What is Business Success?

On Sunday (10/28/07) several affiliated news sites published a story by Gary Rivlin called After Succeeding, Young Tycoons Try, Try Again. The headline is great. I was pulled in. As I started reading about Max Levchin I thought this guy could give me some real insight into what it takes to get very wealthy. After reading the article I knew the answer, but I will hold off on that.

Max Levchin comes off as a very competitive person. As a man who works many hours. He identifies himself as a CEO and wants to out do his previous success. I would say he is very smart from a academic and technical sense. I would say he’s fairly dumb from a life perspective. That is harsher than I would like to sound. But I can’t get over this statement:

Even among this jittery group of overachievers, Mr. Levchin stands
out. In part that is because outdoing PayPal may be an
all-but-impossible goal. Mr. Levchin acknowledges that he has already
earned more money than he could ever spend. But he said he would not
consider Slide.com, the photo and video sharing site he founded in 2005
that is still in its start-up phase, a success unless it is ultimately
worth, in real dollars, “at least $1.54 billion”— the price eBay paid for PayPal.

“Otherwise,” he asked rhetorically, “what have I learned?”

I sincerely hope that isn’t his definition of success. I hope he really sees value in creating a unique product or service offering that meets and exceeds his customers needs and expectations. Granted, the story wouldn’t be much of story without quotes like that, but come on…

If I were Gary Rivlin, I would have interviewed Sean Combs 12 years ago. He is a young tycoon. He built and diversified his holdings. I’m sure he is competitive, but I think he understands that for a business, and himself, to be successful he doesn’t have to out do himself.

So after I finished the article, I learned something I already knew, that to become very wealthy, you need a lot of luck. Max Levchin had a great idea, pushed it, and got lucky with the timing.

Big Prizes

Sometimes you have to use what someone else says. Here is a quick excerpt from Wired Magazine’s online site. The story is called Q&A With X Prize Founder: Big Prizes = Big Breakthough. It is Wired News (WN) and Peter Diamandis, the guy who is funding several great projects and funded X Prize.

WN: Why do prizes work better than investment?

PD: First of all, rather than funding somebody who might succeed, by offering a prize you automatically back the winner.

Second, you can attract a large field of potential competitors, so that
— at the end of the competition — while you’ll have a single winner,
you may have multiple contenders who have advanced their technology.
You may be giving birth to an entire industry, as opposed to a single
technology.

Prizes encourage people to take much higher levels of risk in
order to win. By encouraging that risk, you ultimately encourage
breakthroughs, because achieving a breakthrough is really a risky
proposition. It’s typically something that nine out of 10 think is a
crazy idea and not fundable by conventional funders. In addition,
prizes short-circuit bureaucracy. They say “I don’t care where you’re
from or what you were doing before. If you pull this off, you win.” So
it attracts nontraditional players and mavericks.



I was talking to a coworker the other day (OK, it was about 3 months ago). The problem we were having was around securing funding. His position was to get upper management to buy into what we were doing and have them fork over funding for us to release to other groups based on adherence to certain rules or progress. I didn’t like that idea because it is fraught with vulnerabilities and a suave group could manipulate the results without doing what the intended need for the resource is. Plus, if you have a group that has an innovative means to get to the desired result there isn’t motivation for them to save if they are guaranteed resources. If you have a budget of $5 million, you will use $5 million or at least something close. I suggested we create a prize with the funding. The prize would be greater than any individual pay out and it didn’t have to be used for the actual project (maybe going to support other areas that are getting less attention). If all goes well, each competing group will have unique and hopefully innovative results. But as Peter Diamandis says above, the risk taken would lead to breakthroughs. When teams all get resources their solutions tend to be very similar with only environmental differences between the two determining the winner.

Ultimately, my idea wasn’t used.

Other Work Related Blogs (again)

I thought I would bump this up because I added a new work related blog.

Since I’m very new at writing this blog, I like to look for other
people that are writing this space. I’m primarily looking for bloggers.
I found two that I will link to on an ongoing basis.

A = The Gig

Summary This blog is for Generation Y as they experience the work world.
Opinion
Nadira Hira is covering a group that is mostly ignored in the other
blogs I read regarding work – Generation Y. Which is somewhat ironic
because blogs are a tool of Generation Y. What I really like about her
is that she encapsulates Generation Y. She is young and going after it.
Her writing is unintimidated, relevant, and opinionated. It is a blog I will read frequently.
Recent Posts –


B = The Bing Blog

Summary
Stanley Bing is a Fortune
columnist and best-selling author of business books noted for their
wisdom as well as their sharp, slightly acrid sense of humor. He is
also the only writer on business and the workplace who still puts on a
suit and tie and goes to do battle with the dragons that breathe fire
at corporate America every day. This blog captures what remains of his
brain after it has exploded in all other directions.
Opinion
– The writing style is straight to the point, pull no punches good. It
seems geared toward a male reader, but maybe that is just me. The
website is set up with a lot of information available but not in a
boring way. The tags are great too. There aren’t many adverts either. I
highly recommend this site.
Recent Posts –


A Tale of Two Hotels
What’s your killer quotient? (A vicious little quiz)
It’s Ask Bing time again!
Are you good at giving presentations? A little quiz.
New scientific BS about IQ
The best computer games to play at the office
Doing things we should’t in the office
My six-month eBay chip
Hail to the Chief!
The Pretender

C =  Work in Progress

Summary Lisa Takeuchi Cullen is a New York-based staff writer at Time. She
writes about workplace, business and society trends for the magazine
and Time.com. Of late these trends included snooping bosses, teen interns and cubicles of the future.
Opinion
– Her writing style is similar to mine. We both want to comment on
books, recent news, and our analysis of both. She uses stats to
reinforce one way or another. She provides some advice, but doesn’t
come off as the know it all. I recommend her site (after reading mine)
for general macro level HR issues. The website does have probably one
or two too many adverts and probably should subscribe to the less is
more theory. I do like all the other blogs though.
Recent Posts –

Unbelievable NYT correction
End of Food Week: a Rice-Off!
Eww! Your desk is grosser than the loo
My job is endangered. Is yours?
Trees could do the work of dead-tree journos

D = Train Wreck

Summary Steve Tobak is a marketing consultant and former chip industry
executive. Over more than two decades of management and
behind-the-scenes interaction with high-tech’s elite and their
legendary egos, he has seen a pattern of dysfunctional behavior emerge.
Train Wreck provides irreverent insight into the real inner-workings of
technology companies and their management. When he’s not airing the
industry’s dirty laundry, Steve likes to hang around the house, make
believe he’s working, and drive his wife crazy.
Opinion
– His writing is more like Stanley Bings, but not as in your face. It
appears to be a little generic in topics (qualities of potential
executives and ethics), but it does a good job of going over the topic.
Its a little on the technology side, but not much.
Recent Posts –

Peanut Butter and Pasta

Before the US goes to war, there is a large segment of people that know. The final determination – not official in the press – is official in the market. You see, the government starts buying necessities like toilet paper by the truck load. They stock up. The decision is made as soon as they sign the purchase order.

So where do you look first for a downturn in the economy? Do you look to the stock market? No. Do you look to the Federal Reserve? No. Do you look to surveys? No. You look to PB&J. You look to spaghetti. The economy takes root in spending. If people start adjusting their spending en mass, then you know they know something you don’t know.

An AP story highlights these adjustments. The story is by Anne D’Innocenzio and is called Working Class Stretched Thin. D’Innocenzio points to the rise in prices of grocery supplies and utilities as rising faster than income. Here are some lines I pulled:

  • With the fastest-rising food and energy prices since the 1980s
  • From Family Dollar to Wal-Mart, merchants have adjusted their product
    mix and pricing accordingly. Sales data show a marked and more
    prolonged drop in spending in the days before shoppers get their
    paychecks, when they buy only the barest essentials before splurging
    around payday.
  • Her husband’s check from his job at a grocery store used to last four days. “Now, it lasts only two,”
  • The pantry scrambled to feed 5,000 new families over the past 12 months, up almost 70 percent from 3,000 the year before.
  • Gas prices hit a record nationwide average of $3.23 per gallon in late
    May before receding a little, though prices are expected to soar again
    later this year. Food costs have increased 4.5 percent over the past 12
    months, partly because of higher fuel costs. Egg prices were 44 percent
    higher, while milk was up 21.3 percent over the past 12 months to
    nearly $4 a gallon, according to the Bureau of Labor Statistics.
  • And while overall wage growth is a solid 4.1 percent over the past 12
    months, economists say the increases are mostly for the top earners.

I don’t even think this is a short term slow down either. I think this is a shift. As I noted in my Paul Krugman entry, the middle class is getting squeezed between the haves and haves nots. College costs are up to the point where reevaluating the benefit is now a consideration. And Alex Rodriguez, who didn’t go to college, is about to get a contact of 10 years for something around $30 million a year.

But what is amazing is that this isn’t necessarily a bad thing. Values are changing – at least in the US. There is a push to get more green, be more socially conscience, and to rediscover the family. None of these things requires a rich man.

Does College have a Future?

Everyone knows that the cost of attending college is going up every year. Recently, Keisha Lamothe supplied the statistics as to how much the cost is increasing in an article titled College Costs Keep Rising. I’m a college graduate from 7 years ago. I had college loans (refinanced them) that seriously ate into my income. I have a good job because of college, but I didn’t get paid very well at first – I didn’t have experience and really lacked the true skills required. Yesterday I posted an entry about the amount Alex Rodriguez adds value to the team that employs him. He didn’t go to college. I believe the worth of college is overrated in the US. Being a society of supply and demand, I feel the supply of college educated workers is starting to exceed demand. I think those that have a unique skill are going to really flourish before 10 years is out; maybe even 5.

I see two primary forces making this a reality. The first is the gain in education of the areas that weren’t part of the US/Western European/USSR faction. Countries or areas like India, China, the Middle East, and Eastern Europe are developing programs and churning out workers of quality. The second is the entrepreneurial nature of the US. As the baby boomers move out of the workforce and Generation Y becomes more prominent I see a move to situational or something similar to contract work for a great number of workers than use this method today. Generation Y has a different mentality. I’m generalizing, but Generation Y wants to enjoy what they do and doesn’t really accept not being able to it. They see traditional work and their idea of a job as an intertwined evolution of the workplace. That is great for situational work, but not necessarily for corporate life.

Now the hard part is figuring out what is a unique skill that will have value in the future marketplace. I expect it to be related to the arts or maybe a combination of art and technology.

Baseball is Duped by Warning Track Power

Entertainment is a tough business. Alex Rodriguez is a third baseman for the NY Yankees. Baseball pays by contract. He earns approximately $25 million a year currently. But that is not his market value, at least according to his agent. And that is why entertainment is a tough business. Right now, according to an article written by Chris Isidore on CNNMoney called A-Rod: A Bargain at $300 Million, Rodriguez will increase the value of the baseball team that signs him. Some teams benefit more than others. Why he is valuable is mostly tied to leverage. It is perceived and argued in the column both ways, that the top player attracts more fans and media attention. Controlling that media attention is vital. Controlling the fans wallet is vital too. So you get paid by those wanting to be entertained and those that would like to indirectly benefit from the brand and the focused attention.

So does Rodriguez really make a team more valuable by improving the brand? Does he excite people enough to pay premiums?

My answer is NO.

Baseball is suffering from exuberance that is unlikely to continue over the next cycle, financial that is. Baseball is currently up, but it will come down. People aren’t paying to see Rodriguez exclusively, they are paying regardless of who is out there. The money coming in would come in either way. When the sport down shifts because it hits the limit of consumer spending (as a result limit the interest), Rodriguez would still get paid, but no one will blame him for the downturn in interest. He will simply be a member of the club that gets paid too much money to do something so nonessential. Fans will turn to something else more affordable and accessible.

Just some fun numbers:

$25 million is $68,493.15 a day. Many families live off that, or less, a year.
$30 million is $82,191.78 a day. A decent raise for most people in a year.
If you factor in taxes and other payroll deductions equally 40%, then it is only (jk) $49,315.07 – a day.

Qualities of High Earners

Anne Fisher, a Fortune senior writer, had an interesting post about a survey finding that those that earn six figures and up are more likely to apologize. The article is called Want a Higher Paycheck? Say You’re Sorry. The statistics are amazing in the relationship between earnings and likelihood of accepting blame and apologizing for it. Those stats are:

Willing to Apologize               Earnings
         92%                    $100,000+
         89%                    $75,000 – $100,000
         84%                    $50,000 – $75,000
         72%                    $35,000 – $50,000
         76%                    $25,000 – $35,000
         52%                                   – $25,000

Anne does a good job with laying out the possible reasons for this correlation – really any one of them could be right. But I want to know what other qualities these high earners have.

In an earlier post I described politeness as a good strategy (A Strong Strategy – Politeness). As I see these numbers, I start to think if one personable action is more valuable or if they are all a multiplier affect. Here is a brief list of high earner little things. Feel free to send me more to add to the list.

Politeness
Looking people in the eye
Saying sorry
Saying hello