. Google’s 20% Time policy allows every employee one-fifth of their time to work on any idea that interests them. The new Google Art Project came from Google Labs, and it offers a remarkable way to explore museums and artworks from your very own lazy chair. Gmail, Google Talk, and Google News all started as 20% projects.

Here’s the reality: in today’s networked, interconnected world a corporate lab can and should be ‘everywhere.” It should encourage contributions from all employees.

This is the only way to keep a firm’s customer experience vision ahead of customer expectations. It provides space to fail, to escape the constrictions of naysayers, and to give birth to substantive and lasting opportunities.

But at many firms, this is nonsense. No one “has time” to experiment. There’s no budget for “unproven” ideas. Few executives think it prudent to give any measure of self control over their time to “junior” level employees. Of course, these same firms have time and money for seemingly endless meetings, for excuses, and for reports that defend questionable levels of service, support and innovation.

Earlier today, I compared the 1960 and 2010 Fortune 500 lists. The 1960 list was filled with oil, car, and steel companies. The 2010 one still has some of the old stalwarts, but is dominated by financial, retail, healthcare and technology firms. Here’s my point: if you limit a bright engineer to making incremental changes in his existing product line, he will never be able to share his insight that your firm has opportunities to build entirely new and different businesses. You need to give your people the room to act as intelligently as the customers they serve.

If you can’t find your customer experience lab, or speak proudly of it, it’s time to fix that, and fast.

Does your firm have ADD?

by Bruce Kasanoff

Consider the way your company operates. The more questions you answer “yes,” the more your firm behaves in an ADD-like manner:

  • Are people texting or checking email during meetings?
  • When you talk to someone, is he or she often doing something else?
  • When you call someone, do you hear them typing in the background?
  • Do you get conflicting messages from your company? Does one memo stress that “sales is our top focus,” and then another criticize your team for not providing better service?
  • Do meetings often conflict with other meetings and obligations?
  • Are employees overloaded with “urgent” but ultimately unimportant tasks?
  • Is time rarely – if ever – available for introspection or considered thought?
  • Are opinions given more weight than facts, and facts that are too hard to unearth (hello, siloed databases) ignored?
  • Do forceful personalities have more say than intelligent and creative ones?
  • Are people often promoted because they are personable (i.e. their boss likes them), rather than because they focus well on what matters most?

This is in the context of the growing interest in customer experience, and in protecting your business – and customer base – against the onslaught of disruptive forces. A management team so distracted and incoherent will never be able to focus sufficiently on listening to customers and customizing the services they require.

Next generation collaboration

by Bruce Kasanoff

Almost three years ago, our son came home from a summer filmmaking program and wrote a script for a musical video he called “School for Boy.” He was 14.

Jeff had plenty of motivation and energy at first. He wrote the script, about a girl whose father was headmaster of a private boys’ school, in what seemed like a week. He wrote the lyrics for ten songs, and sang each tune into a recorder, with the idea being that he would recruit musicians to help.

In the months that followed, he tried to enlist others’ help in getting the musical produced. He even typed up a formal overview of the project, including the script, and gave a copy to the instructor of his filmmaking class at his high school. He was seeking help in recruiting actors, musicians and other talent.

Nothing happened. Jeff didn’t know how to maintain the creative energy necessary to power such a project, especially when he was competing against established theater and music programs.

It hadn’t occurred to teachers or the administration that film could break down the walls between the arts, and make true collaboration possible.

For his junior year, Jeff transferred to Interlochen Arts Academy, which is 1,000 miles away from our home. We are two weeks away not only from graduation, but also from the first screening of “Hero Club,” a 23-minute musical he wrote and directed along with fellow Interlochen student Keaton Manning. I haven’t seen it yet, but the film sounds like a Glee episode, except with seven original songs and actors who aren’t famous, yet.

The plot revolves around high school students in a town that a) seems to have a lot of crime, and b) where the students solve all the crimes. Or at least that’s what they want you to think, because the students seem to care more about glory than justice.

To get this film made, Jeff had to learn to be a successful student on his own, establish a common vision with new student Keaton, and persuade the Motion Picture Arts faculty to let the pair stick with that ambitious vision.

But Interlochen, for all its rules and regulations, really is “where art lives,” as their tagline says. Jeff just called this morning to say that with the enlistment of a Visual Arts major to work on the film’s opening sequence, every major at the school has contributed talent to the film.

Theatre and Comparative Arts majors are the actors. Five, count ‘em, five musicians wrote music to go with Jeff and Keaton’s lyrics, and another wrote the score. Between the performances of the songs and the score, Jeff believes that every instrument taught at the school is also represented.

Dance majors provided choreography. Creative Writing majors, for reasons I don’t fully understand, even sung part of one song. Over fifteen Motion Picture Arts majors worked on the film’s crew.

Even at Interlochen, it took a while for both faculty and students to realize the degree to which filmmaking can tear down the walls between departments. The exception was Motion Picture Arts director Michael Mittelstaedt, who all along has been preaching about the collaborative power of film.

This morning a client of mine who lives in a small western Pennsylvania town told told me how blown away he was by the quality of a film his eighth grade son made. Art doesn’t just live at Interlochen; there is talent and creativity in every school. But what’s missing at most schools is a faculty commitment to the sort of amazing, highly professional collaboration Jeff found at Interlochen. This isn’t about school funding; it’s about collaboration.

Jeff and Keaton found actors, musicians, dancers and artists of all types were eager to be part of a film. But they didn’t have to go outside of the system to make a movie; they worked smack in the middle of Interlochen’s system, having to meet countless deadlines, and to constantly prove why they shouldn’t scale back their vision. They also benefitted greatly from regular workshop sessions with their peers, working first on the idea, then the script, and finally successful edits of the film itself.

I know one thing for certain: Jeff’s generation will benefit greatly from being able to work effectively in cross-disciplinary teams. This is where the world is headed. This is not only what success demands, but also what makes life worth living. I’m a fan of anything that tears down walls and brings diverse groups together.

In the meantime, I can’t wait to see Hero Club, and I hope someday you’ll see it, too.

2011 Word of the Year: volatility

by Bruce Kasanoff 1 Comment

Looking forward to 2011, I’m guessing the word that will best sum it up is: volatility.

Most people in the developed world are caught between two forces: inertia and change. The former is because once we establish a business, or build a house, or develop a city – we think it will last forever. The latter, of course, is reality: everything changes.

In recent years, technology is advancing in ways that can be difficult to comprehend. Here again, there are opposing perspectives. Some folks like to be overly optimistic or dramatic about the implications (“this will change everything”), while others don’t recognize changes even after they have happened (can you say Blockbuster?). Billions of people now carry mobile Internet devices; I can remember when analysts were debating why anyone would possibly need a personal computer in their home.

Here are some pretty certain realities that most are ignoring:

- In the United States, our governments have made promises they will not be able to keep. There will be dramatic changes in the way states operate. Taxes will go up, services down. Constituents will be furious. There will be defaults. It will be scary.

- Our weather will get crazier. Human activity is influencing our climate, and we lack the solidarity and strength to deal with this fact. The developing world is, well, developing, which means more cars, more factories, more forests burned down. Natural disasters will increase in frequency and scale.

- Jobs will become more fleeting in nature as some companies grow faster than ever (i.e. Groupon), while others disappear suddenly. As volatility increases and the economy gets worse before it gets better, companies will remain loathe to make long-term commitments. They will hire people when needed, but security will be harder and harder to find.

- Retraining and lifelong education will start to become as important as high school diplomas. None of us possess the skills necessary to keep us competitive over a ten year period, never mind an entire career. Our notion of going to college then working will continue to give way to working and going to “college” simultaneously — and continually.

- Business models will come under increasing pressure as both humans and all our devices become increasingly interconnected. Already in 2010 we started to see customers who – thanks largely to their ever-connected smart phones – had better access to product information, competitive offers, and expert opinions than the companies trying to serve them. Smart customers served by “dumb” companies is not a sustainable business model.

This sounds pretty bleak, doesn’t it? Hard as it might be to believe, I am not pessimistic about our future, only about the near term. Each of needs to make a personal decision regarding whether we are going to accept change and deal with it rationally and honestly. We need to decide whether we are mature enough to work with people who don’t think precisely the way we do. Most importantly, we need to decide whether 2011 is the year in which we tackle tough challenges, or push them off until they become disasters.

It would be nice if we started right now, but I suspect that most aren’t quite ready – which is why I am thinking that the watchword for 2011 will be volatility.

Energy replaces mass

by Bruce Kasanoff

It is easy to lose site of the degree to which a “mass production” mindset permeates our society. All our institutions and many of our habits are based on this increasingly outdated model.

As Sir Ken Robinson asks, why do we “educate our children in batches?” Do we really think that their age is a more important common denominator than their interests or abilities?

I’d like to suggest that we have vast reservoirs of untapped energy, in human form, that the mass mindset utterly ignores or beats out of us. There’s little room for creativity on assembly lines, and our schools, companies and even religious institutions are designed like assembly lines.

Bring too much energy to school, and you will be medicated. Bring too much energy to work, and you will be fired.

Seemingly intractable problems confront our society. Our financial system remains enfeebled, still teetering on the edge of disaster. The Baby Boom can’t afford to retire, and we can’t afford to pay people the pensions they have already been promised. Our infrastructure is falling apart. We are either running our of carbon-based fuels, pushing our climate to the brink of disaster, or both.

And yet our mass mindset still causes us to look to big government and big business for solutions. Forget it.

The real solutions will come when we shift our mindset. The coming years will be about tapping into the energy inside ourselves. I don’t mean this in any sort of New Age way. We need to break each problem down into smaller and smaller pieces, until people like you and I can solve them.

Of course, we won’t do this alone. We will do this by connecting in shifting patterns with other people, and by using capabilities in shifting patterns. In the Mass world, big institutions made stuff for us, or out of us. In the Energy world, we make stuff on our own, with others, and collectively.

This is not a pipe dream. Look at Apple’s App Store, where countless individuals and small groups have developed over 300,000 Apps in less than three years. Look at the way breaking news stories are increasingly covered by people with smart phones and Twitter accounts. Look at microlending, and look at organization like DonorsChoose, which allow individual donors to fund individual classrooms.

The more we let people bring their energy to school and work, the faster we will move past these difficult days and into another era of prosperity.

Bruce Kasanoff is Managing Director of Now Possible.

Welcome to the Personal Economy

by Bruce Kasanoff