What Tesla’s First Autopilot Fatality Teaches Us

What to do when your product kills someone.


Tesla is in a pickle today.

It has a product feature that has killed its user. Now Tesla has to walk the fine boundaries between legal defense, public relations sensitivity, technological defense, and moral culpability.

The National Highway Transportation Safety Administration (NHTSA) has opened an investigation into the circumstances surrounding the death of a Tesla motorist employing Tesla’s much hyped Autopilot feature.

The motorist was cruising on a divided highway when an oncoming tractor-trailer made a left turn in front of it, clearing enough space that the cruising Tesla drove right under the trailer, removing windshield (and one would assume killing the inattentive drive instantly at that moment) before continuing to cruise into several more collisions.  A diagram of the accident is here.


It’s a straight up oncoming left turn–not some freakish move by another motorist that could not have been judged. And, the Tesla drove right through the truck without seeing it.

That’s scary.

Now, there are a few issues related to the use of new technology that come to mind here, namely that there are risks to using new technology in general, and in particular when it involves moving your body at high speed.  The first people to fly in airplanes faced a much higher risk of death than those of us who partake of air travel do today. It’s part of the process.

But… When the technology is uniformly hyped, results in a fatality, and then its purveyor only defends the technology, then the purveyor is on the hook.

Okay, well, no, probably not legally.  As Tesla not so subtly posted in its blog about this crash, the company immerses the user–every user–in disclaimers about the technology while allowing the user to use it. From the blog post:

It is important to note that Tesla disables Autopilot by default and requires explicit acknowledgement that the system is new technology and still in a public beta phase before it can be enabled. When drivers activate Autopilot, the acknowledgment box explains, among other things, that Autopilot “is an assist feature that requires you to keep your hands on the steering wheel at all times,” and that “you need to maintain control and responsibility for your vehicle” while using it. Additionally, every time that Autopilot is engaged, the car reminds the driver to “Always keep your hands on the wheel. Be prepared to take over at any time.” The system also makes frequent checks to ensure that the driver’s hands remain on the wheel and provides visual and audible alerts if hands-on is not detected. It then gradually slows down the car until hands-on is detected again.

That is a mouthful that basically says “use at your own risk.”  And, that’s fine, but to place “public beta” software in charge of multi-ton hunks of metal and plastic moving at 90 feet per second seems a bit…aggressive. And so I’m betting Tesla will face a bit of backlash about the technology.

Which brings us to Tesla’s other defense… the one using numbers. In its blog post, Tesla says:

This is the first known fatality in just over 130 million miles where Autopilot was activated. Among all vehicles in the US, there is a fatality every 94 million miles. Worldwide, there is a fatality approximately every 60 million miles.

And, this is fine, but it’s also indicative of a marketer or PR person using statistics–not a person who understands the stats themselves.

You want to make a fair comparison of the safety of your technology, Tesla?  Great, then let’s do a couple of things…

First off, let’s remove from the 130 million miles cited the mileage merely using active cruise control, because as I understand it those miles are aggregated in there.  That is sure to be a LOT.  That will leave the mileage that Tesla’s are being used with “autosteer” engaged.  That is the technology in question. That means that this fatality came with far fewer miles driven than the company claims.

Second, the company is appealing to the base rates of fatalities as evidence that Teslas on “autosteer” are safer than other cars; but the base rates used are highly misleading.  Okay, so there is a fatality in the U.S. every 94 million miles driven.  That’s fine; but it includes, for instance, people who die from overloading their 1978 Ford Pinto and then losing control after a blowout.  It includes drunk drivers.  It includes people driving old cars, and cars with mechanical deficiencies, and cars with bald tires.  It also includes fatalities where the driver was killed by the negligence of other drivers–not simply their own.

In short, it’s not a base rate that’s comparable for Teslas driven by sober drivers on divided highways. That rate is different, and likely less flattering for Tesla.

The correct base rate starts with the rate of fatalities of people driving brand new luxury automobiles.  And, that matters. In the chart below, you see the car models with the lowest driver death rates, and the models with the highest rates.  Tesla isn’t in league with the Kia Rio or the Hyundai Accent (two cars that happen to have drivers who die at high rates). To suggest it is so is to pad the PR.

The correct base rate also includes cars on divided highways, and where the dead driver was the inattentive one who drove into an avoidable accident.

So what?

First, the facts are actually not likely to be in Tesla’s favor even though Tesla has attempted to lead with facts.  The legal case probably is in Tesla’s favor, but it’s not clear the moral case will be…because:

Second, I’m betting that Tesla drivers, like the one in the unfortunate crash incident, are using this nascent technology and expecting that it will not run them broadside into a tractor trailer.  The hyperbole surrounding the tech, and the feel good ego boost of owning a six figure investment in new technology, likely clouds judgment.

Third, when it comes to new products, it’s probably too aggressive to put highly dangerous equipment in people’s hands and call it a “public beta.”

As someone who is a fan of the prospect of self driving cars but who had no idea the aggressiveness of Tesla’s placement of this technology onto actual roads, I’d say it’s time for them to go back to the drawing board.

One fatality does not make a new product category go away, but Tesla faces a very fine line between legal defense and technology evangelism.  When your product kills someone, especially when it kills someone during a routine circumstance where the technology should have obviously worked, resorting to bad statistics and legal disclaimers is a bad idea.

The right thing to do is to fix the technology, not to spin its goodness.

As always, caveat emptor. And be careful out there.

The Pornographication of Motivation and Values

Distilling motivation to dollars, penalties, or positive thinking may leave something out…

A day or so ago, I came across a post via my LinkedIn feed.  It has now disappeared, probably to protect someone’s sense of career risk.  But…

The post, entitled “Stop Living Your Life Like a Motivational Poster,”  is about how the whole motivational poster and quote industry is dangerous because it leaves out essence and authenticity while peddling positivity and motivation.  The author states:

I truly believe that to keep ignoring every emotion that does not fall into the positive category is at best unhealthy , and at worse can lead to feelings of inadequacy- that your [sic] somehow strange, not good enough, not strong and self controlled enough to ‘think yourself positive’

The post touched off a minor candle fire of discussion on LinkedIn.  And, there’s something hiding in that post for those of us working to perfect (if “perfect” is a possibility) strategic leadership.

Namely, that something is about how the insidious drive to simplify, distill, and extract the essence of motivation can leave out critical context to the detriment of individuals and organizations.

That context might just be how challenging the circumstances were for a leader whose wisdom gets distilled into a motivational witticism.   Mohandas Gandhi’s “Be the change you wish to see in the world” quote is used incessantly by folks who probably don’t understand the massive hardship Gandhi went through to have the credibility to deliver it.

Perhaps more importantly, however, the context can be the values and constructive intent that get left to the side of a motivational incentive.

But, why the link to pornography? 

So, I roped you in with a reference to porn, and now I need to make the link.  To do so, I’ll use a quotation (irony, yes, I know) from Pope John Paul II. He said:

There is no dignity when the human dimension is eliminated from the person. In short, the problem with pornography is not that it shows too much of the person, but that it shows far too little.

Did you get that?  The problem isn’t that pornography reveals too much of the context, but that it reveals too little. Removing the context removes the dignity.

That’s what you and I as strategic thinkers and leaders need to reflect on when it comes to motivating others.  Are we distilling motivational text, structures, and systems down to quotes, numbers, and dollar amounts that remove the context (and the dignity)?

In short, are we making fundamental values a transactional thing that can be priced away?

Three areas where this may matter to you and me:

While the habit of distilling away contextual values in pursuit of efficiency and impact is something to watch out for in all parts of life, I’ll reflect on three areas here that matter.

1.  Motivating your organization:

There’s a very large market for organizational motivation diagnostics and techniques.

This market will only grow as Millennials become more and more disconnected from the values and realities of the older generations who (in many cases) manage them.  If men and women are from Mars and Venus, Millenials and Baby Boomers are from different galaxies.

Practitioners refer to this area of organizational practice as “engagement,” but reality is that this is all about motivation toward the goals of the organization as a whole. Like the article I linked in the opening of this post, “engagement” techniques and programs all too often fall into the trap of trying to distill a multi-faceted, highly personalized issue down to a few pithy drivers.

This is a noble act, to be sure; because engagement does matter.  Still, these programs turn on the distiller and invariably come up with programs that get at only one or two of the fundamental things that people think about when they think about engagement.

In your organization, one person is most engaged when thinking about building the value of the organization he works within.

The next thinks primarily about impact on the customer.

Another thinks it’s all about himself.

The next thinks its about doing good for society.

Still another thinks its about her working team.

Research shows that people split evenly on these 5 factors when selecting the one that motivates them.

When you look to engage your organization, or even your immediate team; you have to factor in this diversity of drivers.  Distilling down to a focus on team building activities or greater community involvement or quotes about whether it’s “good for the customer” will only touch the tip of the iceberg.

2.  Financial incentive structures 

There has been a decades long move toward greater tying of daily activity to monetary incentives.

This trend has slowed somewhat in recent years as so-called “pay for performance” or “penalty for performance” has time and again created unintended consequences and malicious gaming from the shop floor to the c-suite.

When we distill mission critical and values-driven activities like safety or quality monitoring down to financial incentives for attainment of certain standards, we introduce a very challenging set of defining moments for our people.

By defining moments, I mean a choice between two highly conflicting fundamental values.  Do I report that safety incident and take the hit on my bonus, or do I conceal it and get paid?  Do I report the customer complaint when my customer satisfaction rating is at the threshold of my bonus payment, or do I just forget I heard it?

These are fundamental contextual issues that get lost in the distillation of motivation to a single- or even multi-point-formula.

A great and commonly cited study that gets at this particular point involves a set of day care centers in Israel.  The study found that when there were no financial penalties (and therefore no economic incentives) for leaving children beyond the day care centers’ 4pm pickup time, parents rarely were significantly late.

However, once a financial penalty for late pickup was introduced, parents were late much more frequently.

The study shows the types of unintended consequences that can happen when a financial incentive is put in that allows people to replace a moral or ethical one.

People see the price of their ethical lapses, and can judge accordingly.

If I’m a parent operating under a social contract that says 4pm is the pickup time and leaving my child any later means a teacher has to work overtime because of my lateness, I take the moral impact into account.

If the social contract is changed to a financial one, then the price I pay for my lateness is clearly outlined and transactional. The day care center makes it easy for me to forget about ethics and just pay the fine.

This is all kind of cute when it comes to a day care center.  But, imagine what happens when you place a price on values driven behavior in a safety program, or customer service, or (shudder) healthcare programs.

Price is a clear motivator.  I’m a huge fan of price–except for when the cost of inaction is priceless.

3.  The continuing emergence of aggressive short-termism

The place where distillation of context is perhaps most dangerous is in the boardroom and c-suite.  The emergence of aggressive short-termism as a de facto course of management comes directly from the pornographication of motivation.

Boards, being limited in what they can measure when it comes to the health of an organization (though less limited than most boards realize), resort to distilled measures of current profitability and cash flow.  These measures, while absolutely critical to performance, are devoid of the context necessary for the long term stewardship of capital resources.

They are indicators of current vitality (just as a patient’s pulse rate is); but they leave out important contextual risk factors (like whether the patient is a smoker, obese or anorexic, and/or exercising regularly).

Once again, price matters.  When a senior executive can look at the price of his or her action in the short term and see the financial payoff, there becomes a transactional aspect of stewardship that boards must be vigilant about.  This is particularly key when vesting structures align such that executives’ short term actions are monetized at a much greater rate than actions that affect the long term.

So what? 

I co-opted the pseudo-term “Pornographication” because, first, I think it’s a pretty amusing term; and second, because I think it says something about what can happen to an activity (whether that be sex, love, or motivation) when essential contexts are removed and only a most basic “basis of arousal” is left for consumption.

As strategic leaders, board members, and managers; we must be careful to think through the contextual consequences of distilled incentives.  The value of an enterprise depends on considered choices about some things (like safety programs or long term investment) that can only by measured by conjecture.

Watch out for the oversimplification of complex motivational issues.

Context matters.

Mark Cuban: This Bubble is Worse

Mark Cuban, famed Internet bubble beneficiary, Dallas Mavericks owner, and willing pundit, posted on his blog a couple of days ago about the new bubble in early stage assets.

Here’s your LINK

Cuban makes a compelling case that the current frenzy of investment in early stage companies (especially apps and small tech companies) is actually worse than the year 2000-era tech bubble.


Because there are far fewer options for liquidity for the types of early stage investments that are dominating today; and there is a far more diverse investor base putting money at risk.

He sets up the situation with this quote:

“In a bubble there is always someone with a “great” idea pitching an investor the dream of a billion dollar payout with a comparison to an existing success story.  In the tech bubble it was, AOL, Netscape, etc.  Today its, Uber, Twitter, Facebook, etc.”

Interestingly, Cuban lists… That caught my eye.

When a billionaire puts the source of his vast wealth on a list of companies that perhaps just maybe were sold based on a pitch and a dream, it catches my attention.   He actually overcomes the cognitive dissonance induced justification of how his own company was different; and just throws it in the street right alongside Netscape.

He then goes on to lament how the average Joe and Jane are now part of the angel investment crowd.  He explains how they have access to illiquid investments through angel investments and crowdfunding that they would not have had 15 years ago.

And he thinks it’s a bad thing.  His quote:

“All those Angel investments in all those apps and startups.  All that crowdfunded equity. All in search of their unicorn because the only real salvation right now is an exit or cash pay out from operations.  The SEC made sure that there is no market for any of these companies to go public and create liquidity for their Angels.  The market for sub 25mm dollar raises is effectively dead. DOA . Gone. Thanks SEC. And with the new Equity CrowdFunding rules yet to be finalized, there is no reason to believe that the SEC will be smart enough to create some form of liquidity for all those widows and orphans who will put their $5k into the dream only to realize they can’t get any cash back when they need money to fix their car”

It’s an interesting read.

Informed consent is a big deal.  When people have access to illiquid and extremely high risk investments, they have to know what they are getting into.  The implication here may not be so much that public valuations are totally out of whack, but rather that there is a shadow bubble of money being thrown at “big things” that come in illiquid packages.

I think Mark Cuban has hit on one of the dark sides of the democratization of capital allocation.

God Help Your Risk Takers…

Recent studies show that references to God in prompts to survey subjects lead them to take on more risky behaviors. This can have interesting implications for your strategy.

If you’ve been following this blog, you’ve seen multiple references to the need for leaders to underwrite risks and back their people.  I’ve cast this as the need for leaders to say “I’ve got your back.”

Here’s a post that goes into that concept in some depth.

Now, researchers at Stanford University have published studies that show people seeking more risk when they are reminded of God before making a choice between lower risk behaviors and higher risk behaviors.

Here’s a link to an article that outlines the findings.

The researchers posed various choices between higher risk and lower risk behaviors, and varied whether there were subtle references to God in the prompt.  For instance, an ad for skydiving might say, “Find skydiving near you!” or it might read, “God knows what you are missing. Find skydiving near you!”

The studies also differentiated between high risk behaviors in a moral sense and high risk behaviors in a non-moral sense.  Prior studies have shown that religious people tend to take fewer “moral” risks than non-religious people.

The summary of the study is this:

“…people are willing to take [more] risks because they view God as providing security against potential negative outcomes.”

Some implications for the strategist and leader:

The gist of this study is that when people believe they have some backing, even by supernatural forces, they are willing to do “more” than they otherwise would.

They view the security as valuable.

A few implication come to mind:

1.  People will take more risks if they know somebody is underwriting it, even (and especially?) God – You and I need to be good at letting people know when we have their backs.  Simple phrases like, “I know this is a risk, but it’s one that I’m taking, not you” can go a long way to putting people’s minds on business strategy instead of survival strategy.

2.  The source of risk backing has to be credible to the person taking the risk – It’s not enough for you and me as strategists and leaders to know that we have the backs of the people taking risks for us…we have to show, credibly, that we have sponsored others through tough risks and failure.  Religions form around stories;  so does your risk taking (or risk-averse) culture.

3. People have to be reminded – It’s important for people to know constantly that risk taking is backed by someone or something. In the study referenced above, people made marginally different choices by merely being prompted with the word “God.”  In your organization, simple prompts make that much difference.  When people are contemplating risks in your organization, do the prompts come with “I’ve got your back,” or do they come with “You’d better not mess it up…”?

All of this matters for you and me as leaders and as strategists.

Strategies involve taking risk.  Otherwise, they aren’t really a strategy.

They also involve people taking risks on behalf of the company and themselves.

Unless, and until, we get good at being clear on the risks we expect other people to take, and have credibility on the point, our people will take fewer risks.

Compound that with the converse situation that tends to get more play at the water cooler in risk averse cultures–namely, constant references to the negative things that happen to risk takers–and the leverage of a few simple words and actions becomes clear.

God help your risk takers…

Are You Well if Oil is Not Well?


Where to from here?


The jolly crew of optimists at ZeroHedge, quoting some of their stable of doomsayers, are predicting that the oil crisis is just beginning… And I find it worth reading.

To follow on to some of the earlier questions posed by this blog:

What does your business look like in the age of an extremely strong dollar, a Euro depreciating against all other global currencies due to EQE, and oil at $20 a barrel?

Tough question, eh?  Well, I’m not one to call the price of oil…If I were I’d be in a different line of business; but I am one to encourage clients and executives to look at the world through multiple lenses.

The lens that is most interesting right now is the one that includes a dramatic re-set of oil production both domestically and abroad, along with a healthy heaping helping of the knock-on effects that will impact consumer and B2B markets geared to this phenomenon.

Remember, you don’t have to sell into oil exploration and production to feel this wrath…you only need to be near people and companies who do.

Their risk is your risk.   Stay ahead of it.

Stay tuned.  Your comments are welcome.

The One Essence of Great Leadership

Great leaders, regardless of the arena they lead within, share one absolutely essential trait.

“I’ve got your back.”

It is, without a doubt, one of the most satisfying things to hear from one’s leader.

In a single phrase, a leader can differentiate him or herself from the managerially mealy-mouthed “we’re all in this together” to the semantically and substantively different “I’m backing you.”

Such is the embodiment of the single trait–and it is a trait–that differentiates great leaders from all the also-rans.

Put simply:

Great leaders underwrite the risks their people take.

It’s the essence of great leadership. It encourages, extends, and drives people to levels of performance that the individual would not have thought possible.

What it means to underwrite risks

In the financial world, the underwriter is the one who bears the residual risk of non-performance. Underwriters back insurance, loans, mortgages and equity offerings.

The word derives from the 17th century birth of the insurance trade. In those early days, members of the Lloyd’s of London insurance market would write their names under (therefore underwrite) the risks being undertaken by ventures (usually ship voyages) that they would insure.

The underwriters, in exchange for a premium, backed the risks they underwrote.

Because of this insurance, shipping companies were freer to engage in commerce individually than they otherwise would be.

That’s what great leaders do. They explicitly backstop the risks their people take.

Sure, they extract a premium from their teams in the form of performance and value.

And, sure they don’t underwrite all risks. That would be absurd.

But, they provide cover…protection…a backstop.

And, their people know it; because it’s explicit.

Great leaders underwrite the risks they ask their people to take. In doing so, they quite literally enable people to accomplish more than they could alone.

Why this matters

Why does the backing of a leader allow for out-performance by followers?

The reasons are many. Here are a few:

  • It inspires confidence – Dwight D. Eisenhower, in his letter to the Operation Overlord troops prior to the D-Day invasions in Normandy in 1944, told each man of his “full confidence in [their] courage, devotion to duty, and skill in battle.” Confidence is a tremendous asset when pursuing risky ventures.
  • It encourages action – Leadership underwriting allows people to try new things more easily. Think of it as the social venture capital of innovation and initiative.
  • It encourages stretch – Like the safety net for an acrobat, leadership underwriting allows for a more complete exploration of one’s talents. It encourages people to take on stretch roles.
  • It neutralizes doubt – Doubt can be healthy. Doubt can be paralyzing. A strong leader underwriting his or her people takes the doubt and bundles it up; like any good insurer does.
  • It apportions risk appropriately – Great leaders own risks commensurate with those owned by those they lead. At the same time he drafted the words of confidence in his troops noted above, Eisenhower also drafted his “in case of failure” letter. Though it was never required, it famously ended with the words “The troops, the air and the Navy did all that Bravery and devotion to duty could do. If any blame or fault attaches to the attempt it is mine alone.”

Eisenhower knew the risks he had asked his troops to take, and stood ready to take the blame in the case of failure.

He did not equivocate.

That’s why this matters.

So, how do you know if the risks you take are being underwritten by your leader?

The answer to this one is easy. Ask yourself one question.

Do you feel that you are freer while within the sphere of influence of your leader, or do you feel that you have more freedom outside of it?

Because, put simply, it should not feel freeing to leave the sphere of a great leader.

It should feel risky.

Because they have your back.

Parting thought

One of the most important choices we all will make in our careers is the choice of risk sharing relationships between us and our people and between us and our leaders.

How we apportion risk between ourselves and our teams or allow it to be apportioned between us and our leaders essentially shows how much we respect our people and ourselves.

Choose wisely.

Try it today… Underwrite somebody’s risk.

I’ve got your back.

How to Punch Through Adversity

A renewed focus on individual and organizational entrepreneurship provides a “puncher’s chance” when dealing with ambiguity and adversity.

On November 5, 1994, an object lesson in responding to adversity occurred.

On that date, 45-year old boxer George Foreman–known as much at that time for being the spokesmodel for his eponymous grill as for his boxing–knocked out Michael Moorer, who was up to that point the undefeated reigning World Heavyweight Boxing Champion…and 19 years Foreman’s junior.

Moorer outboxed Foreman for nine rounds, turning Foreman’s face into a fleshy swollen mess. During those nine rounds, Foreman struggled to throw punches and certainly didn’t evade many thrown at him.

And then, in the tenth round… Boom.

Foreman, well known for his punching power, slipped in a short right hand that crushed Moorer’s chin, knocked him to the canvas, and won Foreman the championship for the second time after a 20 year hiatus.

Here’s that classic 10th round on video:

Note the comment from Foreman’s corner man at the beginning of the video:

We gotta put this guy down…we’re behind, baby!

They knew they were losing. Foreman had eaten a steady meal of Michael Moorer’s right jab.  He was way behind and beaten badly.

Foreman was old, heavy, slow, and beaten up going into that 10th round. Moorer was young, fast, strong, fit, and ahead in the bout.

But, Foreman had a chance. His chance was embodied in his wrecking ball of a right hand.

That “chance” put Moorer’s lights out at 2:12 of the video.

The Lesson…

There’s this thing in boxing. It’s called the “puncher’s chance.” It means that a boxer with a strong punch–a go-to skill that can turn a bout on a dime–always has a chance to win. The puncher’s chance applies to those who have it even when they are the lowliest underdogs facing the most superior of opponents.

It doesn’t guarantee a win, but it offers the light of hope to those who have it, even in the midst of a beating. It is literally a means of punching through adversity.

So What?

We all should aspire–individually and in the teams and organizations we lead–to have a foundational capability that helps us punch our way out of adversity. In the most dire of circumstances, having a core capability to call on can mean the difference between having a chance and having none.

We should aspire, in other words, to cultivate a puncher’s chance.

In simple terms, the puncher’s chance in a business environment is a valued capability that, regardless of environment, allows an individual or an enterprise to endure, grow, and prosper.

Be careful, though: For every true cultivated go-to capability, there’s an mountain of pablum about “competitive advantage” and “core competencies” to wade through.

There’s also that catch about “valued” capability–be careful not to claim the ability to spin and confabulate as constituting a valued capability. It isn’t. It’s a delaying tactic just waiting to be exposed.

So, what gives you a puncher’s chance?

What foundational capability gives you your best chance to overcome adversity, individually or as the leader of an entire enterprise?

Is it superior operations? Sales? Marketing? Product development and innovation? Design? Supply chain expertise? Executive talent? Cost control? Effort and work ethic?

In reality, that’s for you to answer. It might be different for you.

In my estimation, the best analogy to the puncher’s chance in business is a deep seated appreciation for and cultivation of


It’s the crushing right hand just looking for a chin to demolish. It’s the single latent capability that can save an organization time and time again, regardless of market context.

Unfortunately, it’s also the capability that gets quashed most quickly by risk-averse and resilience-starved corporate hierarchies.

Still, in the most staid corporate contexts you’ll encounter, where cost control and small thinking rules the day, it is on the shoulders of a few enterprising individuals and teams that success tends to ride. Those individuals drive activities like:

  • Development of profitable new products and markets that nobody in the corporate hierarchy wanted.
  • Development of new customer accounts that others viewed as too hard, too distant, or too far off strategy.
  • Growth of key leaders who renew the organization in tough times
  • Response to muted customer inquiries that turn into significant opportunities
  • Establishment of entire new businesses that feed off the capabilities of the organization in entirely new ways.
  • Constant focus on competitive activity and required responses, acting as the few sentinels for the health of the organization.

In the process, the individuals and teams who do these things create possibilities where none existed…

…and that, my friends, is what the puncher’s chance is all about–a very real something from an apparent nothing.

But, how do you cultivate it?

On some level, it’s fair to debate whether entrepreneurship as a capability is a nature or nurture proposition. I’d argue that entrepreneurial capability can not only be taught, but that it is also contagious.

The flip side is that it is also easily extinguished.

In any event, if you are looking to cultivate this particular punch, here are 5 ways to start:

  • Establish clarity on boundariesEnsure that you achieve clarity on what values apply (i.e., what you won’t do) and what boundaries exist (i.e., where you won’t do it). This applies to you and to your organization.
  • Relentlessly encourage resourcefulness The most ossified of organizations fall into the trap of top down management. People in the organization become so used to being second guessed that they never even bother with the first guess and therefore lose whatever entrepreneurial spirit they had. Encouraging resourcefulness means asking for, listening to, and developing novel perspectives on markets and solutions to pressing issues vs. telling the answer. It also means holding yourself to a standard of generating options vs. finding problems.
  • Generate risk awareness Ensure that leaders in the organization have a sense of ownership and understanding of the price of risk. This can be done through incentives, but also through mere transparency around how capital of all sorts is allocated within the enterprise. Such transparency shows smart people the types of risks a company is willing to underwrite and reward. For you individually, establish thresholds for risks you are willing to take with your career, your income, and your wealth.
  • Role model resilienceIn an odd and ironic point of fact, senior executives in large organizations tend not to be all that tolerant of ambiguity or error. That reality is a driver of the great divide between the mindset of an entrepreneur and the mindset of a solid corporate manager or executive. Corporate managers look at a project and see all the risks, the reasons not to do it, and how to effectively hedge the budget. Entrepreneurs tend to look at a project and wonder why it can’t be done faster and better; all the while disregarding any need for hedging because “you win some and lose some.” Execs need to role model a resilient mindset more often.
  • Reward entrepreneurship asymmetrically – Though such an assertion flies in the face of the world of compensation hierarchies, benchmarks, job classes and bands, and workplace equity; find ways to recognize and compensate intelligent risk takers asymmetrically. Too often, the perceived cost of entrepreneurship exceeds the potential recognition or upside. It tends to look more like executives and shareholders providing a “heads I win, tails you lose” proposition when viewed from the lower end of the hierarchy. Share the wealth…Loudly.

No matter how beaten up your organization is in its markets, how many product launch failures you’ve endured, how much market share you’ve seen erode; the ability to constantly redefine and attack markets and problems with an entrepreneurial edge gives you and your organization a puncher’s chance.

These tips work for enterprises large and small, and certainly work for individual professionals. History is rife with examples. Apple Computer emerged from being a PC maker to being a dominant player in mobile and media markets. Texas Instruments was once an oil and gas exploration services company. GE was Thomas Edison’s hobby shop. IBM made mainframes.

But, watch out!

Perspective matters. Many of you reading this think you know your core ability…”I have it, it’s my competitive advantage and it’s X” (fill in the X with your known strength). Keep in mind that while you might be the fit, strong champ in control of the bout, the other guy just might have a stone cold right fist to throw your way.

The other guy might have a puncher’s chance. Watch out for it.

Today, executives believe that 46% of global strategies fail to deliver. So many companies are trying to develop agility top-down in order to respond to a rapidly changing environment.

We simply can’t rely on top-down thinking driven by corporate savants to save the day.

So, cultivate a tight focus on entrepreneurial mindsets alongside loose control over skilled people.

Do it to drive wins, even while choking on the modern world’s heavy dose of volatility, uncertainty, complexity, and ambiguity.

Cultivate your own puncher’s chance.

Find a way to win.

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

Activist Investors and How to Handle Them

Activist investors may become more active–spurring management to focus and accelerate.


Fortune’s Paul Hodgson filed this article yesterday about how activist investors are becoming even more active.

It’s a good read that summarizes the influence of activist hedge funds and the like; and how that influence is growing into the Fortune 500-sized company space.

Hodgson’s point of view is that we should look for more activism because, well, it works.  Success breeds success.

His defining quote is at the end of the article:

Boards are crumbling in front of the [activists] because the value released by changes they are forcing through is making it more likely that other shareholders will support them.

It really is that simple. If an activist like Carl Icahn can campaign for eBay to sell PayPal, and subsequently “unlock” trapped value, then so be it.

Recently, there has been a spate of debate and discussion about how activists can create incentive misalignment.  In a letter to the editor of the Wall Street Journal yesterday, reader Jonathan Kaufelt laments the lack of incentive alignment in the Dow Chemical Board of Directors case.  You may recall that there has been an ongoing discussion of whether activist investor Daniel Loeb’s scheme to pay his director nominees for near term stock appreciation is conducive to good governance.

A reasonable person could say that such incentive structures are problematic more for their mis-allocation (not all directors hold the incentives) than for their mis-alignment. There might be a temporal conflict with fiduciary duty, but it’s not clear that the conflict is one that other shareholders would mind (which would be the point of Hodgson’s Fortune article).

In other words, the activists may be amplifying existing incentives to boost near term stock performance; but might not be an issue to those who own the company.  This gets into a more existential view of value creation and “long term” investing where the question is whether a shareholder’s objective ought to be to maximize value of holdings today (the “activist” vision) or to create an investment vehicle for all time (the “investor” vision).

On those things, reasonable people can disagree.  In the case of a public company, it’s reasonable to say that all shareholders ought to be ready to vote with their feet–or sell orders as the case may be.

Another view–my view–is that activists, by stirring the pot, actually serve a purpose that should normally be served by right functioning boards in the first place:  They sharpen management’s focus on value creation vs. sleepy backslapping boondoggles.

For CEOs and boards, the best prevention program for the pains of activism is–wait for it–to act like an activist.  Ironically, activists often create the pressure of scrutiny where it should have already been.

I welcome your thoughts…

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?