Bill Gross: Debt Binge Worthy of Future Scorn

Bill Gross says future generations will view the global debt run-up of the past 6 years like we now view smoking on airplanes…misguided or just plain stupid.

Janus’ Bill Gross released an investment outlook today that is a painfully good read.

Your Link

His thesis:  That future generations are going to look at this one and say “How could they do that?” when it comes to running up debts the way we have in the past several years.

For those scoring at home, the U.S. National Debt stands above $18 Trillion as of today.  That, of course, looks trifling in the face of the U.S.’s $115 Trillion in unfunded liabilities.  Regardless of what you call them, they are promises to pay; and they are big ones.

An always interesting link is the U.S. Debt Clock.  Try it out; but keep a bucket handy.

The U.S., of course, isn’t alone; and that is what makes Gross’ read so interesting.  There may be no place left to hide soon.

In his outlook, Gross lodges multiple protests.  He states that while debt fueled recoveries from debt caused recessions are possible, they must have three preconditions to be so…

1. A non-fatal structural starting point (that is, countries can’t be insolvent at the start…)

2. Alignment of monetary and fiscal policies (especially that fiscal policy should take advantage of loose money to invest in accretive infrastructure)

3. Willing participation by private investors (they have to stay in the market even as yields are driven down and asset prices up beyond any realistic point of further appreciation).

It’s clear that all preconditions are/were not present in all countries pursuing the “borrow or monetize your way to freedom” strategy.  At the end of the day, fiscal, monetary, and investment indicators have to point toward kickstarting consumption and investment in the real economy.  It’s not clear to Gross (or me) that this has happened. If anything, Gross points to massive inconsistencies in political and market sentiments.

This is a fantastic read.  One that is well worth your time.

The implication?  Well, I posted last week about lower energy prices being a wake up call for business leaders to re-set scenarios for the future.  In this case, Gross is essentially saying that financial investors might do well to get out of markets sooner rather than later.  His quote:

Markets are reaching the point of low return and diminishing liquidity. Investors may want to begin to take some chips off the table: raise asset quality, reduce duration, and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.

Ouch.  That’s the implication.  Bursting of high valuations by investors fleeing to quality and going short could very much signal a period of deflation; then who knows what…?

Photo credit: Lendingmemo

Here is the link.

Image from Yahoo News

A Reuters report today outlined a “cyber espionage” ring focused on stealing insider information for use in stock market trading.

Here is the link.

In an interesting and not so surprising approach to targeting, the spies sought email addresses and passwords of individuals most likely to have insider access.

Cyber security continues to be a critical element of any company’s strategy.  The question will be how to maintain a level field in the capital markets with this sort of thing going on in the background.  Like cockroaches, confidential information leaks are typically far broader than the ones you see; and the key to security is not to have a low incidence rate, but rather a zero incident rate.

How does secrecy and confidentiality affect your enterprise? 


Yahoo: Fed Rattled by Elusive Inflation…


Image from Yahoo News

On the heels of my post yesterday regarding energy prices and your future, Yahoo posted some news about the Fed being rattled by “elusive” inflation.

Your Link…

In a zero real rate environment, getting some positive price momentum would be helpful to the Fed.  Unfortunately, energy isn’t cooperating.  A “final” quote from the article:

William Dudley, the influential New York Fed president, hinted at the possible response to a further cooling in prices, saying last month the central bank could run the economy “hot,” keeping rates low longer than what growth and jobs data would have suggested.

Run the economy hot.  That means allow free money to flow more freely, longer.  Still.

Once again, if we think about the impact of inflation (or, deflation) on our business, end users, and suppliers; what does it mean for our marketing, procurement, and investing activities?

How do you think about this? 

Energy Shocks Put a Premium on Foresight

The current sea change in energy markets brings the need for foresight to the front stage.


Foresight feeds the foundation of strategy.  The ability to read and react to the likely future defines organizations and executives.

On November 25th, energy expert Daniel Yergin (writer of The Prize among many other interesting books and articles) appeared on CNBC to outline the impact of revolutionary changes in U.S. oil and gas production.  Here’s the Link. Video here.

The upshot?  The U.S. is becoming a bellwether energy producer…so much so that Russia and OPEC are losing sleep over how to handle the ocean of oil and gas that is slated to come from the U.S. in the next few years.

Subsequent to Yergen’s commentary–on Thanksgiving day–OPEC chose not to alter its production schedule.  This was a move to maintain share at the expense of price. The decision sent oil prices plummeting more than 10 percent on Friday.  Here is CNBC’s report on that.

So, what?  

These issues impact you, your organization, your city, state, and country.  Pick an affinity that you have–any affinity–and this news matters.

Imagine first a future where energy stays cheap. Imagine that the economics of the petrochemical supply chain are severely impacted by low prices.  Maybe the dynamics crush upstream commodity producers.  Maybe they enhance smart specialty producers who benefit from consumer spend and lower commodity costs.  However, lower energy prices directly impact players who depend on energy production, particularly in specific geographies. Laborers in geographies that lie on the high end of the cost curve might not enjoy this news; neither will suppliers to those work-forces–the ones that provide uniforms, tools, meals, and services like laundry and transportation. The more localized the impact, the worse it could be.

But every shock means opportunity.  So, meanwhile…

Imagine second a future where consumer and corporate disposable income is unlocked from the dungeon of costly energy.  Where an average family receives a dividend that amounts to real cash to spend, just because the world has become more efficient at extracting (and, yes, using) energy.   Imagine that the average manufacturer can also contemplate reinvestment of such gains.

Those two imaginary impacts of lower energy prices are strikingly significant to all companies, whether they play in the petrochemical space or not.   Now is the time to contemplate change (yes, 2011 was the time, but still, get on board now).

What does this mean for your end products?  How about for your capital projects? What about for your procurement targets and programs? Perhaps more importantly, what does this mean for your job?

The market-wide impact of energy costs is practically instantaneous.  In 2008, we saw a tremendous reallocation of production in the automotive industry due to sustained spikes in oil prices.  SUV and truck plants were closed, not just idled, as reality set in.  Demand for efficient vehicles spiked as well, spurred by some (perhaps spurious) legislation in that era.  Such corporate moves dwarf in relation to moves that consumers make as energy costs crowd out other spend categories.

What will this sort of change mean for your company or your career?  How do you sense and predict what different end states of the world look like, and how each one impacts your capital and expense allocation?

Think about the the future, and develop options for it.  Options are the foundation of strategy, and foresight feeds them.

What do you think? 

When Enough is Enough…

Know how to really know when to say when.

Last week, I posted (here) about grace as an under-appreciated leadership trait. Given the very positive response to the topic both online and off, I thought it timely to discuss the other side of grace.

I’ll refer to the other side of grace as judgment because it is a term that is applicable across disciplines and into the professional realm. Some might say that the opposite of grace is justice. I won’t quibble with that interpretation; but justice implies an abundance of objective truth, and judgment implies an abundance of ambiguity.

The business environment offers far more ambiguity than truth.


Get your thinking cap ready for this one. It’s bit of a climb, but there’s quite a view.

First, an anecdote.

Recently, pundits and fans expended a tremendous amount of energy on the NFL’s Ray Rice domestic abuse incident, and rightfully so. While there is plenty of nuance to the discussion, one thing became clear: Once video of a grown man striking his soon-to-be wife with enough force to knock her unconscious became public, it was enough.

He was fired and roundly vilified.

The NFL’s Neanderthal and perhaps cynical decision processes aside, the case of Rice’s dismissal is a study in decision making.

To wit: Plenty of people can logically argue that grace in this instance might be merited. Mr. Rice has been an upstanding citizen and model representative of his NFL club (until he beat his significant other…that is). In fact one need not look too far to find plenty of people blaming the victim and justifying Rice’s actions as forgivable if not acceptable.

Others, particularly those in higher profile positions in the professional community, know the score. They know that one highly deviant data point is all it takes. When a person breaks a social contract in such an egregious manner, the evidence is sufficient to pass judgment.

The application of evidence, from the mundane to the shocking to the stealthy, to judgment and decision making is what this post is about.

When is enough…enough?

We deal with ambiguity in all sorts of situations. How do we know when to go full speed ahead with a plan, when to cut ties with a boss or business partner, or when to at least alter approaches with others based on the evidence we see?

Most of us want to give people and plans the benefit of the doubt… Some of us do it to such an extreme that we lead ourselves into professional peril or, worse, purgatory. Grace for grace’s sake. The benefit of the doubt as a rule vs. an option.

When do we know enough to make a decision?

The answer? When we see one or two powerful indicators, or many, many subtle ones. The art is in knowing the indicators and their strength and in avoiding errors of intuition around them.

I’ll explain that in a moment.

Probabilistic thinking, when applied to situations at home and work, can allow you both to give the benefit of the doubt AND to maintain a meaningful level of decisiveness in the face of ambiguity. The concepts in this post are just as applicable to human relationships (both personal and professional) as they are to strategic plans.

Let’s dive in.

The Foundation:

Depending on your disposition, you would have either been fascinated or bored to tears if I went into detail on the foundational subject matter for this post (in short: Bayesian Inference); but others have done it better than I can. So, I won’t. I will give a short overview instead.

The basis for the rest of this article is a formula for probabilistic thinking known as Bayes’ Rule and a method using it known as Bayesian Inference. I’ll work with a slightly bastard interpretation of both. For those of you who know better, bear with me to the end.

Bayes’ Rule was formulated by a man named Thomas Bayes…a thinker ahead of his time (and behind his own thinking, some would say–he never published his work). If you have no idea what Bayes’ Rule is, you might study it elsewhere (links to good, popular/accessible summaries are out there. Here is one).

Bayes’ Rule is a formula for evaluating the impact of evidence. It is the foundation for Bayesian Inference, which is a process that provides a quantitative method for combining new evidence with prior beliefs–for “objectifying the subjective.” It is, at its most simple, a formula for taking:

  1. A “prior” hypothesized probability that something is true or false–“I’m 80% sure Johnny has ADD.”
  2. An observation that provides evidence (the “test” –> “Johnny sat for 30 minutes reading a book.”)
  3. And a set of 2 conditional probabilities based on the prior assumption and the observation (1. “If Johnny has ADD, there’s a 5% chance of Johnny sitting still that long.” and 2. “If Johnny has no ADD, there’s a 60% chance of Johnny sitting still that long.”)

These things come together to create a “posterior” probability that the hypothesis is true. The formula looks like this:

The term “P(A|B)” is the posterior probability that A should be true given that B was observed. Enough said, right? To make it simpler for the practical uses I’ll put together later, the calculator I’ll use (here’s an online version) looks like this:

Based on the posterior probability that Johnny has ADD based on this test (the green box, which is now 25%, down from the prior of 80%), Johnny’s parents can rest a bit easier.

If you are still with me, you are wondering “So friggin what?” Right. Well, this little primer is necessary because the power of Bayes’ Rule in your everyday life is real. It’s a way of updating your thoughts on a strategy, a relationship, a bet you want to make in Vegas, and any number of other things, by just applying evidence and judgment. And it doesn’t require you to sample forever in order to increase or decrease your conviction.

More importantly, it’s a way of battling a sympathetic and highly anchored intuition. Almost all of us have it. For example: I’d bet you dollars to donuts that Johnny’s parents, when asked what their “posterior” should be after the observation above, might update from 80 percent to “oh, ah, about 60 percent.” The reality was a fraction of that (25%).

Your intuition isn’t great when it comes to judging the meaning of highly deviant events or behaviors, and that can cost you. It can cause you to write people off based on a bad streak when it isn’t warranted, or it can cause you to be far, far too forgiving to someone or something (like a plan) that looks nice but isn’t performing.

Thus…Bayesian Inference.

Constant updating with new information can make you a better professional (and poker player), and frankly allow you to live a better life.


Let’s apply it to a situation like the NFL’s with Ray Rice.

Case 1: Ray Rice and Firing Decisions

Take the Ray Rice example. Imagine you have a high profile employee in your organization who does as Ray Rice did. There are really two considerations that come into play in a case like this. Call them Reputation and Values.

  • Reputation: Given the evidence available, prior experience, and the profile of the person, what is the likelihood your organization can weather the reputation storm?
  • Values: Given the evidence available, what is the likelihood the individual’s actions could be reconciled to your organization’s values?

The NFL, at first, applied the reputation question to its calculus; and it looked something like this:

Round 1: Evidence available was an ugly video of Rice dragging his fiance out of an elevator car. Ugly, yes, but who knows what happened in there. Right? The NFL has weathered many, many of these similar storms in the past without indefinitely suspending a player, so experience was on Rice’s side. The NFL took the intuitive view that Rice wouldn’t hurt its reputation because his actions were on a continuum of behavior. Bygones and all that. 2 game suspension.

Then? Video of the actual incident leaks. Woah. A firestorm. What happened?

Round 2: Well, let’s consider the values case, which is what the NFL was ultimately forced to do after video of Rice actually cold-cocking his soon-to-be-wife comes out. It results in more of a binary conclusion. Here’s a simple calculation based on the hypothesis that “Ray Rice is aligned with the values we espouse.”

See what happened there? A guy punches his fiance, and suddenly there’s no way he can represent the values that some people expect the NFL to protect (simple things, like “don’t beat up your girlfriend”). Rice goes from “model citizen” to “persona non grata;” from a 2 game suspension to fired with indefinite league suspension. It’s not a continuum, it’s a cliff.

Keep that in mind: Powerful evidence deserves a powerful response–a cliff, not a slope.

A case of an employee filmed publicly beating his significant other is probably too egregious and easy for most leaders to judge. It’s pretty much binary. Still, cases of legal or moral misconduct and how we handle them hold the mirror up to us in ways that few other cases do. The outward appearance of when enough is enough for you as a leader or follower reflects on your morals more than you’ll ever know.

What’s the equivalence point between grace and judgment when it comes to an employee’s misconduct? You have to make that call, and I’m offering one set of tools. Even the most “pure as driven snow” of ethical leaders probably has an expense or two that could be called into question even if just via poor recollection (let’s see, was that 15 miles to the airport or 18…?). In the case of small deviations, it takes a lot of them. In the case of big ones? not so much.

Let’s move the cases a little closer to issues you probably face in your workplace.

This is where these approaches get juicier.

Case 2: The Change Leader Who Doesn’t

People are keen observers of behavior. When a leader declares a change, and doesn’t change behavior, people know it; even when the leader INTENDS to change. Intentions don’t matter. Observations do.

Let’s say a leader declares a tremendous new initiative for his organization that is going to require all parties to think and act differently. Problem is, his behavior reveals no real substantive indication that anything has changed.

Some people will say “yes, sir” and attempt to implement change.

Others? They will assess the conditional likelihood of change given their observation of the leader. They won’t necessarily use math, but if they did… Applying Bayes’ Rule, it goes something like this:

Situation: I’ve been told by my leader that things are changing.

Prior Probability of Real Change: Let’s say the organization has been quite good at implementing change, so 60%.

Observation of the Leader: Once he announced the change, my leader does nothing to reinforce or role model the change (probability of observing this given real change? Let’s say its 10%. Probability of observing this given no real change is actually going to happen? Let’s just say it’s 90%).

The calculator looks like this:

See how easy that was? We go from an announced change effort that had an estimated 60% chance of success to a quick, mathematical assessment that change is only about 14% likely to happen given the leader’s lack of change.

In short? Why bother changing? Nobody else is. This from a single assessment of the actions of the announcing leader.

By the way, this gets worse the more case history there is. The more “flavors of the month” get launched and abandoned, the more fatigued and rational people become about change. “Going through the motions” and “why bother” mindsets are real things.

Case in point: If I had started with a 20% likelihood of real change as my prior estimate, the calculator outputs 2% as the posterior probability.

Yeah, that’s right, if you are bad at implementing change, people may qualitatively stop believing you; but the reality is that their cynicism is justifiable with numbers.

Such assessments show why role modeling by leaders is so critically important in transformational change environments. While people in the rank and file won’t typically do the math; they will, in most circumstances, read the clues. The math just reinforces it.

If anything, in my experience leading change, I’ve observed that people get on or off the bandwagon quickly based on their assessment of commitment and consistency of senior executives in charge of the change in a fashion very similar to that presented here.

Let’s look at another case you might find familiar.

Case 3: The Stretch Role

The age-old question of when a person is ready for a promotion can be tackled with a Bayesian approach in order to avoid “has-to-have-been-there-itis” where nobody is good enough for promotion to a role they’ve never held before.

Let’s say you have a budding manager who wants to step into a more senior role. What do you need to see from her in order to gain confidence in placing her in a stretch role? Pick a few triggers and use them as tests.

Maybe the triggers for her to be considered ready for the stretch role are (keeping it bland and general) organization, acumen, and foresight; but all people have some doses of each of them without being ready. So, how do you handle it?

This is where the compounding or iterative approach to Bayesian Inference matters. The “Posterior” of your first test becomes the “Prior” of your next. The analogy here is a poker player updating his assessment of his probability of winning as each card is played.

Let’s say your “prior” probability is 60% that your charge will be ready for the stretch role, but that you really need to get to 80% to pull the trigger. What do you do? You keep track of how she does on the “trigger” criteria.

So, you use the calculator in an iterative way this time…

Reading from left to right, you can see that you’d be justified in placing the person in a stretch role (85% confidence) after observing the confluence of 3 observations on the triggers. The addition of evidence for organization, acumen, and foresight support the decision. This is overly simplified, of course.

There could, in turn, be a column here for evidence that is contravening, and it would be factored in. That’s right: The iterative power of this mode of thinking is real; and it works in both directions.

Let’s have some fun with one that demonstrates the bi-directional nature of Bayesian Inference along with the asymmetric power of different types of observations.

This time I’ll use an unpleasant but all too common situation.

Case 4: The Asshole*

Let’s say you establish a “No Asshole” rule in your life. Perhaps this means that you will do you best to either remove them from your team or, failing that, remove yourself from contact with them.

Some assholes are easy to identify (in a Lloyd Christmas kind of way, they’re obvious). But sometimes, especially in a professional setting, you have to figure out when enough is enough through evidence and observation. The issue is this: Assholes can act like good people at times–sometimes even better than good people. They can be charming, or attractive, or smart and polished. But, deviant behaviors stand out.

I’ll demonstrate.

Imagine a new colleague comes into your organization. Let’s say that your No Asshole radar is completely inactive. They might be an asshole, but you see no reason to think so. You assign a 10% chance of asshole-dom at the start (perhaps the base likelihood of encountering one of these animals in your professional experience). Then, over the course of six months, you observe the person being actively deceptive, politically pitting people against each other, backbiting, and bullying.

Taken individually, these actions could come from anyone. Even a great executive could backbite once in a while. For that, I’ve used 10% to 20% as the probability of a “bad day for a good person” in the “Behavior|Not an Asshole” line below. But, as observations mount…it becomes clear:

The person is an asshole. 100%.

Get away.

But wait, you say? They are nice, have a warm smile, have charisma, are active in the community, and are great with their family.

That’s the issue, so are people who aren’t assholes.These aren’t deviant behaviors like the first set of observations, so they really don’t count for much. It’s the old “I’m just an intense person sometimes” or “my job requires it” shibboleths that assholes like to trot out. The person is already over the cliff. Statistically speaking, adding in nice but common behaviors has no power in the assessment.

All the goodness in the world can’t overcome a multitude of highly deviant behaviors that tag your colleague as an asshole. Find a way to get away and preserve yourself and your organization.

Here’s why this matters: Outlying behaviors are huge signals, and should be taken as such. In-lying behaviors (like smiling and acting nice, for instance) are actually not all that big a signal. Even the biggest assholes in the world smile and act nice frequently, just like “normal” people. It’s simply a posture–like crossing and uncrossing one’s arms. Observers of actions know that it’s much harder to hide deviant behaviors over the long run.

This is why true acts of deception and bullying, especially within a purported culture of integrity, should sound the alarms…now…loudly. Enough is enough.

So What?

It all comes down to this: When considering evidence in order to make a judgment or decision, a series of small signals can add up to a lot of conviction, but it takes a lot of time. A single, clear, outlying signal can remove any doubt, even in the presence of small signals to the contrary. When it comes to judging people’s actions (like in Case 4), it’s a cliff that can’t be walked back up.

After the presentation and consideration of some types of evidence, no amount of earthly grace is indicated.

Here are 5 practical ways to apply this kind of thinking everyday:

  • Have a point of view going into any interaction, particularly those with significant ambiguity. Be vigilant. And, update your point of view as you judge events and actions, to the good and to the bad. Your “posterior” estimate of reality is what matters.
  • Place checkpoints on strategic plans that call for evidence based tests of whether the world is what you thought it would be. Update!
  • Hold performance reviews with people that allow you to mutually update your understanding of how things are going and ideally to steer away from misunderstandings of performance or inference. Get intentions out on the table to match with actions.
  • Remember that your actions are what people see, not your intent. The best thing about using Bayes’ Rule is that it relies on observation and evidence. The worst thing about it? When others use it. You can’t weasel your way out of being an asshole once people are onto you and get over their tendency to let you slide.
  • Tolerate, but only to a certain degree, bad behavior. That goes for bad behavior from your superiors or from your subordinates. Everybody has a bad day. A bad day is not an indicator of a bad person. A single data point can’t indicate a trend, but it can indicate a probability of the underlying personality, which has been the point of this post.

A friend recently related to me an adage from his years in the U.S. Army: “Once is happenstance, twice is coincidence, three times is enemy action.” Such is the type of thinking I’m encouraging here, with the slight adjustment that sometimes, once is enough.

Grace is a critical element of leadership, except when it’s time to use judgment. Using the concepts in this post can allow you to know when enough is enough.

Now, go mind your posterior.

* I would like to thank Stanford University professor Bob Sutton for popularizing the notion that the word “asshole” has no polite substitute. I am using it here as professor Sutton would. If you have not read it, Sutton’s book The No Asshole Ruleis worth a look.

Geoff Wilson hopes that this overlong and somewhat technical article did, in fact, provide a view that was worth the climb. Offer your comments or critiques below or offline.

Click Here if You Know How to Read

If you enjoy connecting the dots and thinking critically about the world around you, read on.

Below is a list and some discussion on ten books every executive should know.

Some of the books I’ve listed are all about how to “play offense” (that is, to build and execute on a philosophy of leadership effectiveness). Some, however, are very much about how to play defense (that is, to understand some disordered twists on philosophies and personalities that you might want to avoid).

Two things before the list:

First, I use the term “know” as opposed to “read,” since simply reading a book is not sufficient. Lots of people “read” (past tense) Animal Farm back in junior high or high school. Few can really internalize the implications at that age.

I’d argue it’s important to know these books’ content at a practical level. Many people will tell you they’ve read one of these books, and then go on to bastardize the philosophy. In fact, several items below are in the list because they are popularly twisted (hello, Hayek!).

I may even do the same thing in my notes below.

You’ll never know unless you know the books. I encourage you to know what you believe.

Second, this is a list of books that take on politics, philosophy, economics, change leadership, and human nature.

What you don’t see in the list is a set of business books.

I’d much rather encourage the world to think critically about their situation than to look at books that encourage them to emulate others’ situations. True, you don’t have to reinvent the wheel, but it’s good to know whether a wheel is what you really need.

That’s where critical thinking comes in.

But, I digress…Onward.

Ten Books Every Executive Should Know

1. Atlas Shrugged, by Ayn Rand

What it is: A rambling screed of a novel written against statism, cronyism, and bureaucracy everywhere. Atlas Shrugged has stood the test of time. Sadly, it is, in the end, a caricature of philosophy and good writing all at the same time. Still, after reading Rand, the next time you are in a meeting with a bureaucratic leader who dissembles with vision-less imprecision, you’ll ask yourself “Who is John Galt?” with warm self confidence.

Why read it: Because Rand is every 25-year-old budding executive’s favorite author; and unfortunately between the ages of 25 and 45, few budding executives read very much.

Know this: Befriend anyone who embraces Rand’s fundamental premise (essentially, you can’t conjure individual well being out of thin air or by force and theft / can’t have your cake and eat it too). Beware anyone who thinks “Shrugged” is great literature or airtight philosophy (they are more likely to be one of Rand’s “moochers” or “mystics” than they will ever realize).

Extra Credit: Read Rand’s The Fountainhead for a better read and a more concise understanding of Rand’s super-individualist point of view.

2. Animal Farm, by George Orwell

What it is: An anti-communist allegory. It has great messages for leaders everywhere, particularly in organizations undergoing transformational change (watch out for those animals who grab power for themselves and deceive others). Ultimately, it’s a dark story, but it’s also a warning relevant to many leaders and groups.

Why read it: Because too often Orwell’s little book is ascribed solely to political systems when it really can be applied to organizational systems as well. As a leader, you should know your constituencies well. Pigs who espouse equality, transparency, and performance but who are just ever-so-slightly more equal than others exist in every organization.

Know this: Too often, it’s the “Boxers” (the hardworking, loyal draft horse in Animal Farm) in your organization that make it go. Get to know your Boxers. Keep in mind the anecdote of the cat “re-educating” the sparrows to perch on the cat’s paw next time you think you can fool people into changing their behavior when your own behavior doesn’t engender the trust necessary for them to change.

3. The Road to Serfdom, by F.A. Hayek

What it is: Hayek’s classic warning of the perils of central planning and actions that obscure price.

Why read it: Because you probably have read some Smith, Keynes, and Friedman, but you’ve probably only heard second hand regurgitations of Hayek. Go to the source. It’s applicable to you as a leader in an organization. The more you confuse your people as to who has what incentives and as to what actions have what costs, the more you push your organization down the road to serfdom…

Know this: The favorite poster child of Libertarians everywhere was a proponent of social services and safety nets in wealthy societies.

4. Better, by Atul Gawande

What it is: A collection of essays on improvement in surgery and medicine, written with a heartfelt focus on both incremental and tansformational improvement. As a book, it’s as close to a safe haven of reflection for change leaders that I have found.

Why read it: Gawande’s essays, centered on three virtues of diligence, doing right, and ingenuity, are useful to any leader who really wants his organization to do…better.

Know this: Getting better in any pursuit does require diligence, values, and ingenuity. Gawande’s book is a good set of examples.

5. Capital in the 21st Century, by Thomas Piketty

What it is: If you don’t know at least the caricature of the book, you must not read the news much. Depending on your point of view, The book is either about how Piketty wants world governments to confiscate and redistribute all wealth OR how he wants to save capitalism from its own structural instability. My read is that Piketty has posed an intellectually honest and largely fact-based outline of real structural deficiences of “run rate” capitalism (read that: Capitalism without world wars or other significant dislocations of capital holdings), with a probably-right-but-probably-impractical taxation scheme as the cure.

Why read it: Because so few people with opinions on Piketty’s writing have actually read Piketty’s writing; and Piketty’s writings are relevant to global economics and politics.

Know this: As popular as an economist can get, Piketty has pricked the finger of capitalism in ways that few writers have since early in the 20th century. You’d best know what his premise is (Fundamentally: That economic growth cannot over the long run outrun return on capital, leading to capital structurally accumulating in fewer and fewer hands without intervention) so you don’t get misled by people who think they know what it is (“he’s a raging socialist” is my favorite ad hominem).

6. The Signal and the Noise, by Nate Silver

What it is: A engrossing but dense read on managing through the noise and moving forward in the face of ambiguity. Silver’s experience predicting elections is extrapolated to many different arenas (including poker).

Why read it: Applying Silver’s (essentially Bayesian) approaches to management takes “decision making” from a once a year budgeting process to a constantly updated, probabilistic approach to “leadership.”

Know this: Even if you are right, you might be wrong (and vice versa). Randomness can still beat you. But, there are methods that can help minimize the risk. Silver’s book outlines how.

7. The Sociopath Next Door, by Martha Stout

What it is: Stout’s treatise on the prevalence and malevolence of disordered personalities in your community and the workplace.

Why read it: While Stout’s estimates of the population prevalence of sociopaths (~4%) are higher than other experts’, the fact that these personalities self select into and thrive within corporate environments means her estimates are probably conservative when applied to your office. The next time someone stabs you in the back and then takes you out to lunch and asks you to pity them for the situation that made them stab you, this book will ring a bell.

Know this: People who lack conscience are out there. They are dangerous to you if you espouse a values set of any sort. And, they thrive in political organizations. Know, especially, how to spot them over time (Silver’s Bayesian approaches are helpful). Try to inoculate yourself as a leader from the charms and methods of these particular animals above and below you in the organization. If you don’t know they are there, others around you do and are feeling the pain of their machinations.

8. Into Thin Air: A Personal Account of the Mount Everest Disaster, by Jon Krakauer

What it is: A story of the May 1996 disaster on Everest. It’s also a gripping read with lots of action.

Why read it: Under the surface of this popular nonfiction narrative is an amazing web of case studies and lessons on decision making. The pressure to succeed, whether it comes from within an individuals (“my life goal is to summit Everest”) or from commercial interests (the guides made a lot of bad decisions with a lot of money on the line), has to be managed.

Know this: In rare environments, it takes rare skill to evaluate one’s circumstances effectively and make the right decisions. Executives who are confronted with deal fever (“let’s just get this thing closed”) should go back and re-read this book. Sometimes, when you are 100 feet from the summit, it’s the right answer to turn around and go home.

9. The Selfish Gene, by Richard Dawkins

What it is: A deep, logical dive into the notion that we are all just carriers for our genes.

Why read it: Because ideas travel like genes, and Dawkins was one of the first to realize and discuss it. He invented the notion of the Meme. As leaders, you and I trade in ideas.

Know this: Dawkins’ summaries of population genetics, memetics, and game theory (his “Evolutionarily Stable Strategy” concept still fascinates) have amazing applicability to change leaders everywhere. Unless you understand why people behave in an organization they way they do and what it takes to change, you can never really effect change as a leader.

10. Deep Survival, by Laurence Gonzales

What it is: A scorching examination of why and how people survive in many different life threatening circumstances.

Why read it: As with so many things in life, the art of survival is sometimes counter intuitive. Gonzales provides a view of extremely valuable traits that you might otherwise overlook. He boils down survival to a set of guidelines that are directly applicable to the life of any reader: Stay calm, be humble, don’t rush, have a plan but don’t fall in love with the plan, enjoy nature, do it for others. If you and I did these things every day, we would be much more effective than we are.

Know this: Gonzales’ examination brings into question what traits we really need in people who are leading themselves and others through harrowing circumstances. The next time you are looking for a prototypical talent, think about the survivors in Gonzales’ book and look again. Sometimes the best survivor isn’t the endurance athlete, it’s the pudgy guy who moves slow and continually examines the world around him.

There you have it.

This is just a list of ten books. I could make a list of 5 or 20 and it would be equally incomplete. There are insights everywhere. Go find them.

I’d love for you to add your “must know” books to the comments section. I (and other readers) might learn something.


Success Can Be a Problem, Too…

Sometimes, learning from your successes can be the hardest learning of all.


“History is written by the victors.”

– Winston Churchill

The most difficult leadership disease to overcome is one that springs from success. A victory—whether it be in business, war, or sports—is a victory. A win is a win. The disease I write on here is what I’ll call the “blind man’s bullseye” disease or BMB disease for short—the ability that leaders have during time of success to recast a win…any win… as intentional and well planned. We read a lot about how business and political leaders have learned from “adversity” or from failure. It is less common to hear how these leaders learn from their lucky breaks, particularly if they are in an environment that doesn’t respect luck.

BMB disease—this tendency to recast luck as acumen and to avoid learning from it—kills agility and learning; and it does so when the organization just might have the most to gain from being more agile and focused on learning. In its most extreme form, this disease destroys trust and implants a ticking time bomb of false confidence that will trigger when tough times hit.

Why the name? I use the analogy of a blind man’s bullseye because this leadership affliction is akin to a blind man firing an arrow from a bow and then painting the bullseye around the arrow—no matter where it hits—after the fact to match the hit. Apost hoc fitting of strategy to results vs. measuring results and adjusting strategy.


In reality, this concept is an offshoot of well-known cognitive biases outlined by Daniel Kahneman and others. In particular, BMB is a type of survivorship bias—it’s a way of promoting success at the expense of learning from failure. It is a cousin of the “Texas Sharpshooter” logical fallacy that derives from a similar, but different, projectile analogy.

So where does the affliction come from?

A true irony of the information age is that spin has become easier than ever. The availability of data, networks, relationships, and ostensible transparency ought to result in an environment where escaping hard truths is increasingly difficult. It’s logical, right? Give me enough information about any problem, and I should know the truth.

It’s just not so.

Today, leaders of all stripes have tremendous power to form, propagate, and change messages at any given time. At its best, this power allows for obvious flexibility in moving an organization forward—influential control of a mission-based approach. At its worst, it forms the basis for the meanest sort of revisionism at both a personal and organizational level—Orwell’s memory hole writ large. “I meant to do that” becomes not only a means of self-promotion, but also of self-defense and self-delusion.

Where might we see this in the business world? Here are a few examples from my experience:

The Strategic Management BMB:

I had the opportunity to spend my early career in the venture capital space during the rise and fall of the dot com. During that era, many corporations got into the game of venture capital investing in the name of it being “strategic,” particularly while it was profitable, only to find that the game is not only difficult but also highly volatile. Many companies who accumulated large venture capital portfolios on their balance sheets ended up with a bucket full of write offs when the market turned. Incentives being what they are, we tend to define as “strategic” that which is immediately profitable versus that which is sustainably profitable.

This is going on in your office today, and it is a natural bias—In fact, you may be mining a highly profitable small account today (bullseye!) at the expense of a more difficult but potentially much larger account your strategic aims say you should be mining. We paint the bullseye on the things in our portfolio that pay off now, and downplay the risk-adjusted strategic approach that may have been our target in the first place.

The Talent Management BMB:

One of the more malicious aspects of the BMB is its tendency to drive out diversity of thought and experience. In the run-up to the sub-prime lending crisis, most anyone who had the gall to question lending standards or the lunacy of some securitizations ran the risk of being squarely ostracized. Many people who were bearish on the securitized debt market as a whole spent years and a tremendous amount of capital convincing others that it was overvalued. A few of them made a killing in the subsequent turmoil. The reality is that understanding the value of “minority reports” in an organization or market sector is a key leadership trait. If we spin our success as intentional, we will push these thoughtful perspectives to the side and drive them out of our organization.

In your own organization, there are people who think differently about your success. They should be embraced for their diversity and not ostracized because they “don’t get it.” We paint the bullseye (mark them as “successful,” that is) on the employees who are immediately productive—or, in the worst case, simply sycophants and acolytes—in the current environment vs. those whose points of view, talent, and mindsets will move the organization forward in different states of the world. In times of plenty, people who have a cost and risk discipline are valuable counterweights; just as people who are entrepreneurial, creative, and growth-oriented are in times of cost control and retrenching.

The Thought Leadership BMB:

Perhaps the most egregious use of the BMB in existence is in business literature. Every business school case study and almost every business book in existence takes what was almost certainly an ambiguous, amorphous circumstance that resulted in success and attributes it to structured planning, vision, and “good business thinking” that can be summarized in 10 bullet points or fewer. The success of an organization can be written into a tidy story suitable for consumption by a business school class or an aspiring professional; but the ambiguity of actually muddling through a difficult business environment—the many shifts, turns, decisions, and blind alleys—almost never get displayed for consumption.

Storytellers being as common as they are, the thought leadership BMB is likely right under your nose—it may even be your own work product. Internal case studies and after action reports often exhibit BMB disease because they fail to confront the lessons learned that will make the organization better the next time around. “We brought the project in on time and on budget” sounds a lot better and cleaner than “we brought the project in on time and on budget but we burned-out 5 of our best professionals and alienated our two most strategic business partners in the sector.” We paint the bulls-eye on the end state of “great” companies, businesses, or projects but rarely examine the structural, cultural, or risk-taking advantages they had—along with the real failures they endured—along the way.

So what?

These are all examples where valuable learning opportunities are papered over in the interest of the promotion of success. In some instances, such papering over implants a ticking time bomb in the organization. In the first two instances, the time bomb was the future profitability or organizational health of the company. In the third, the ticking time bomb is that we imbue young business leaders with a view of business success as somehow formulaic and simple vs. ambiguous, random, and hard won.

Overcoming this disease is hard. You and I have incentives to promote success and minimize failure. Those incentives are as basic as dollars or as ephemeral as ego. Recognizing that you, as a leader, have both the motive and, increasingly, the opportunity to spin your way to a dangerously revised view of success is prerequisite to solving this problem.

The best leaders I have had the opportunity to work with and around do a few things better than others to avoid the BMB disease. In times of success, they (1) acknowledge when their arrows have landed randomly, (2) evaluate and understand why they landed randomly and why they were successful, (3) celebrate the win and the intent—the what and the why—but own and fix the process—the how, (4) seek objective counsel, and (5) aggressively eliminate spin and the habits that propagate it in the organization.

Step 1–admitting it–is the hardest for most leaders, but without it the other steps never happen.

Enlightened leaders pursue a learning mindset, a learning team, and learning organization. The leader has the power either to succumb to BMB disease or to overcome it. But, the leader has to have the discipline to assess component failures within grand successes in order to lower the probability of grand failure in the future.

One warning: Don’t take this article as an indictment of risky or random wins. Seizing on emergent opportunities is important. A win is a win, even an ugly one. As leaders, we have to embrace and bask in the joy of what John Madden called the “no-no-go-go” where a risky, unorthodox, or simply bad decision becomes a great one. We never need to scoff at off-strategy wins; we just need to know whether they are sustainable. Blind Man’s Bullseye disease is manifest in “spinning” or moving the organization’s bullseye to the organization’s results without a sound rationale to do so—fitting the strategy to the result, vs. assessing results and adjusting strategy.

As we write the history of our victories, may we all have the humility to admit when we were lucky, and to grow from the experience.

I invite you to share examples of this affliction from your own experience if any come to mind…