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Hardball is So Last Century: Why Mean People Lose

Posted By damien on March 4th, 2010

Angry catThe era of mean business is over.

Internet killed the hardball-playing jerk.

It no longer pays to drive a hard bargain.

Why do I say so?  Two reasons:

  1. The abundance of information thanks to the internet
  2. and the abundance of choice in products and business partners

No More Secrets…

The internet and the flood of information that came with it has been a game-changer for the American business model.  Today’s business world is too full of information and opinions for anything to stay a secret for long.

This abundance of information has negative consequences for mean people.  Anyone who acts the jerk in business (or life in general) nowadays will have to face the music on facebook, twitter, blogs, etc.  Mean people just can’t keep their meanness a secret for long.

Eeny, Meeny Miny, Mo

In this new, flat world, your pal in India (or Bangladesh, or Canada) can supply your business with whatever it needs. There is just too much choice in business to be a jerk!  We have no need to put up with bad products or business partners.

My generation, Gen-Y, is especially aware of the abundance of choice and information.  As my friend Brant Choate explains, if you are mean, boring, or incompetent, we’ll drop you in a heartbeat.

It Pays to Be Nice

How can you make sure you aren’t the jerk?  How can you keep your customers (and colleagues) from trashing your name on the internet?  I have just two bits of advice:

  1. Be Sincere: Fakeness has a certain odor to it that is instantly detectable and repugnant.  If you are insincere, people will pick up on it and withhold information, business, and even friendship from you.
  2. Bring Something to the Table: No one likes a person who takes and never gives.  If all you do is take, pretty soon the well will dry up and you will constantly be on the hunt for new “marks”: new people to use.  Give abundantly and it has a way of coming back to you.

Bottom line: in today’s business world, mean people lose.

Posted in Business, Interpersonal Skills
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Will Outsourcing Kill Your Brand? 4 Things to Consider: Part Two

Posted By damien on February 2nd, 2010

courtesy of flickr.com/photos/markhillary/

As we discussed in the last post, outsourcing is all the rage nowadays.  All the cool companies let their virtual assistants in Bangladesh handle SEO, blog content, and even sending flowers to their significant others after a fight.

But can outsourcing ever be bad for your company? Could outsourcing actually kill your brand?  According to many business strategists, the answer is a definite yes!  I’m here to give you some factors to consider when deciding whether to do it yourself or delegate it to your pal Manesh in India.

In the last post, we looked at resource-based analysis, which pretty much states you should continue doing whatever gives you competitive advantage, whatever sets you apart from others in your market, and outsource the rest.  That’s a decent rule of thumb, I say.  But the academics have come up with another way to examine your options, what is called “transaction cost analysis”.

Transaction Cost Analysis is considered to be the more nuanced and sophisticated approach.  It is composed of three parts:

  1. Asset Specificity
  2. Frequency of Transactions
  3. Uncertainty

Let’s look at each in detail.

1) Asset Specificity

Asset specificity has to do with how unique your product is, or rather, how unique the inputs to your product are.  The reasoning goes like this: if the supplies needed for your product are common, then there are probably an abundance of suppliers.  The more unique your supplies become, the fewer suppliers there will be in the market.  As the number of suppliers in the market decreases, the power of remaining suppliers increases.

And supplier power is bad for you and your company.  The more power a supplier has, the more control they have over the price you pay.  So, according to the rule of asset specificity, if your asset is specific, then there are probably few suppliers available (and these suppliers will have great power), so you will want to make it yourself instead of outsourcing.  On the other hand, if your inputs are a common commodity, then it is probably more cost-effective to buy them (outsource) rather than make them yourself.

2) Frequency of Transactions

How often do you need inputs from your suppliers?  The answer to this question will determine whether to outsource or make it yourself.  If you are planning on ordering the product often, then it is worth the effort to invest in resources to make it yourself.  However, if your product will only be sold for a short time, it’s better to outsource.

3) Uncertainty

To define the factor of uncertainty, ask yourself these questions: How much will the wants of my customers change? How often will I need to innovate and change my product?  If your product is constantly changing and adapting to customer desires, then it’s better to make it yourself; do not outsource innovation to a third party.

Why not?  Two reasons: It is more expensive to pay an outsider to drive the innovation of your brand and once your creativity is outsourced, face it, it’s not really your brand anymore. On the other hand, if the product does not need to change very often, then outsourcing is a good idea.

I hope you’ve enjoyed this examination of the arguments for and against outsourcing. After reading The 4-Hour Workweek, I wanted to outsource my whole life (well, just the boring parts).  But a closer look has taught me that if you aren’t careful, outsourcing can kill your brand.  Stick to the two methods I have shown you (resource-based and transaction cost analysis) and outsourcing will take your company (or life) to the next level!

Posted in Business
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Will Outsourcing Kill Your Brand? 4 Things to Consider: Part One

Posted By damien on January 26th, 2010
courtesy of flickr.com/photos/markhillary

courtesy of flickr.com/photos/markhillary/

This is part 1 of 2. Get part 2 here.

With the advent of the internet and all kinds of real-time global communication technologies, the world, as they say, is flat.  This flattening has led to a meteoric rise in outsourcing, or using third parties to produce part of your business offering.

Companies in Bangladesh, India, the Philippines, (pretty much anywhere the population speaks English marginally well) are offering their services to American businesses.  Proponents of outsourcing, such as Tim Ferris of The 4-Hour Workweek, suggest you outsource everything in your life that you don’t personally want to do: cooking, blog posting, even writing make-up notes to a scorned lover.

But is there any danger to outsourcing your life?  This blog post (and the next) will offer four factors to consider when deciding between doing it yourself or outsourcing to your pal Manesh in India. The first is what the academics call “resource-based analysis” and the second, which consists of three parts, is called “transaction cost analysis”.

As always, don’t worry about the fancy names, the concepts themselves are easy to grasp.  It’s just academicians impressing themselves with their erudition.

Resource-Based Analysis

When deciding whether to do it yourself or outsource, the simplest rule is this:

Engage in activities in which you have competitively valuable resources or capabilities.

So, keep doing the things that set you apart from your competitors, and outsource the rest.  Here’s an example: Oprah Winfrey is the most popular talk-show host ever.  In fact, her show, Oprah, is all about her.  Imagine if she were to outsource the hosting of her show.

She decides to let Thongchai Viyada (random Thai name) interview her guests.  Viewership would plummet! Soccer Moms would picket in the streets! “We want Oprah back!”  Using resource-based analysis, Oprah should continue hosting her show and outsource other aspects of it (such as writing articles for O Magazine) to third parties.

One more example: Apple computers.  Apple is known for their innovative and sleek (even sexy) design.  Now, I’m not an Apple fanboy, not even a Mac user, but I do appreciate the look of their laptops.  Apple knows this, and so they design the laptops themselves.

They are the creativity generators.  Apple knows that others, such as Intel, are better at making the actual hardware.  So Apple sticks to what they are known for, what they are competitive at, and outsources the rest.

There you have it, the simple rule of thumb for determining whether outsourcing will kill or supercharge your brand.  Next time we will examine transaction cost analysis, which the academics consider to be a more nuanced and sophisticated approach.

Posted in Business
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Shorts: Strong Weaknesses And Tapping Your Creativity

Posted By damien on August 6th, 2009

sleepingHere are a few bite size ideas from No More Mondays.  They aren’t long enough to deserve their own posts, but are worth mentioning.  The first is about the importance to focus on your strengths, not your weaknesses.  The second is a case study of how a very creative person would tap into his creativity:

Strong Weaknesses

In the sixth grade, a teacher told my friend Phil that the “secret to life is to focus on your weaknesses.”  So for the next thirty years he worked on those areas where he was weakest.  He struggled with accounting, with organization, and with ordering and inventory control.  He ultimately developed some pretty strong…weaknesses.  Then he discovered the power of focusing on your strengths.  He surrounded himself with people who were more competent in all the areas where he was weak.  He allowed them to do what they did well while he did the same.

Now, in my opinion, this is business advice from Dan, not advice for your personal life.  In our personal lives we should dedicate significant amounts of time to overcoming our weaknesses, instead of delegating them.  Say, for example, you are not good at communicating your feelings to your significant other.  If you followed Dan’s business approach, you may find someone else to communicate to your significant other for you.  This will not improve the relationship; partners must communicate their feelings directly to each other.

Business is about finding the fastest and most efficient way to deliver a product or service; thus focusing on strengths and delegating.  Life, on the other hand, is about learning and improving.

Tapping Your Creativity

Thomas Edison had an intriguing way of tapping into the mixture of thoughts and dreams we all have in those moments just before we fall asleep–a highly creative state of mind.  Daniel Goleman, Paul Kaufman, and Michael Ray, the authors of The Creative Spirit, explain his method: “He would doze off in a chair with his arms and hands draped over the arm rests.  In each hand he held a ball bearing.  Below each hand on the floor were two pie plates.  When he drifted into the state between waking and sleeping, his hands would naturally relax and the ball bearings would drop on the plates.  Awakened by the noise, Edison would immediately make notes on any ideas that had come to him.”

Isn’t it strange how the time between waking and sleeping does give us so many creative ideas?  I  keep a pen and notepad next to my bed, just in case I get a flash of inspiration.  At night, before falling asleep, I usually have lots of ideas; I won’t claim that all of them are creative, but some have been winners.  I don’t use Edison’s plate method since currently only own four plates (don’t know why we’ve never bought more), so can’t afford to lose any.

The take home lessons from today: in your business endeavors, focus on your strengths and delegate your weaknesses. Also, find when you are most creative, nurture those moments, and make sure you write down your ideas.

Posted in Business, Selp Improvement
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Risk Defined: Employees Versus Entrepreneurs

Posted By damien on August 3rd, 2009

office politicsJust finished Dan Miller’s No More Mondays, his follow-up to 48 Days to the Work You Love, which I wrote about here.  No More Mondays is similar to his previous book, in that his goal is to help you find the work you love, but this guide focuses more on starting your own business.  I love how Dan points out the opposite ways that employees and entrepreneurs view risk:

I frequently hear people say they are afraid to apply for a new job, try a new sport, buy a new car, or launch a new business because of the risk involved.  When people are considering a new career or change of position, they often ask themselves, “Why leave the predictable for the unpredictable?  Why take the risk?”  And yet there is a core issue regarding risk that must be clarified…if you find yourself in a negative work environment, have checked out your options, and are planning to move to a higher organization with a higher income, how can that be called risk?

This is how Dan summarizes an employee’s view of risk: the fear of the unknown, fear of leaving what they are used to, even if leaving means going to a better life.  Now see him describe an entrepreneur’s view of risk, how it is the polar opposite of an employee’s:

In my many years of life coaching high-achieving people, I have observed that they view risk differently from those who fear it.  They think it’s risky to be trapped in one company; they view security as having the freedom to do what they love on their own terms–the exact opposite of the average person’s perception.

They view security as having freedom to do what they want, instead of freedom from uncertainty.  They see staying at one company as imprisonment.  In case you couldn’t guess, Dan Miller sides with the second group in his views of security and risk:

In today’s traditional workplace, security is an illusion.  When you are working for a company, your fate is in the hands of one person–your boss (or even worse, the shareholders and executives who see you as fixed overhead, not a person).  A decision by one person, who might not even know your name, can put you out on the street.  But in your own business, if you are selling hot dogs on the street corner, every one of your customers would have to fire you before you’re out of business.

I know what you’re thinking, “But I don’t want to be an entrepreneur!”  That’s fine, you don’t have to change your employment status, just change your mindset.  Don’t think of your financial and vactional situation as being at the mercy of your employer.  Don’t live in fear of the unknown, fear that your life will fall apart if you are laid off.  Remember that your job security hinges on your ability to produce and get results.

Posted in Business, Selp Improvement
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Overcome America’s Fixation with Experts: Ignore Them and Become One

Posted By damien on July 30th, 2009

trust meCurrently reading I Will Teach You To Be Rich by Ramit Sethi.  I know the title sounds gimmicky, like it was written by a used car salesman, but Ramit is LEGIT.  I haven’t been so excited while reading a book in a long time.  Ramit’s book is based on his blog of the same name, where he teaches 20-somethings about personal finance.  His money automation and investment strategies line up with my own, and I’ll write more on these later.

This post will focus on a topic that both Ramit and others like Tim Ferriss talk about: the myth of the expert.  America loves experts, we want someone to trust, someone to explain things to us so we don’t have to think for ourselves.  But many experts are full of bull and Ramit has a great story to illustrate:

In 2001, Frederich Brochet, a researcher at the University of Bordeaux, ran a study that sent shock waves through the wine industry.  Determined to understand how wine drinkers decided which wines they liked, he invited fifty-seven recognized experts to evaluate two wines, one red, one white.

After tasting the two wines, the experts described the red wine as intense, deep, and spicy—words commonly used to describe red wines.  The white was described in equally standard terms: lively, fresh, and floral.  But what none of these experts picked up on was that the two wines were exactly the same wine.  Even more damning, the wines were actually both white wine—the “red wine” had been colored with food coloring.

Wow, I don’t know anything about wine, but if a self-professed expert can’t deliver results, then he/she loses my respect.  And that’s what being an expert comes down to: delivering expert-level results.  Ramit says that financial experts have not been delivering results in America.  His targets for derision are the “talking heads” in the financial media and investment fund managers:

The media feeds off every little market fluctuation.  On one day, the pundits are spreading gloom and doom about a multi-hundred-point loss in the market.  Then, three days later, the front page is filled with images of hope and unicorns as the market climbs 500 points.  It’s riveting to watch, but step back and ask yourself, “Am I learning anything from this?”

[Fund] managers chase the latest hot stock, confident in their abilities to spot something that millions of others have not.  What’s more, they also demand extraordinary compensation.  Get this: In 2006, the average Goldman Sachs employee made $622,000.  That’s not a typo—it’s the average amount Goldman employees made with a salary and bonuses.  Despite this astronomical compensation, fund managers from all companies still fail to beat the market 75 percent of the time.

Ramit showed me that I don’t need these experts to invest my money for me.  Put simply, fund managers cannot consistently beat the market.  So, you can invest with a managed fund, get a decent return, and lose any advantage over an index fund with the 1-2% (or higher) expense ratio.  Or, choose the less sexy road, invest in a non-managed index fund, get a decent return, and keep your money with lower expense ratios.  I choose to avoid the self-proclaimed experts and be master of my own fate.

Get Ramit’s book because he’s an expert that delivers results; he’ll show you how to become financially secure.

Bonus: How to Become an Expert

I have already written about Tim Ferriss’s productivity and time-management tactics; another big idea in his book is how to become a (perceived) expert in your field very quickly.  Here are a few of his tips:

  1. Read 3 top selling books on your topic (Then record what you’ve learned, maybe in a blog?)
  2. Join 2 or 3 related trade organizations (Search online for your field + organization, club, or group.)
  3. Give one free 3 hour seminar at the closest well-known university (Record it, you could use it later.)
  4. Give 2 free seminars at branches of two well-known big companies such as AT&T or IBM (Reference your seminar at the university to get your foot in the door.)
  5. Offer to write 1 or 2 articles for trade organizations (Maybe by re-purposing material from step 2.)

So, in conclusion, Americans love experts, but some are frauds.  Ignore the fakes and become one that delivers results.

Posted in Business, Selp Improvement
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