Andre Durand

As start-ups mature, many fail to transition in how they deal with decisions. When you’re strapped for cash, you don’t always have the luxury of thinking through the full-cost of your actions. You are essentially forced to compromise, opting for the short term gain, and pushing the full cost of your decision into the future in some manner. I emailed this to Bernie Daina (a friend and corporate psychologist) knowing he’d have something to say about it. I wasn’t wrong.

I’m sure many companies are started that way, it’s in the people’s heads originally and then becomes a fundamental component of the company’s culture as a result of repeated decisions reflecting this mentality. But not many companies last for long this way. In today’s market, investors’ pressure for exits is so profound that even companies that are aimed at short-term gain are exiting earlier than anticipated. Or merging for reasons that — when it comes to mission and business focus — are nonsensical.

Much of the formula for a startup’s long-term viability has to do with a clear yet adaptable vision, faith in that vision, and the readiness, discipline, and competence required to do the heavy lifting in order to fulfil the vision. Many hiring decisions must be made to get from one point to the next point. But if the predominance or decisions are made this way, whether hiring or purchasing decisions, logistics companies — for example — would buy used vehicles cheaply off some rent-a-heap lot on East Colfax Avenue. Your company would purchase its servers on Ebay.

Framing the problem in terms of social comparisons can also be a trap. Making social comparisons is useful in competitive dynamics. The runner sees a faster colleague win a race, and is inspired to beat him, or at least place second. He or she will seldom, if ever, compare his own performance to that of people at the bottom of the heap, unmotivated runners, and so on, unless the subject is also near or at the bottom. Comparing ourselves, or our endeavors, to those that rate our contempt just drags us down. Even if the comparison is made with “good” performers, whose methods, ethics, or standards we disrespect.

It is also useful to bear in mind that decades of research have established that making social comparisons can help performance in well-mastered, routine tasks. In complex and unfamiliar tasks, and especially ones we are learning, having a real or imaginary audience or base of comparison only hampers performance. True in humans, primates, and cats; true cockroaches running various types of mazes that also vary in how dark they are.

The bromides and cliches suggesting delayed gratification are so numerous, it’s not worth mentioning them. World religions are founded on this principle. Popular cliches also proliferate to the opposite, e.g., A bird in hand is better…” In today’s times, the way we are reacting as a nation, a Jihadist can blow up a pizza parlor in St. Louis and throw our economy, and that of nations we trade with, into an abysmal depression. This would not be the consequence if an insane citizen performed the same act. So who’s to say if short-term versus long-term is the wiser course? Best be prepared for both.

But if you are a man with vision, vision pertains to longer term thinking and actions. Short-term is more about risk aversion. A modicum of risk aversion is healthy, and even healthy to have on hand in stable, upbeat times. When caution drives the decision making and momentum singularly, you don’t have an entrepreneurial endeavor. You have a lemonade stand set up for the day a safe distance from the road on a quiet cul-de-sac; by some children who wish to garner a little cash for tonight’s charity event or visit to the toy store. Or to “show” their ingenuity and enterprise in order to please parents — who invested in plastic cups. A little too saccharine for your tastes, I imagine!

Bernie

Bernard L. Daina, Ph.D.
Management and Organizational Psychology
730 Seventeenth Street, Suite 690
Denver, Colorado 80202
Tel 303-596-6640
E-mail Go2Daina@aol.com

It’s a slow day in a little East Texas town. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit…..

On this particular day a rich tourist from back east is driving through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night..

As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything.

However, the whole town is now out of debt and now looks to the future with a lot more optimism..

And that, ladies and gentlemen, is how the United States Government is conducting business today.

Assuming I live to 80, 14199 is the number of days I have left on Earth. Doesn’t look like much when you look at it that way, and that’s ASSUMING I live to 80, which is a pretty big assumption. Thanks Chris for sharing this way of thinking.

Another great quote from my EO forum yesterday while on the topic of mentors and finding people to help you build your business.

* 99% of everything has been done before by someone. You just need to find them and ask them to help you.
* The other 1% is innovation. No-one can help you with that. You either have it or you don’t.

Scott Davis, one of my EO brothers had a great quote last night.

1. Concentrate your position to create wealth.
2. Diversify your position to protect wealth.

I don’t know that I’ve quite appreciated the beauty and simplicity of these statements.

One of the hardest things to do as a CEO is to determine where in the shades of gray to land between long-term and short term, between strategic goals and tactical mandates. And how to change the mix as the market changes, resources change and competitive situations change.

I’ve heard two great quotes which summarize the extreme endpoints of the decision making spectrum, as it relates to product related decisions and quality.

1. Anything worth doing is worth doing well.
2. There’s nothing worse than doing well, that which no-one cares about.

In an early stage company, you’re not quite sure what the market wants, so it’s not unusual to go a bit broad, and a bit shallow. In this period of the product life-cycle, you’re essentially trying to avoid mistake #2 above.

As the market matures, and as the customer feedback loop matures, one has a better understanding of what the customer wants, and then you need to make sure that you don’t forget to circle back around, and close the loop on #1.

Dave Berkus was one of my first mentors, and was an investor and board member of my first company, Durand Communications (circa 1993-1998). Dave is a true entrepreneur, who’s been coaching and mentoring entrepreneurs for the bulk of his professional career. His practical advice and pattern recognition on what it takes to succeed in business is exceptional. Now he’s consolidating his knowledge and is offering it from a new blog, in addition to a recently published new book.

I read his blog regularly and if your a budding entrepreneur, I recommend you do the same.

A new email acquaintance asked me a fairly profound question the other day, “how do I measure success?” I found myself introspective and realizing that my answer depended on the context of course, but also realizing that my answer has changed with the years.

Recently, I find myself keeping score differently. I’m evaluating my contribution (and measuring success) over the big picture more than I have in my past. I value the movie more than the single frame snapshot. In business, this translates my valuing sustainable growth over simply ‘growth’ at any one moment in time, with the emphasis on ’sustainable.’

Let me explain why.

I believe that productivity gains through specialization is a wonderful thing, but when things become very compartmentalized, one unintended consequence is that it can distance people from the outcome, or the downstream ramifications of their decisions. When cause and effect become too distanced, we lose track of the true cost of any one action. This, in my opinion, is a bad thing. Much of the default credit swapping that was going on prior to our recent meltdown showed how when you push risk too far from those that should care about it, bad things can happen.

While not a precise analogy, the notion that a factory could produce cheap goods while emitting a lot of pollution showcases the problem. The factory get’s rich, people who purchase the goods benefit from cheaper prices, but those that live in or around the factory bear a health cost that wasn’t fully accounted for in the profits taken by the factory. In effect, the factory has externalized a cost of doing business, making it ’someone else problem.’ If one measured ’success’ and only accounted for the profits of the factory, you would say the factory was successful. However, if you measured success and accounted for the factories true societal cost of doing business (bad health in and around the factory), you’d come to a different conclusion.

Fact is, when you measure success over a longer horizon, you’ll notice that it’s harder to get rich quick and not create externalities (e.g. costs) that have to be born somewhere, often times to society as a whole.

Responsible growth is growth that can be sustained.

I respect that.

Over the weekend, I got a call from a very close friend who is on the verge of losing his home. I have several other friends who are on the brink of their own financial meltdown. I have other friends in the commercial real estate sector who confirm for me everything I’ve been hearing about the impending commercial real estate collapse. And now we’re beginning to understand how all of the craziness we’ve read about for years with private equity firms buying up various corporations is going to come crumbling down under the shear weight of the debt they brought on their various acquired companies.

And I can’t tell you how many baby-boomers I know of who have little to no savings, or have been riding the good times on their over-inflated home valuations.

All of this to me spells a lot of pain in our financial future as a country.

I’m sick and tired of seeing new shopping malls erected. We need more real businesses producing real goods that compete on the world stage, not more ways to spend money we don’t have.

I’ve done a poor job keeping myself informed on the current status of many of our nations most pressing debates. Health care is just the most recent. And then I came across this 54 slide presentation, which BTW was apparently voted one of the best presentations in some recent contest.