Emotional junk, Beyond Entrepreneurship, Jim Collins, GTP-3 & The Infinite Game
26th July 2020 Evolution Partners Newsletter
“We give each CEO a simple mission – Just run your business as if (1) you own 100% of it, (2) it is the only asset in the world that you and your family have or will ever have; and (3) you can’t sell or merge it for at least a century.” – Warren Buffett
Hope you’re Thriving!
Integrity > $
Have you ever been part of a situation where a person is hung up over small amounts of money, and in doing so is damaging their integrity and reputation?
Where they’ve perhaps agreed to buy something, didn’t read, nor didn’t pay attention to the specifics of what they were buying, and then later on decided to demand their money back or complain in a completely unreasonable manner?
I’ve seen two or three instances of this in the past week in different areas of life (not my practice). The seller could not be clearer about the product, yet the buyer, through their own lack of attention to detail becomes irrational. As I’ve looked at each of these situations from afar, it’s made me come back to a principle I’ve thought about before, from my friend Kevin Lawrence’s book Your Oxygen Mask First called ‘Deal with your emotional junk’.
Kevin states that a failure to deal with one’s emotional junk means that people deal with situations emotionally or irrationally. And I observe this in leadership teams also, where a person can’t truly be an A player, where a leadership team member is actually a liability if they haven’t dealt with their own emotional junk. The cost to them, and their career is immeasurable, yet they don’t know it, only the people around them do.
And just like these leadership team members, these unreasonable customers are actually making themselves a liability and they don’t know it. They think that their money makes them always right. They think that their money (in an equitable exchange for goods or services) enables them to demand things from the other party and that to them the transaction is in fact, inequitable in their favour. Yet what their actions are actually doing is damaging their own reputation. Because people come away from interactions like that, dealing with an unreasonable customer deciding to not deal with that person again and to tell others to do the same.
When you’re an irrational buyer, the sellers with the best products won’t want to deal with you.
Integrity > $
The past week has been pretty good to me. A very busy week, that ended with a 2-day kick-off workshop with a new client, which was awesome because like the Warren Buffet quote above the CEO is dedicated to building an enduring, great company and has a team of A-players on the leadership team already – and the first part of building a great business is having the right people. In the end, during our wrap up an interesting comment from the CEO was about the value he obtained from an off-the-cuff remark I made stating that between our strategic planning workshops don’t start any new initiatives, that if new ideas pop up they should be postponed until our offsite workshop. Instead, the job is to focus on 13-weeks of pure execution on the established priorities.
But before that, on Wednesday was the Jim Collins virtual event, where Jim broadcast live to around 3,000 delegates. Now as a huge Jim Collins fan there was nothing new, but that was actually the best part — because nothing was new it’s a testament to the enduring principles Jim has built through the years with his rigorous research. While he went through and explained many of his key concepts such as get the right people first, confront the brutal facts, the flywheel and the stop doing list one of my favourites was Jim relating a story between him and Peter Drucker where he said: don’t spend your time trying to be successful, spend your time trying to be useful, and the success will come naturally.
During one of the breaks, the hosts conducted polls which asked for our favourite Jim Collins book. As expected there were hundreds for Good to Great, or Great by Choice, and because it was a live, dynamic poll you could see the changes as people voted. Now for me, I love all those later books with great research and I use the concepts every single day. But my favourite book and the one that had zero votes was Jim Collins first book — Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company.
Here’s one of my favourite quotes from Beyond Entrepreneurship.
“Notice that the companies in our examples tend to view profit as a necessity, rather than as the ultimate goal of the business. What do you make of that? How does this fit with the classic business school doctrine that the purpose of a business – the primary responsibility of its managers – is to maximise shareholder wealth?
To become a great company, we ask you to reject the classic business school doctrine. “Maximise shareholder wealth” is a simple theoretical way of looking at business, but it’s not supported by the reality of many great companies. Most great companies are formed to meet the goals and express the values of their founders, which is not always the same as maximising shareholder wealth. For them, profit is simply a strategic necessity rather than the supreme end point.”
He goes on…
“Actually it’s not the profit per se that’s essential, but the cashflow that it generates”
And so in the end, mine was the single vote.
Don’t believe me about the quality of this book?
Netflix CEO Reed Hastings states that it’s his number 1 book recommendation and his advice at Stanford for young CEOs is that it’s the only book he reads every year, and further that they should memorise the first 86 pages.
Speaking of books, I’ve been reading The Infinite Game by Simon Sinek this past week and a simple metaphor stood out to me that I wanted to share with you. In the book, he talks about the role of shareholders, and much like the quote from Warren Buffet and Jim Collins above, when shareholders assume an inequitable position in the relationship with the leadership team and the company, it’s not possible to build an enduring, great company.
Sinek suggests that the company is akin to a car and that shareholders often treat a company like a rental car, rather than a car that they own. They don’t own it, they just want to get something out of it. By accepting an inequitable deal from shareholders, to always put shareholders first and focus on immediate, maximised returns, leadership teams are in fact capitulating to a short term life for the company. Instead great, long term businesses are built by putting the products, the customers and the employees first. Then, the profits and growth will come because they are building a strong business.
Check out the 3-minute video of Simon discussing the book on the image below.
This saying is attributed to King Louis XV of France, which is roughly translated into “After me, let the deluge come”, meaning that he does not care what happens after his death, it’s your problem then. Sounds a little like the shareholders and the rental car right?
And that’s one of the key attributes absent in Jim Collins Level 5 leaders and a key difference between a level 4 and a level 5 leader. Level 4’s are focussed on themselves, and level 5’s are focussed on others.
From Jim Collins talking about the subject:
“for a level 4 leader, all that energy and ambition and drive is about them. It’s about what they get. It’s about how they look. It’s about what they make. It’s about what accrues to them. It’s about whether they are the center. That’s a level 4. Level 5s, all that same level of energy and drive and ambition is channelled outward into a cause, into a company, into a culture, into a quest, into something that is bigger and more enduring than they are. Level 5s lead in a spirit of service, and they subsume themselves and sacrifice for that.“
And that’s why I found the 2-day strategic planning workshop this past week compelling because the CEO kept saying that he wanted to build an enduring company, one that would outlive him, and it was a great signal that he was, or had the seeds to become a level 5 leader.
Closing out Jim, one of his really powerful concepts is the Flywheel, and the importance of a business model that accelerates momentum over time. This article The $50million flywheel from Lasse Kjær founder of Truestory and Blacksnow is a short, good example of how he used the Flywheel concept to start and grow his business that you might enjoy.
In January 2015, Stephen Hawking, Elon Musk, and dozens of artificial intelligence experts signed an open letter on artificial intelligence calling for research on the societal impacts of AI. The letter affirmed that society can reap great potential benefits from artificial intelligence, but called for concrete research on how to prevent certain potential “pitfalls”: artificial intelligence has the potential to eradicate disease and poverty, but researchers must not create something which cannot be controlled.
Later in 2015, stemming from the concerns outlined in the letter, Musk founded OpenAI along with Sam Altman from Y combinator together pledging $1B, and in 2019 another $1B was pledged by Microsoft. Things have been progressing well, but in the past week, OpenAI reached a major milestone with the release of the third version of their Generative Pretrained Transformer or GTP-3. What makes GPT-3 extraordinary compared to its predecessors is the sheer size of the model, which has 175 billion parameters. GPT-2 “only” had 1.5 billion parameters, which was already considered massive when it was released last year. In English that you and I might be able to understand, this program self-learns interprets and communicates language like a ridiculously intelligent human.
Big deal you might say, I used Google translate earlier this morning.
Well, the smartest kids in the room are saying things like “Today the world changed forever”.
Let me give you a few examples.
Lawyers make a living translating between plain language people use and the legal code, and it’s applicability of the legal code.
In the image below plain language was entered by a human, and the legal language was the response by GTP-3. As it’s responding, the software is actually also searching the internet for the correct answer – and citing the relevant law in legal language.
When integrated with Microsoft Excel, a command is built that automatically searched the web, pattern matches and automatically populates the cell.
This interesting article from Nesslabs tempers the jubilation somewhat and provides a practical outline of how GTP-3 could help businesses in the near future. From the article “The same way Excel enabled many small businesses, independent workers, and non-profit organisations to afford better planning, GPT-3 will allow many to supercharge their workflows”.Surely an interesting space to watch.
This week I’ve put in a new section called from the vault in the newsletter, with timeless articles I’ve written that you might enjoy. Check out the article “The 1 reason ‘Profit per X’ is the ‘nub’ of your strategy” below.
Before I finished there are 3 quick things I wanted to share.
- New government grants
If you’re a West Australian business who has seen >15% drop in the June 20 quarter and serve priority industry sectors such as energy, defence, mining, marine you may be eligible for a WA govt grant to help with strategic planning, training or plant and equipment.
Check out the details here. Also, don’t forget this valuable list of available government grants for Australasia companies from Arowana.
- Interesting podcast episode
This week two of my very good friends came together for a podcast that you might enjoy. Shannon Susko, author of 3HAG Way and one of Canada’s Top 100 Most Powerful Women in 2018 met with Tristan White, who I’ve been working with for many years and is the author of Culture is Everything. Together they spoke on Tristan’s Think Big Act Small podcast about Shannon’s approach to building a step by step strategic execution system, and her journey scaling two businesses, one of which was a top 3 Wall St exit for the year.
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This week on The Growth Whisperers podcast
On episode 15 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
Confidence in 6 months
Kevin and Brad talk about a survey of 172 CEOs which stated that “Almost no one sees their businesses “significantly weakened” by the COVID-19 crisis looking out 6-months, and most CEOs expect to be “normal” or “stronger than before” in this timeframe”. How is this so, what does it mean for you and importantly what should you do?
Toxic A players
Brad & Kevin discuss the concept of High Performers who are culturally toxic. The people who are great at making the numbers but cause damage within the organisation and why they are such a challenge, why we keep them and why we don’t take action. Finally a specific playbook for how to deal with Toxic A players.
Listen to The Growth Whisperers
From the vault
The 1 reason ‘Profit per X’ is the ‘nub’ of your strategy
This week I’m introducing a new section which highlights timeless articles I’ve posted which you may find useful.
We start this week with one of my favourite concepts from Jim Collins, Profit per X in this article “The 1 reason ‘Profit per X’ is the ‘nub’ of your strategy”.
From the article:”Having a deep understanding of your Profit per X can provide an advantage, even during a downturn.By developing this single strategic metric that becomes the measure by which significant, strategic decisions are measured, a team is enabled to improve it’s discipline and focus as well as decrease the likelihood of spending on initiatives that end in failure or don’t align with the business strategy.”
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