Monday, July 10, 2023

Entrepreneurial Brain?

 Occasionally I guest-lecture for an entrepreneur class at a local university, so I was intrigued by Jeff Hays’ forthcoming book, The Entrepreneurial Brain: How to Ride the Waves of Entrepreneurship and Live to Tell About It

Jeff Hays compiles a lot of helpful advice and strategies for entrepreneurs, especially serial entrepreneurs and entrepreneurs from business schools (why I say this latter part, I’ll explain later). Two helpful keys are found in this book: business is full of paradoxes—contradictory advice where both sides are true at times; the key business functions and different strategic tools to grow (or survive). An example of the first is the advice to “never quit” while it’s also true that you should “quit early and learn” so you can make improvements for the next round. An example of the latter key is to be reminded that sales and marketing are two different and necessary business functions. His compendium of strategic tools may be worth the price of the book.

Hays himself is a paradox. He describes his values and how they rank in his decision-making and then conforms to his principles and violates them at the same time. For example, he describes the time value of money and explains how he’s refused to have lunch with people who want to learn from him. It’s not worth a $1ooo of his time to have lunch with someone. But then later explains that he’s willing to give because others have given to him. That it’s all about serving others especially customers. You give, and as a result you get. Through all his stories/adventures I’m wondering if he gives only to those that he can get something from. (I’m not impugning his character; I just couldn’t find a preponderance of evidence that he has lunch so others can pick his brain.)

While he’s trying to encourage entrepreneurs and notes that “all” entrepreneurs score high on the Quick Start dimension of the Koble assessment—versus Follow Through, Fact Finder, Implementor—it may do a disservice to those overlooked entrepreneurs who start most of the businesses in the US. We often call them “mom and pop” shops because they’re the key to providing for the owners’ families. They’re started sometimes by recent immigrants and refugees who see a need in the community. They’re started by non-Stanford, Silicon Valley-bound graduates. I challenge the author’s premise; I doubt all of these entrepreneurs score high on Quick Start. Millions of businesses are sole proprietorships. (Millions of businesses are also asset owner/holders like LLC’s to own/operate a solar farm in order to sell energy to a single customer, like a hospital, college or factory.) While the author’s book might help the millions of independent contractors in construction, computer programming and related, event planning, videography and home healthcare, and many other service industries, this audience will have trouble relating to the multi-million dollar deals Hays highlights. Maybe rather than knowing the Brain of the Entrepreneur, it might be worth paying attention to the Soul of an Entrepreneur (a book by bestselling author David Sax with the subtitle “The Work and Life Behind the Startup Myth.”)

Quick Start brains, according to Kolbe, can assess risks and are risk tolerant. Perhaps being risk tolerant, opposed to risk averse, is the key here. Others have shown that we’re horrible at assessing risk and predicting the future. Review Daniel Kahnemann’s and his co-authors’ works. Ask Nassim Taleb about black swans and how to invest broadly because we can’t predict who will win—for example, he describes the difference between NYT bestsellers and other writers as a lottery of catching the readers’ attention. There are many gifted authors but only a few sell more than a hundred or a thousand copies. Same with businesses (and economic trends and stock market stars, since most economists are wrong and most mutual fund managers can’t beat the stock market indices repeatedly). Hays’ mantra here is to make sure you avoid complexity and keep a simple business model. Whether that reduces risk or not, I don’t know. The guy who developed the copy machine thought there was a need for three in the whole world—maybe it was more complex than pen/paper and a good mimeograph machine. Risk tolerance might be the key to the entrepreneurial brain, or a bit of desperation if you’re trying to feed your family.

Friday, July 7, 2023

Managing Risk

 K. Scott Griffith’s forthcoming book, The Leader’s Guide to Managing Risk, describes how most of what we see in terms of risky situations is just the tip of the iceberg. What we often fail to see are the numerous systems and people aspects lurking below the surface that need attention as well.

Griffith can tell us a lot about success and how to develop high-reliability, high-performance teams and systems. He’s had an enormous amount of success and is very familiar with systems thinking and how we all can create more robust mechanisms/systems/experiences for the probable risks. The author coaches us to think differently and coherently puts a way of thinking that can help us all.

It is, however, a pedestrian, common-man way of thinking through reliability, robustness and risk. I’m sure the author is familiar with a lot of techniques: accelerated failure testing, and the like, as well as Failure Mode Effect Analysis (FMEA), which requires us to step through the mechanical, cyber-system, digital and human elements. We have to think through potential failures at each step, each element. We have to rate its probability of occurrence, its severity and the likelihood of detection. High scores in those three aspects necessitate mitigating efforts to reduce probability, reduce severity or improve detection. 

The author sufficiently covers redundancy to reduce probability (because we’re putting elements in parallel paths and “both” would have to fail). Not all systems can accommodate such mitigating factors. And humans are notoriously inept in multiple-stage “inspection” points—such as auditing, observing safety system changes, etc.: inspector A assumes inspectors B & C will catch the problems, while inspector B assumes A has already caught them or C will catch them….(you can probably guess inspector C’s reasoning as less-than-full attentiveness).

The audience for this book are the people who don’t want to pick up a small-ish article or book on FMEA.
[A scene from the movie, The Charge of the Light Brigade, a tragedy that could have been avoided with clearer communication and shared intelligence.]