Business

Harvard Business Review July/August 2017 issue

BR1704_500 Here are a couple of articles I particularly liked in the latest HBR issue. Why CMOs never last discusses how to match the right person to the CMO job and how CEOs, executive recruiters can all help maximize CMI success through a 4-step approach:

(1) define the role (is the focus on strategy? commercialization? both? to which degree does consumer insight need to drive firm strategy? how difficult is it to achieve firm-level growth? what is the level of dynamic change in the workplace? what has been the historical role of the CMO within the firm? what is the structure of the firm?)

(2) match responsibilities to the job's scope (3) align metrics with expectations (4) find candidates with the right fit. At 4.1 years on average, CMOs have the shortest tenure of all C-level executives, just ahead of CIOs (4.3 years). The authors also discuss how to improve outcomes. Another HBR article discusses the potential of the partnership between CMOs and CIOs. 

Being the boss in Brussels, Boston and Beijing discusses cultural differences in leadership styles. I usually find most such articles vapid, but this one was excellent. The authors argue that managers often fail to distinguish between two dimensions of leadership culture: attitudes toward authority and attitudes toward decision-making. For instance, according to the authors, Americans tend to be egalitarian (empowerment rather than command-and-control) but practice top-down decision-making rather than building consensus. This leads to 4 cultures of leadership. Countries like France tend to be top-down and hierarchical, the United States and Canada are top-down and egalitarian, Sweden tends to be consensual and egalitarian, Germany tends to be consensual and hierarchical.

What's your best innovation bet? argues that by mapping a technology's past, you can predict what future customers will want. I'll admit I read the article while looking for parallels for career management for my recent graduates - can you predict what skills will be in demand by mapping the past of your company, or the industry you work in? Step 1 is to study how a technology has evolved along key dimensions. Step 2 is to locate your position (where you are on the utility curves for those dimensions). Step 3 is to determine your focus. 

Managing climate change: lessons from the U.S. Navy was a valuable case study in far-ranging thinking by describing a strategic mix of "no regrets" investments (which make sense even if climate change "doesn't alter the world as much or as quickly as scientists are forecasting" - like installing backup power generators) and "bets" investments (decisions that "provide little benefits if the seas don't rise and coastal storms don't get worse" - like relocating naval bases) to address the threats posed by climate change. 

Globalization in the age of Trump discusses current trends in globalization and protectionism. The author (Pankaj Ghemawat, a prominent expert on the topic) argues that the world is less globalized than most people realize and that, "even in the face of a trade war, international trade and investment would still be too large for strategists to ignore." I read this article while trying to find parallels with the world of higher education. With the advent of online education, people have promoted the idea that students from anywhere in the world can study online anywhere else in the world (the globalization side of it), but higher education at the college level isn't as globalized as people think, at least in the U.S., where students get charged in-state (rather than higher out-of-state) tuition rates if they go to a public university in their state, and where community college students remain very local (in their home county). But there is also been a trend in universities launching campuses abroad, which rather parallels the behavior of companies building plants in multiple countries. While such companies are looking for arbitrage opportunities in labor and other resources, universities might tap into different student pools. 

Finally, the Synthesis part is about liberal arts in the data age: why the hard sciences need the humanities. I'm all for the humanities, the study of history, Shakespeare, psychology and more, but what I think is missing from the books the segment discusses is the fact that the study of liberal arts is often wasted on the young. What I mean by that if that many 18-year-olds who have not had any life experience will not relate to the quiet desperation of Chekhov's Three Sisters or Flaubert's Madame Bovary, the burning ambition of Shakespeare's Macbeth, the determination of Cervantes' Don Quixote.

They can still write good essays about the books, but to fully understand them you need to read them a little later in life. But the educational system is set up as a narrowing of skills, especially at the graduate level, where most coursework focus on courses in the major, and the rest of the requirements come from related departments.

Then, people love to use Uber as an example, but we should also recognize the American culture of making money through entrepreneurship as fostering ruthless ambition, and making youngsters read the classics won't help anymore than making them hold hands and sing kumbaya. The type of youngsters who will relate to books as a source of meaningful growth is not the same type of youngsters who is attracted to launching startups, and the type of authors who argues in favor of the humanities is the humanities professors that future startup launchers might not pay attention to. Knowing how to think is definitely important, as well as excellent written and oral communication skills, but one hopes that engineering students are taught those skills too. I think the most useful skill learned by humanities majors is not how to think - every self-respecting program claims to do that - but how to deconstruct people's arguments and point out their flaws. As in, they're good detectors of bs or lazy thinking. In times even more devoted to one-sided versions of events and embroideries of the truth, people who can see through others' lies are important indeed.  


HBR on The Talent Curse

HBRMayJune2017The May-June 2017 issue of Harvard Business Review also has an article about The Talent Curse: Why High Potentials Struggle and How They Can Grow Through It. I felt the article had glaring weaknesses quite a few times, so here comes my analysis of it. The idea behind the article is that some people, when they are "groomed as future leaders," "feel trapped by others' expectations and fixate on proving themselves worthy", either "blandly conforming" or leaving altogether. The solution is for them to accept help, bring "all facets of themselves to the job" (I had to laugh at the inanity of that comment - Zadie Smith, who probably will never be cited in a business magazine unless I do the writing, mentioned when she was in Dallas promoting her latest book Swing Time how the quest for belonging and finding one's tribe was a very American pursuit, and I think the quest of bringing one's whole self to the job is archetypically American too) and, perhaps the one drop of wisdom here, to treat "the present like a final destination."

First of all, I find the name "Talent Curse", while catchy, incredibly inaccurate. In other words, I don't think there is a talent curse. I think talent management is like the R&D drug pipeline: you've got to launch some projects to get at least one to work down the road. You select multiple employees to be on the talent track, knowing that not everybody will turn out to be leadership material, but you can't say who it is until you've put them on the track. Saying that their talent was some sort of curse will make them feel good in retrospect after their careers failed to take off, but many similar employees with the same talent did succeed and, o surprise, didn't fall victims to the same curse. It is a little easy to say you failed because your talent was a curse. Maybe those people failed precisely because their reaction to the honor (either conforming blandly or leaving) showed that they were not leadership material after all. Culling out such people is part of the process of identifying the true future leaders. 

The article also suffers from the absence of context given to the examples' stories. We don't know their age, their country, their background - how long have they have been out of school? in that company? in that position? how have they reacted to high-pressure assignments before? were they the first people in their families to go to college or did every relative go to the Ivy League?  

It also suffers from some quite ridiculous examples, such as the one of "Laura", who left a PhD program in artificial intelligence to become a consultant and then "a role in the strategy function of a consumer goods company." When given a high-profile assignment, she floundered, falling "into a spiral of overwork, anxious to show others - and herself - that she could handle the challenge." Although sales grew, she feared people didn't dare tell her what they really thought of her performance and her bosses, "accustomed to her competent and composed demeanor", didn't realize she needed some sort of help from them, although they did praise her for her independence and initiative. In other words, Laura needed a cheerleading battalion. Well, Laura, the obstacles are in your head, my dear. It's not other people's job to read your mind. Maybe there would be a case to give such employees a career coach, but again I'm not sure if it makes sense to actually rescue people like Laura from herself. There are more talented employees than there are high-impact managerial positions. Perhaps a career coach would be more useful once the employee has made it higher up in the hierarchy.

Then other employees, when put on the high-potential track, stopped striving to develop their skills and focused only on where their talent shone, losing their edge and spoke of "paralysis" to the HBR authors. If the idea of succeeding gives you a deer-in-the-headlights look, just imagine when you face a major high-stakes decision, like a major product recall. I don't feel sorry for those people not making it to the next promotion.

Then, the involuntarily funny moment: the 2nd sign of trouble, "A preoccupation with image despite a yearning for authenticity." Apparently some employees feel inauthentic when they can't bring their whole selves to work. Good Lord. You know your colleagues aren't your friends, right? You're not supposed to bare your soul with them. I guess it's easier for people from Europe to understand, since over there it is more acceptable to have a life outside work. The famous Laura from above fantasized about quitting and getting a job where she could be "true to herself". This is one of the surest signs of professional immaturity that I've seen in a long time. No wonder she didn't do so well on the talent track. The HBR authors also point out this often happens to business school students, who go to business school for the same reason: to find "a space where they could discover and recover who they really were." This is why I said above it would have been helpful to know the age and work history of people like Laura. If she's, say, 27, then I can chalk up her immaturity to her age. If she's 37, then it becomes a different problem. 

Even better: the authors cite psychologist Alice Miller and her work on "the drama of the gifted child." Her idea is that "inquisitive and intelligent children often learn to hide their feelings and needs to meet their doting parents' expectations." Well, if adult employees on the talent track are reduced to the role of children and managers are supposed to play the role of doting parents, I can see why companies are going to have a problem. Your manager is not your parent. I'm not even going to try to explain that.

Then there is another story at the end of the 3rd sign, "the postponement of meaningful work" (as a sign of trouble), that suggests some of those employees profiled are very young. That one took the most prestigious job offer in his class after graduating without questioning whether that was really what he wanted to do, and then hoped to transition out, somehow, without really knowing where. But there was no mention of the company actually putting him on a talent track after hiring him. And the dear Laura also had contradictory dreams, talking both of returning to get her PhD and to become a COO some day. Maybe she's too young to be put on any sort of talent track. 

The authors' advice to break the talent curse is rather silly ("bring your whole self, not just your best self, to work") except for the last part, which is to treat your current work as a destination rather than a stepping-stone. Laura, though, seems past the redeeming point. When she said she was considering leaving, she was offered a bigger role, but "six months into the new role, she had not yet negotiated her package." Didn't that raise any red flag at her company that she wasn't actually competent to do the job? Weren't alarm bells blaring? For whatever reason, Laura is self-sabotaging. She has some pretty excuses to explain it: "What would they think if I worried about the contract, the salary and things like that?" Well, Laura, they'd think you're a professional, that's what they'd think. Right now you've disappointed your sponsor and perhaps he is in denial that he so misjudged you, giving you a second chance long past the point where you deserved it.

The authors write: "The best way to develop leaders, in the end, is to help them lead." That is not the same thing as enabling people who clearly are not ready for leadership positions. Sponsors should be aware of their blind spots, know when to admit a protege has underperformed and move on. You did your best. Cut your losses. You can find someone else more deserving of the opportunity. That is, sadly, not the message of this not-so-great HBR article.  


HBR: State Street and Social Responsibility

HBRMayJune2017I enjoyed this article about State Street's innovative approach to create employment for at-risk youths, in the May-June 2017 issue of Harvard Business Review. (The result is called Boston WINs, which stands for "workforce investment network.") The key, the article explains, is a system to support kids as they move through school and into the workforce. State Street has developed a highly original process where it has enlisted five nonprofits to support at-risk youths in a manner akin to a relay race: each nonprofit focuses on what it does best, for instance teaching study skills or finding a good fit for college or applying to university, and then passes off the student to another nonprofit to fulfill different needs. It allows each nonprofit to focus on what it does best and create meaningful impact for the students.

In the words of State Street CEO Joseph Hooley: "Getting students through schools, into college, and then into good jobs requires managing a series of handoffs and transitions, just as runners in a relay race have to pass the baton."

The five partners ultimately selected to be part of the experiment were: Year Up, which provides "intensive skills training for low-income young adults", UAspire, which helps students "find ways to finance college, The Boston Private Industry Council, which helps "students obtain workplace experience and find a path from school to work", College Advising Corps, which "assists students with the college search and application process", and Bottom Line, which "helps low-income and first-generation students get to and through college." 

In its first year, Boston WINs served close to 20,000 youth and State Street hired over 200 of the Boston WINs graduates (note that not all 20,000 graduated in their first year.) 20 schools are participating this year, and the students have a list of 12 milestones they much reach by certain dates. State Street "opened a facility at the University of Massachusetts that allows students to work part-time, gaining job experience and giving us a look at how they work." It also has "more than 50 interns from Bunker Hill Community College in any given time." The program launched in June 2015 and State Street has committed to four years of funding, so the program is at its halfway mark now, but it seems highly promising, if two years can ever be enough to judge such things.

In some ways, it reminded me of recent approaches to innovation, especially for pharma, where big pharmaceutical companies have developed agreements with universities where the universities, funded by big pharma, focus on early-stage innovation and big pharma gets first look for commercialization. Obviously there are many differences too but it touches upon specializing, focusing on what one does best. I wonder if we'll see a continuation of this trend toward more segmentation of the R&D pipeline, with different companies becoming responsible for different stages. The difficulty would be to work out the monetary compensation aspects. But maybe a time will come where this makes business sense.

Here's to hoping Boston WINs continues for many more years!


Parcel lockers and other things

Twelve years in the boondocks of Pennsylvania, and I've never had an Amazon.com package stolen before. The interesting thing is, Amazon.com shows it as delivered to the ParcelPending lockers in my building (in Dallas where I live now). This is supposed to be a more secure way to receive packages. When the Amazon delivery person puts a package in a locker for you, you get an email with a 6-digit code that will allow you to unlock the box. Unfortunately, the system is only as good as its weakest link, which is in this case that the Amazon delivery person has to key in the apartment number. And he's made mistakes before (not sure if it was the same guy), but the resident whose apartment number got mistakenly typed in by the delivery guy gave the concierge my package the next morning and the concierge sent me a message. And once I got packages for another apartment, and I gave them to the concierge right away. Mind you, we've only had ParcelPending for a few months.

This time around, my Amazon.com orders page shows that my package was delivered on Friday, and it's Tuesday evening and I still don't have it. So I think by that point the probability is getting high that my package was stolen. (I posted a message on the building's online bulletin board that got sent to all residents, so by now the only other option would be that the resident would got my package is away far from his email on, say, a cruise in the Caribbean, in April. Not impossible, but not terribly likely either.)  

Now of course I can't complain to Amazon, because Amazon considers the package delivered, although its delivery guy made the mistake of typing the wrong apartment number. (Go ahead and try to prove that, though. And of course no one cares about getting the logs, if they exist somewhere in the ParcelPending system, showing which residents received Amazon packages on Friday. The only thing I can prove is that Amazon shows my package delivered to a locker while the ParcelPending website shows I haven't received a package through their system in weeks.) ParcelPending has such bad Google reviews I'm not sure I even want to waste time calling them. 

And a resident somewhere in the building has my package, and this is not the sort of building where you'd think residents want to make extra money by selling books they stole from other residents. Dallas has a lot of good sides but the young professionals crowd in my area is definitely not the reading type. More the blowouts and manicures and all the fashionable yoga outfits kind of crowd. (What can I say, I wanted to live close to work and it's a very walkable neighborhood close to the arts district.) In the package I had two paperback books by the Argentine novelist Julio Cortazar, one by Octavio Paz and one by Jorge Luis Borges. I don't expect whoever stole my books to easily find a buyer on Amazon Marketplace for all four, although perhaps they'll go and resell them to local chain Half-Price Books. Or, more likely, they put it in the dumpster, just for the fun of it. They'd be the type.

I'm not sure what makes people think it's okay to steal other people's packages, although I suppose some of the younger residents have been so spoiled by their parents (you just have to look at their cars in the parking lot - no way they could afford those cars by themselves) that they think everything belongs to them, if they can just get their hands on it. I just don't understand the point of it. Especially when they might be the one missing their package next time.

I'm very sad to have that theft happen - I was really looking forward to reading those books - but more broadly for those of you with only a limited interest in hearing me whine about my stolen package, I think the whole model of Amazon Locker or ParcelPending is going to have to be seriously revised if it's ever going to take off. Because the system is only as strong as its weakest link and in this case the weakest link is the Amazon delivery guy. And people might give their neighbors their packages if Amazon leaves it in front of the wrong door, but people who find a package that is not for them in a locker won't go out of their way to give it back. At least in my case we're all in the same building, so it's not difficult (for a normal person). The only thing that will make the parcel lockers work is if they have a scanner so that the system can recognize the proper address without human interaction. I also think the drones idea is ridiculous, because there will be people who will make it their pastime to get those drones and steal the packages. The presence of a delivery person helps protect against the temptation of theft. But of course in my case, the delivery person was part of the problem.


INFORMS Wagner Prize: Call for Entries

Each year INFORMS grants several prestigious institute-wide prizes and awards for meritorious achievement. The Daniel H. Wagner Prize for Excellence in Operations Research Practice emphasizes the quality and coherence of the analysis used in practice. Dr. Wagner strove for strong mathematics applied to practical problems, supported by clear and intelligible writing. This prize recognizes those principles by emphasizing good writing, strong analytical content, and verifiable practice successes.

Applicants to this prestigious award have come from a variety of areas, such as: Health Care, Logistics, Supply Chain, Political Districting, Manufacturing, Cancer Therapeutics, Machine Learning, etc.

The deadline for submitting a 2-page abstract for the Wagner Prize is: May 1, 2017.

More information here.


Amazon Books, Amazon Prime

Jf17techreview(Photo source: technologyreview.com.) The January/February issue of MIT Technology Review has an article by Nicholas Carr about Amazon's foray into brick-and-mortar bookstores, called Amazon Books. The plan for such bookstores was first announced in late 2015, for instance in this New York Times article (the NYT also has a video about it here) as well in that one. It isn't apparently viewed as a return to traditional bookselling but rather as a "physical extension of Amazon.com", where physical bookstores play the role of showrooms for the books. The journalist adds that "The retailer, which is spending billions to refine and speed up home delivery, suggested that some people would come to the store to look at the books and then go home and order them online."

According to Carr in his MIT TR article, though, "[Amazon.com CEO Jeff] Bezos underestimated the allure of bricks and paper." We learn that "in the mainstream trade-book market, e-book revenues dropped 11 percent in 2015 alone" while "sales in bookstores grew 2.5 percent in 2015." He also wonders whether the launch of Amazon Books is "the vanguard of a much broader push into brick-and-mortar retailing by the company," that will include convenience stores to boost its grocery business (his source is this WSJ article). Such a move would be well-aligned with current retailing trends toward omnichannel strategies, "which blend physical stores, Web stores and mobile apps in a way that makes the most of the convenience of smartphones and overcomes their limitations." Could Amazon.com be a future multichannel behemoth? 

In the retail location in Seattle, as described by Carr, "all the books are displayed with their covers facing outward" and "beneath each volume is a small placard that displays the book's Amazon star rating - only books that have earned at least four stars from Web buyers are stocked - and that also includes a brief excerpt from a customer review." 

First, there are obvious issues in selecting books based on the Amazon star rating. I'll get the issue of fake reviews out of the way by saying that only the reviews of Amazon customers with verified purchase (meaning they purchased the product on Amazon) should be included in the computation of the star rating displayed at Amazon Books. (I also think that Amazon.com should offer two ratings online, the one based on verified purchases only and the one including all purchases, because the fact that you didn't buy the product on Amazon.com doesn't mean you didn't really buy it.)

Further, the reason bookstores employ book buyers is that those people have a deep understanding of their store's customers, what sells and what doesn't in their market, and books those customers might not have heard from on national media but would love reading. And of course the book buyers at chains like Barnes & Noble or the defunct Borders may not all have upheld this ideal vision of the local professional with his ear on the ground, finely attuned to the interests of his store's frequent customers, but you get the idea. Should the books in the Amazon Books retail space be selected only based on the ratings of the Amazon customers in that area? Should the books on display be of the "popular but not very popular" kind, no matter the star rating, to raise awareness of certain books? Isn't the point to discover new books?

Amazon.com currently displays in one long row books that other people who purchased this book have also bought, sometimes with comical results when someone buys together books for very different purposes, such as a business book for work and a book of, say, vegetarian recipes. The fact is, we often don't need to scroll through 20 pages of other people's purchases to find books we like. Often those books can be clustered according to themes or authors, and of course Amazon.com should distinguish between books very often bought with this one and books bought once out of one thousand times with this one. What is curious is that Amazon.com bought Goodreads back in 2013 (read more about this here and there) and Goodreads's recommendations system -- based on the ratings users give to books they've read -- is massively more sophisticated than Amazon.com.

Why doesn't Amazon try to provide better-quality suggestions? It is almost as if it didn't know what to do with the troves of data it has so went ahead with the simplest way to use the data, to do something. But the Goodreads system, right in their backyard, actually seems very good. The Amazon and Goodreads systems don't seem to be "talking" to each other since Goodreads is recommending books I've actually already bought on Amazon but haven't put into Goodreads yet. If that's not data going to waste, I don't know what is. (On the other hand, it's an easy argument in favor of the Goodreads recommendation system, since it recommends books I was indeed interested in enough to buy.)

Finally, Amazon Books's differentiated pricing is worth pointing out: Amazon Prime members pay Amazon's discounted online price for a book, while non-members pay the list price. Unless non-Prime members struggle with delayed gratification (and since they willingly choose not to have the free 2-day shipping that comes with the paid membership and instead wait 3-4 days for their online purchases to arrive, they probably don't), it therefore seems like a strategic move by Amazon.com to push more customers into the Amazon Prime membership. Over recent weeks, I've noticed that some items I was once able to buy, for instance Green Mountain Coffee Half-Caff Keurig K-Cups, 72 count, are now reserved for Prime members only. If Amazon.com one day foregoes online discounts for non-Prime members, it might not be completely unthinkable that book lovers would order online elsewhere. I think Amazon's advantage at the moment is that their online payment and delivery system seems more robust, but if publishers developed their own payment systems, then direct purchasing from publishers could emerge as a serious alternative to Amazon.com's growing hegemony. (I wish there were a buzz of excitement surrounding B&N's strategy, talk of an innovative approach etc, but really B&N seems to just be plodding along, except in redesigned stores that focus on games and K-12 education, in a push to reposition itself as a "lifestyle brand". You can read about that here.)

In summary, what I got from this article is that the Amazon Books retail locations come across as glorified airport bookstores and that Amazon is finding new ways to push for Prime membership. 

PS: According to MIT Technology Review, Amazon.com has opened two more bookstores in San Diego and Portland, OR, and has plans for Chicago and Boston. One can only hope Barnes & Noble mounts a massive campaign of top-notch analytics, high-quality book-buying and stellar community events to defend its turf (because it is naive to expect Amazon.com's online discounts to continue, especially to non-Prime members, on the same scale as before if Barnes & Noble goes out of business and customers have few other choices to get their books). I was surprised to read that Amazon.com would venture into the Boston area, which has thriving indie bookstores in Brookline (Brookline Booksmith) and Cambridge (Harvard Bookstore), but it turns out Amazon Books's retail location is in Dedham, about 20 miles and half an hour away. 

PPS: If you're getting really bored and are reading this on a laptop or tablet, flip it upside down and see a different cover image appear for the January/February issue of MIT Technology Review

PPPS: Two unrelated articles I liked in the same issue of MIT Technology Review are The Frontline Reporter: Dickey Chapelle '39 blazed a trail for combat photojournalists and Obama's Stand-up Economist (For Austan Goolsbee, PhD'95, doing his bit for the country meant helping tackle the recession - and performing a little comedy on the side).


Other Good Reads

  • Why bad science persists: Incentive malus from the September 24, 2016 issue of The Economist. The subtitle, "Poor scientific methods may be hereditary" is misleading, because there's nothing hereditary about it, except perhaps that poor methods are passed on to generation after generation of students trained in the same lab. The article explains: "the way to end the proliferation of bad science is... for universities and funding agencies to stop rewarding researchers who publish copiously over those who publish fewer but perhaps higher-quality papers," although it is "easier said than done". (There is also the issue that you don't know which papers are higher-quality until other teams have replicated them, or failed to.) 
  • The long march abroad: China's brightest and wealthiest are leaving the country in droves from the July 9, 2016 issue of The Economist. Here is the paragraph that caught my attention: "Of the 4m Chinese who have left to study abroad since 1978, half have not returned, according to the education ministry... In some fields the brain drain is extreme: almost all of China's best science students go abroad for their PhDs and 85% of Chinese science and engineering graduates with American PhDs had not returned home five years after leaving, a study by the National Science Foundation found this year." (On the other hand, since H1B visas can last for at most six years unless a green card petition has been filed, maybe they return home not long after that.)
  • The Affordable Care Act: Encumbered Exchange from the September 10, 2016 issue of The Economist. The article explains that Obamacare has led to a decrease in the percentage of Americans without health insurance and highlights the new premium redistribution mechanisms. "Premiums now vary only with age, smoking habits, family size and where customers live" rather than "medical history, occupation and most other factors that correlate with health spending." Also, "the old can be charged at most three times as much as the young." This has led to an increase in premiums for the healthy and the young, and while poorer customers, who receive subsidies, may not have noticed, those who are healthy and not poor enough to receive subsidies have seen an increase in what they pay for health insurance. Health payers have failed to predict the new enrollees' poor health and the predicted withdrawal of small-employer plans - where those employers would have sent their employees to the public exchanges for coverage - did not happen. Also, more people than expected have continued to buy plans directly from insurers. It is worrisome to hear that in 2014 over two thirds had a loss from the exchanges, with profit margins now of about -10%. The average planned premium increase for 2017 is said to be around 25%, according to the article. The article does an excellent job describing the threat to the exchanges of insurers leaving them. But while it advocates "nudg[ing] Americans away from employer-provided health insurance" so that the flawed public exchanges could survive, by eliminating the tax-exemption for employer-provided healthcare benefits, this sounds like a solution that would unite every taxpayer with such insurance in strong opposition.  

 


Y Combinator's Sam Altman

The October 10 issue of The New Yorker has a profile of Y Combinator's new leader, Sam Altman, who succeeded Paul Graham as President of the company back in 2014. It is titled "Adding a zero" in the paper version of the magazine and "Sam Altman's Manifest Destiny" online. I'm still not quite sure what to make of the profile (authored by New Yorker staff writer Tad Friend), except that 31-year-old Altman struck me as exceptionally juvenile and uncharismatic. (If you'd like to know more about Y Combinator in the Paul Graham days, I recommend The Launchpad by Randall Stross, which I reviewed here.)

Y Combinator is arguably the best known and most powerful start-up incubator/accelerator in the United States today, with TechStars its main competitor. Altman has launched a number of new initiatives to leave his mark on Y Combinator, including the YC Fellowship Program, targeting companies at an earlier stage than the batch of companies selected for YC's traditional program, and the YC Continuity Fund, to invest in YC alumni companies. 

Before I go in more detail over YC's new strategy, let me explain why I found him exceptionally juvenile. Here is a key quote by Altman: "The missing circuit in my brain, the circuit that would make me care what people think about me, is a real gift. Most people want to be accepted, so they won’t take risks that could make them look crazy—which actually makes them wildly miscalculate risk." This reeks of so much condescension toward the average person - in particular the average person coming in contact with Altman - that I'm surprised he's been able to get anything done. I suppose his subordinates will be glad to know he doesn't care what they think and believes they primarily want to be accepted. He apparently also doesn't believe in advisors, mentors, or any outside source of wisdom and experience (why bother).

That sort of nonsense about "I don't care what other people think" reminds me of my parents (not a good thing) when I was teen and they insisted "don't care what others think" to try to make me do exactly what they wanted me to do. Altman uses that cliche to do exactly what he wants to do. People above the age of twelve have typically learned that you should learn to make the difference between people whose advice you're going to value and people whose advice you're going to discard. The anecdote about a blogger asking Altman, “How has having Asperger’s helped and hurt you?” and Altman reacting at first with anger (“I don’t have Asperger’s!’) but then proceeding to describe character traits of his that make him an excellent candidate for undiagnosed Asperger's, provided a bit of levity to the piece. 

The thing is, you can't be a very effective leader or mentor if you're so proud of saying you don't care about what other people think (because what you're really saying is that you don't care about other people, so it's going to make it difficult to make them want to follow you or pay your advice any heed). The journalist comments: "Altman's regime has left some people at YC nostalgic of the early days. One YC stalwart told me, 'Sam's a little too focused on glory - he puts his personal brand way out front... Sam's always managing up but as the leader of the organization he needs to manage down." It is when the journalist asks Altman about that critique that he made his "Not caring about what other people think is a gift" comment.

(Another excerpt, early on: "Two YC partners sat Altman down last year “and told him, ‘Slow down, chill out!’ ” another partner, Jonathan Levy, told me. “Sam said, ‘Yes, you’re right!’—and went off and did something else on the side that we didn’t know about for a while.” That was YC Research, a nonprofit, initially funded with a ten-million-dollar personal gift, to conduct pure research into moon-shot ideas." Not a bad idea either, but the fact that Altman didn't try to enlist the other partners for his new vision of YC is a red flag for me.)

Leaders are only leaders because other people want to follow them. Some people will undoubtedly find it in their best interest to follow Altman since he is at the helm of the top incubator. But in the long run, the Altman portrayed in this article doesn't seem to behave like an effective leader. It seems to me that he'd be more effective in a number-two role, making big plans for the number-one person and reporting only to him with no direct reports. There, I imagine Altman would be transcendent.

Now, on to the new YC initiatives. As mentioned earlier, Altman doesn't have a choice if he wants to leave his mark on Y Combinator, which was founded by his predecessor: he needs to have some big initiatives. But while he argues that more companies should fail fast, he also recognizes that the "Y Combinator" tag (stamp of approval) may needlessly lengthen the life span of a company that would have been better off dying soon. Yet, he hopes to place YC's stamp of approval into many more companies and at earlier stages.

One has to wonder what would happen to companies that don't make the cut. Is it possible to imagine that YC can make a mistake once in a while? Or will it strangle innovation by making participation in a YC program a must-have for young entrepreneurs, leaving the ones who are not selected by YC (by real people, I might add, and real people have this inconvenient characteristic that they may make mistakes, in contrast with the A.I. that Altman and Friend banter about) out in the cold? Even Harvard doesn't pretend to have the magic recipe to select the future stars of tomorrow. Or is the thinking going to be along the lines of "Only the top 200 [random number I just picked] companies have a chance to succeed so by admitting 10,000 we're quite sure to be admitting all the possible future Reddit or Dropbox"? And at a higher level, is the company better served and its staff's time better used by early but superficial involvement in 10,000 start-up ideas or by more focused interaction with fewer? Is the risk higher at the later stage because the number of companies is smaller, or higher at the early stage because, well, it's so early?

Friend explains: "Starting this winter, YC Fellowship is becoming Startup School, a free, online, ten-week course for as many companies as want to take part. They won’t get funded, but they can learn the same lessons as batch companies do. Altman, who will personally oversee this initiative, believes it is the fastest, easiest way to bring ten thousand new founders a year into the network." But will the alumni of the regular program really consider those other people as members of the network? Won't they fear the stamp of approval will get diluted and create an exclusive network of their own for the main program's alumni? (People who benefit from the system don't want to change it.) In itself, it's not a bad idea: preventing waste and misallocated time and resources by decreasing the failure rate of later-stage companies by intervening earlier, but it's hard to imagine that current later-stage companies will be pleased, and not clear where YC will find the resources (especially in mentors' time, since participants are supposed to have access to such people via Skype).

Friend raises similar questions when he writes: "Concerns about the accelerator scaling too much and too fast remain widespread... [Is YC] stretching the network to its breaking point?... [Silicon] Valley's guiding principles conflict: scale precludes uniform excellence and a tight-knit network." Maybe a people-oriented leader could pull it off, but Altman goes out of his way in the article to appear emotionally deaf, so that his announcements don't seem to rally the troops. Now, maybe he gives so inspiring advice at the ripe old age of thirty-one that founders will forgive him anything, But most leaders would know they have to make the case for change to their troops and establish a sense of urgency to effect change. Altman certainly doesn't use the New Yorker profile as an opportunity to make that case for change. 

The other thing that bothers me is that I wonder how founders' innovation and independent-thinking skills will be maintained if YC mentors them closely from beginning to end while they develop their startup idea. (A big if.) Ultimately the founders must make their own decisions to hone their expertise. Because of YC's clout, it will be very tempting for them to agree with whatever YC says even if they had a different vision for their startup. If YC is involved from the very beginning, young entrepreneurs may not grow professionally as easily.

 YC definitely has an ambitious plan but the failure for Altman to inspire audiences when he communicates his agenda may signal troubles ahead. The subtitle of The New Yorker's article says it best: "Is Y Combinator's Sam Altman fixing the world, or trying to take over Silicon Valley?" If he's picked the second option, my guess is that he's in for a rude awakening.


"First Follower", "Dancing Guy" or the best leadership video you'll ever see

I discovered this video recently thanks to the Emerging Leader seminar at SMU that I'm taking part in this semester. It actually makes some excellent points in spite of the wacky factors so I figured people might enjoy it. This was posted on YouTube by Derek Sivers. Please take a moment to watch other videos of his or like his YouTube channel. He also discusses the video in his TED talk.