August 11, 2006

Way of Go MBA lesson 4 - GO'S RULES

So, you've slowed down. Stopped to think. Decide before acting that you'll think things through. This is a good time to think through the strategic rules of thumb that can help your analysis and their structure - GO'S RULES.

The Way of Go asserts that GO'S RULES make up the lion's share of strategic rules of thumb structurally. That is, there is hardly a rule of thumb for strategy that is not contained within GO'S RULES.

GO'S RULES are spectrums of planning or decision-making rules:

Global - Local: What's your perspective? 20,000 feet or a 1 foot view
Owe - Save: The spectrum of risk - Owe (debt, risky) to Safe (risk-free)
Slack - Taut: The spectrum of tension metaphorically
Reverse - Forward: Planning back from a goal or going step by step forward
Us - Them: Whose perspective to look from? Yours or the Competitors?
Lead - Follow: The spectrum of initiative.
Expand - Focus: Diversify or put all your eggs in one basket?
Sorry, there are no rules: Real life is not about set patterns

The key notion provided by GO'S RULES is that you can't just bank on one side of the spectrum or you'll miss the other side of the coin. If you're favorite saying is "absence makes the heart grow fonder" and strictly follow it, you're bound to be less successful than someone who can also, when appropriate, follow the rule "out of sight, out of mind."

Why are GO'S RULES important to the Way of Go MBA? Here are four reasons:

1. Much of what you learn across disciplines - Finance, Operations, Strategy, Economics, Marketing, etc. - stem from the same root rules that power The Way of Go. That is, when you strip off their meanings just within their subject matter, you'll find that the rules can apply to other topics. Take Finance. "A dollar today is worth more than a dollar tomorrow." In Sports, a sure pitcher, QB, or center now is worth more than some unsure draft picks. While subject matter experts from both fields suggest that you take risks on the dollar/player tomorrow, there are chances that Sam Bowie may not become the next Michael Jordan. But, if you learn the Finance rule and don't cross-pollinate to Sports, Go, and other fields, you're bound to lose out on its teachings.

2. People dogmatically fight for one side or the other, despite the coin being two-sided. The classic Lead-Follow example is from Sony in the Betamax years. Having invested in the Beta technology, they wanted to control the market for devices that played back Beta movies (where they also led studios to go somewhat forcibly). If they would have followed the demand for their product, instead of forcing it and leading it, they could have licensed production of Beta players so that there could have been more Beta players by others (and extracted rents from them), created more simple channels to get movies out of studios (not leading studios through them), and perhaps taken a ride on their leadership in the market to its possible conclusion. So, the key learning before embarking on a MBA is to think when you hear a maxim or proverb or rule, to look for the other side. Think: would the opposite advice also be good in some instances.

3. It's helpful to have a structure for these rules before embarking on one's MBA. If you get the structure later, then you don't get as much out of it as you could have. If you know to look for, and note all the times where similar things occur, it's easier to track them down and summarize your understanding. Moreover, you're bound to find things in your pre-MBA experience that will line up well with what you'll soon be learning.

4. Taxonomies are cool.

Posted by wayofgo at 04:56 PM | Comments (0)

December 28, 2005

Marketing Primer - How Toothbrushes Make Better Generals

Marketing is about making choices within the typical four C's affecting most business decisions - Company, Customer, Competitor, Collaborator. Things work out best when your choices align well.

Take Harley Davidson, the company. Harley has to make choices about what it's going to do with its brand. It has to decide things like who it will go after: latte drinkers or hard-core bikers. If latte drinkers, perhaps the right thing would be to show shiny new hogs with riders in the latest fashions. If hard-core bikers, then you probably want to do exactly the opposite. But, if you can get away with marketing to them differently, and not having the others find out (or find out strategically), then even disparate goals can work. Think airline pricing - vacation vs. business fares.

The other thing to figure out, from the company side, is what can we be? There are umpti-odd books on core competencies, competitive advantage, and so on that look to explore what you can do as a company versus what you cannot do. The thought being that most any company can do anything, but what can a company do well or best? So much so that it can do it better than others. Go some place where others cannot go. If you have patent protection, you've got some competitive advantage if people want your product. Without intellectual or regulatory advantage, sometimes it's just how well you're able to do something relative to others.

This speaks to the competition and the concept of a value proposition. Value is determined in the customer's mind. Price to Earnings ratio is an example. People think Google earns a P/E of around $94 (as of today), while Yahoo earns a P/E of $38. People buy Google shares at a higher price than Yahoo, not because the earnings are more than Yahoo's, but because they feel that Google's earnings are worth more than Yahoo's. They feel the stock, maybe, will climb higher, that earnings will rise faster, among other attributions.

Starting with the customer's idea of value, and business's need to recoup investment and expense, you can start to chart the relativity of value to cost.

Take a toothbrush. If it costs $2.50 and people pay $2.50, then that's the toothbrush's value. What's the value if no one buys it at $2.50? Less than $2.50. Again, value is in the customer's mind. What if I price the same toothbrush at $1.00 and no one buys it? What if I offer it for free? If no one wants it, then it has no value! Likewise, if I price the same toothbrush at $10 and someone buys it, then the value to that person is $10. Key thing for marketers to understand is how many people will buy something, in what circumstances, for how much.

If most customers value our toothbrush at $2.50 and a competitor offers a toothbrush at $2.00, what will happen? That all depends! What is the value of the competitor's toothbrush? That is, is the competitor's toothbrush one of those that's worth $10 in the customer's mind or one that's worth $0. You cannot tell just because they priced it at $2.00! If it's worth $10 to the customer, and your toothbrush is worth $2.50 to customers, then the competitor's toothbrushes will sell out before you sell even one. Likewise, if the competitor's toothbrush is worth $0 in the consumer's mind, then yours will sell out before they even sell one.

Now, these are extreme examples between very different brushes, but in the real world toothbrush competition, the stakes are higher and the similarities between values in brushes dominate the competitive landscape. It also becomes harder for the customer to determine which brush has a higher value.

Let's look at some attributes of the physical toothbrushes:
- bristle variation
- angle of the brush
- compactness of the bristles
- hard, medium, soft
- grip
- color
- head geometry
- and so on

Different customers going to the supermarket to buy a toothbrush may value these physical attributes differently. Your competitor might make a diamond shaped, compact bristle, angled brush, with serrated bristles that will appeal to 10% of the buying public. But, if your research showed that oval shaped toothbrush heads sell better than diamond, then you can make the same toothbrush as the competitor, but with more valued head geometry; therefore, a more valuable toothbrush in the customer's mind.

However, the physical attributes of a toothbrush are NOT the only attributes customers buy. Consider the following:

- Performance attributes (how long a brush will last; how "effective it is")
- Packaging
- Where on the shelf it is at the supermarket (collaborator)
- and so on.

This makes the toothbrush competition even more complicated. If you have a $2.50 valued toothbrush and the competition has a $2.00 valued toothbrush, but your brush is on the bottom shelf almost buried next to the shaving cream, and the $2.00 brush is at eye level, within easy reach, and has big arrows point to it, that $0.50 of effort the customer might make to reach your brush might not seem worth it.

However again, the process is not even that simply complicated. Factor in the following:

- Brand name (Colgate, Crest, Oral-B, and so on)
- Advertising (collaboration with supermarket)
- Word of mouth
- Dentist recommendation

If Crest goes on a rampage and advertises how other toothbrushes are more fit for canine than human toothbrushing and does it convincingly, and shows that only their new brush is really fit for humans, then, as long as everyone remembers the ad when going into the stores, and remembers it's Crest, not Colgate, that made this claim, then they can expect that you'll buy their brush over the others. Of course, they won't do this and even if they did, it would be remarkable to have people believe it en masse.

Go to your supermarket and check out the toothbrush racks. You'll see a variety of toothbrushes. Most brushes belong to the major brands. Most of the smaller brands are at the bottom or top of the shelf, far away from most strolling customers. Now, how would you pick? Is your current brush working for you, but needs a replacement? Want to ditch the standard brush and go for an electric model?

Your own thoughts about how to pick a toothbrush are cloudy enough. Toothbrush manufacturers and competitors have to think through all your value issues, juxtaposed with all the various value markers mentioned above and more for how to compete for your business. Why? Because they have to CHOOSE how they are going to compete. (I'm surprised we haven't yet seen the Sleep Number toothbrush yet, or the build your own toothbrush, but imagine they're coming... at least now that I've mentioned them)

In the Way of Go there's an entire chapter on focus versus diversification labeled Expand Focus. I've heard time and again from people saying, "I'm going to market this to everyone!" That's usually always a bad move. People value things differently. And, there often are discrenible segments of people that value things the same way. Gain a beachhead with a segment that you can really attack with your product's best value proposition first, if the numbers pencil. Cross the chasm and get into the rest of world from there.

So, how does this relate to you?

If you're a Go player, then you have to make choices between moyo or territory; influence or territory; many positions or one position; leaving aji or not. Goal: to obtain more territory ("board value") than the opponent.

If you're a politician, then you have to make choices between a clean campaign or a dirty one; anti-choice or anti-life; gun control or not; death penalty or not. Goal: to raise your value above the competitor's in the most constituents' minds.

If you're a general, then you make choices between troop levels, positioning, timing, air land or sea, time of day, among myriad others. Goal: obtain the objective at the lowest or no cost.

Brushing up on Marketing or the Way of Go should help.

Posted by wayofgo at 04:44 AM | Comments (0) | TrackBack

December 23, 2005

The President’s Decision Analysis 101 aka FISA Savvy Terrorists

I’m the first to admit that I had no idea about FISA – the Fone Invading Spy Act, the law that says you need a secret judge to get authorization for your wiretap, even if the authorization is after the fact. I operated under the assumptions of modern culture that my government would spy on me whenever it wanted to (c.f., “Enemy of the State,” “The Net,” “Above the Law,” “Sneakers”). Can’t tell you how many conversations I had on my cell or at home where someone would say, “It’s between you, me, and whoever’s listening.” Glad to hear that there are laws to prevent this from happening; don’t know if that will make me any more cautious on the phone. Not that I’m doing anything!

What I did not realize, however, is that terrorists know the laws better than I do. I suppose that’s part of the terrorist training curriculum. I can imagine the syllabus entry: “FISA’s Too Slow! Relax! You Can Make Calls Inside the US to Foreign Countries Without Getting Wiretapped.” (I suppose it doesn’t have to be part of the training program… maybe if you grow up in a terrorist friendly village, you learn it by osmosis (Hard to tap osmosis… Hmmm)). Now why, you say, do I now know that this must be part of every terrorist’s internal mindset? I came to this realization when President George W Bush got really mad because someone disclosed the secret wiretaps.

Before I actually read through the paper on this breaking story, I heard about these secret wiretaps on my local news radio and just shrugged it off. “Secret wiretaps, humph!” I said to myself, “Major movie studios have been telling me about them for years.” But the President knew, as all those terrorists knew, that secret wiretaps were illegal. Therefore, because of the lengthy, onerous procedures of FISA, terrorists could operate willy-nilly. I mean if terrorists weren’t FISA-savvy, why would the President be mad?

Let’s say that they weren’t FISA-savvy. If some of the card carrying members of ______ (your least favorite terrorist organization here) thought the Bush/Cheney government would eavesdrop on their conversations, they would have not relied so heavily on transmitting their secrets over the phone lines, would they? They would have figured out how to carry out operations by phone or other means so that they wouldn’t be caught if wiretapped. If this were the state of the terrorist thinking, then secret wiretapping would reveal little to no info. Terrorists must have been confident in the law-abiding President and FISA, in order to conduct such operations by phone, and we know this because Bush is so angry at the disclosure of this now not-so-secret wiretap program and his telling us of how this is helping terrorists (Might also be possible that potential illegalities are exposed, but that’s another topic).

It must be the case, since Bush is angry and believes that this was not illegal, that terrorists knew about FISA, knew that America wouldn’t break laws to try to prevent another attack, and that they would phone each other with reckless abandon, knowing the law on wiretaps, or at least slowness of FISA, was on their side. They had to believe this or they wouldn’t be using their phones to conduct terrorist business.

Bush, therefore, tricked the terrorists for the last few years. He convinced the terrorists that the USA was a law-abiding country (let’s ignore prisoner treatment for now) and was therefore going to not interfere with even the questionable-public’s phone conversations. There must have been some weighty conversations going on given how the terrorists must have believed in FISA.

Potential Terrorist Phone Conversation
Ted (terrorist #1): “Bill, I have this secret plan to blow up something. Can you help me get $1,000,000 in C4?”
Bill (terrorist #2): “Ted, aren’t you worried that the US Government is listening to our call?”
Ted: “No dude, remember our training on FISA?”
Bill: “Oh yeah, it’s so lengthy and onerous to hear our calls; we can speak freely about our plans.”
Ted: “Right on. Now about our evil plot and the C4…”

To have some yahoo inside blow the entire secret wiretapping gambit is a travesty.

I mean look at just some of the quixotic odds that Bush had to ignore in order to make this secret wire-tapping a success. Below are the probabilities that:

- terrorists believed we were law abiding – 1,000,000,000 : 1
- terrorists, so believing, would give up good information over the phone, instead of speaking covertly or otherwise – 50 : 1
- our intelligence apparatus would be able to sift through the millions of phone conversations (including those of PETA and other anti-war camps) and find the various needles in the haystack that would thwart a terrorist attack – 10,000 : 1
- if we found the right needle from the right haystack that it would lead to the right action to prevent a terrorist attack – 500 : 1
- if the secret wiretaps were disclosed, it could bring a criminal case / probe – 1 : 100
- a case / probe would lead to impeachment – 3 : 1
- lessening of trust from Congress – 1 : 1,000
- lessening of trust of American people – 1 : 3
- making lawmakers less effective – 1 : 1,000,000

Even without baking in the jeopardy to the President, the odds of preventing a terrorist attack as stated above are about 250 quadrillion to 1. 250,000,000,000,000,000 : 1. Pretty low odds.

But, we also need to assume how the President looks at his decision analysis. There is a rationale to all of this. Here is what I imagine the President’s calculus must look like to justify such measures:

- a stem cell – nearly infinite worth
- a human embryo – infinite worth
- one American – infinite worth
- reinvoking 9/11 = priceless

When you look at it multiplying 250 quadrillion to 1 odds against priceless and infinity values, (namely, anything that supports saving those stem cells, embryos, non-captured Americans, and 9/11 memories) most any action is justified.

The problem lies with whatever alternatives there were (not just for this, but for Iraq, ANWR, etc.). Given the infinite values will always justify anything, you can still act more cost effectively if other measures improve on the 250 quadrillion to 1 odds you’ve set off with the secret phone taps. But, since we’re not the President, we can’t know what he knows until far after the fact, even if then.

So, relax about this whole FISA thing. At the end of the day, the President’s career, criminal record, and the Constitution may be in jeopardy, but for any chance of stopping terrorists, especially as the President must believe, savvy ones, we’ll always do the right thing as long as there’s some chance we’ll be right given infinite values for the above; however infinitesimal.

Posted by wayofgo at 01:09 PM | Comments (0)

April 21, 2005

Decision Sciences Primer

At Kellogg, Decision Sciences (DS) was essentially statistics, but due to the mastery of professors like Scott McKeon, DS was something more.

His mantra "Verbalize, Visualize, Mathematize" sums up the approach well. First, understand in words what you are trying to solve for. Then try to picture it. Then you get into the equations for it.

The typical Statistics class is replete with mathematize. Typical questions would be something like "Determine the confidence intervals blah blah blah." The typical student answer is certainly mathematizing, but where are the first two - verbalize and visualize? Why are they important?

Verbalize means not just solving an equation for the sake of solving for the equation. It means you understand something of why. Instead of "Use Bayes rule to determine the conditional probability of A given B occured," have something a bit more real.

In Scott's class, you do actually learn this, but it's not dry, to say the least. Instead, you're introduced, verbally, through a game of chance; say, The Monty Hall Problem. Confronted with a real life situation that you can actually imagine and tussle with makes a big difference. Getting the class to participate in an argument about what "should" be the best way to score the big prize, is verbalize in action.

Visualizing is another important concept. If I flip this coin, what's the probability that it ends up heads? Well, is it a weighted coin? What about the probability of a multicolor patchwork misshapen bean bag? What's the probability that a particular color comes up? Should you just divide by the number colors? If there are five colors does that make a 20% chance for each?

Another aspect of visualization is the output of chance events. If you ask Excel to generate random numbers between 0 and 1, and you do it a 1000 times, what will the graph look like (for Excel pros, what would an X Y Scatter look like)? Plot the random rolls of dice on a graph, what will that look like (say the dice aren't loaded)? Do these pictures look the same?

Mathematize is taking these first two and looking at the science underlying them. In the Monty Hall example, you can either use Bayes' theorem or do some tree flipping, but without getting into the math or tree, rest assured that there's a mathematize answer ready for you. In the plots of the chance events, these shapes (visualizes) conform to equations about their nature (whether rectangular or Gaussian).

But, as the Way of Go has shown, this approach should not be limited to DS. Verbalize, Visualize, and Mathematize can be used elsewhere. For instance, say you want to do good in the world. While most people might be comfortable verbalizing and visualizing, could you really mathematize?

One of the ways I did good in the world, IMHO, was to read Kellogg candidate applications. Admitting or denying candidates into the next class is a chore many a Kelloggian has performed and it's practically thankless work. That said, there's certainly a "do good in the world" aspect to it.

One way I mathematized in reviewing applications, especially where I was having problems admitting or denying the applicant, would be to flip a coin. Yes, it's true. I'd flip a coin to recommend to admit or deny an applicant and I highly recommend the technique for people who want to really understand their inner psychology and get at the right answer.

The power of the technique is strong, but it can only be used once effectively for a particular decision... in my experience. Therefore, if you have some big decision ahead of you, try it. I wont give away how to use the flip unless you click to read on. First step is to flip. In your mind verbalize "Heads - Choice A (or whatever one route is); Tails - Choice B (everything else or another choice)." Flip the coin and agree that you'll do whatever fate decides. Probably not how Kellogg would approve of my decision making technique, but terribly effective and quick! Read on for more...

Did you really do it? If not, stop reading and work on a real decision and flip. If you have, please read on...

The result of the flip gives you the answer, but not necessarily the one that came up on the coin. When I was stuck reviewing an applicant and I'd flip a coin, if the coin said "Admit" and I AGREED, then it's as if fate agreed with what I felt internally. It gave me license to Admit, per se.

If I DIDN'T agree with the coin, but wanted to flip again or argue with the result, then that part of you deep down comes out and you get to see it. It's as if you don't want fate to have the final say.

Agreeing or disagreeing with the coin makes all the difference. Use this for most any big and real decision. "Should I buy this house?" Flip comes up Buy, and you are glad that fate has decided on Buy, then go ahead (given you've done all the other requisite due diligence (important caveat)). Flip comes up Buy, and you want to flip again, it might be time to reconsider.

Posted by wayofgo at 01:37 AM | Comments (0) | TrackBack

April 18, 2005

Operations Primer

Operations is really how business is delivered. It's logistics, assembly lines, warehouses, deliveries, cells, inventory, etc. You can barely make a business go without operations. An MBA without some Operations, is like composting without a bio-cycle.

The core tradeoff elements of Operations are: cost, quality, time, and flexibility. Like the game of Go, you can have one, maybe two, sometimes three, but it's hard to get all four at once. Take cars, for instance.

Some cars are bargains; cost. Some need few repairs and perform wonderfully for years; quality. Some are fast and/or can save you from jiggling keys before opening a door or trunk; time. Some are sporty and practical, some can function as entertainment centers and comfortable rides; flexibility. No car really tries to be all these things. Just start with the cars that cost less and ask if you get the rest.

Business is no different. You can be a low cost competitor - like WalMart - and be the cheapest place to shop. You can provide a quality experience - like Nordstrom - and be the best place to shop for moderately priced upscale clothes. You can be Honda and be a flexible competitor with your understanding and prowess in engines and also be fast (time) in getting products to market. But, it's very hard to hit all four elements because you have to focus.

Why focus? One of the big lessons from Operations is bottlenecks. Bottlenecks are where things bog down; where inventory stacks up. One of the key lessons from Operations is to improve throughput by improving capacity of your bottleneck. To do this, you need to focus and not worry about the other business flows that don't affect the bottleneck.

For instance, let's say you're paid to build a house. You get paid bonuses for low cost, high quality, faster delivery, or more potential configurations of the rooms therein. But, the bonus for building the house fast is the biggest bonus by far. Where's the bottleneck?

When you optimize for speed in building (and can meet the thresholds for quality, flexibility, and cost) then you're only interested in what things keep you from building the house faster. There are actual competitions for how fast a crew can put a whole house together. Indeed, an entire house can be built in a day that is fully functioning and meets quality standards, but such an approach is considerably more expensive than standard approaches (cost). Forget change orders in the midst of the build would throw off the entire chain of events needed to happen precisely in order for it to get built. But, that said, the proper focus on the aspect of time can get the job done.

As the Way of Go would suggest, you can reuse these rules for more than cars and houses. Think about these elements when you go to mow the lawn - do you want to get the job done with as little gas as possible, well, quick, or while you enjoy the sights and scenes of your lawn (not recommended). Optimize on one or two, but don't try to go for all of them.

Posted by wayofgo at 01:05 PM | Comments (0) | TrackBack

April 07, 2005

The Marty Stoller Experience

The best business school in the nation, Kellogg, doesn’t suffer from poorly taught classes (save a few…). Indeed, the number of epiphanies and Eureka! moments are legion across great professors such as Scott McKeon, David Besanko, and many many more. But, if you dared to expend all your points in the class bidding lottery, you would not go wrong to embark upon the Marty Stoller Experience. The Marty Stoller Experience was something 80 exclusive few, out of almost a thousand students, every two years, experienced first-hand.

Paying nearly $60K/year for all the room and board, tuition, beer, etc. while not working, for an average of four classes per quarter, works out to about $500/hr you’re paying to learn, know, and/or experience. The Marty experience was worth every penny.

This treat, this marvel of a class, went beyond simple classification. Proof? Sample material from the first five minutes of the first class:

In a Kellogg classroom
[lights go dark]
[playing on the screen at the front of the class was a clip from The Usual Suspects with suspects standing up in a line-up]
Policeman [not seen]: "Alright, you all know the drill. When your number is called, step forward, and repeat the phrase you’ve been given. Understand? Number one, step forward."
Number One (actor: Kevin Pollak): "Hand me the keys, you fucking cocksucker."
Policeman: "Number two, step forward."
Number Two (actor: Stephen Baldwin): "Gimme the fuckin keys, you fuckin cocksucker motherfucker [as he pretends to be blowing away people with a gun, acting crazed. The others in the line-up crack up]
Policeman: "Knock it off, get back!"
Number Three (actor: Benicio Del Toro) [in somewhat broken English] "Hand me the keys, you cock sucker."
Policeman: "In English, please?"
Number Three: "Scuse me?"
Policeman: "In English."
Number Three: "Hand me the fuckin keys, you cock sucker. What da fuck?"

Marty stops the film, brings up the lights and walks over to one of the students in the class, hands him a note card with something written on it, asking the student to stand up and read the card.

Student: “Hand me the keys, you fucking cocksucker.”

Thus started one of the truly memorable experiences in a classroom ever. As evidenced, there were no bounds of standard classroom decorum observed; everything was fair game.

So, what was this class? What was the formal title recorded in our report cards? I think it was Management Communications, but in reality it was “Stop being so boring and get off of the PowerPoint ad nauseum reading bandwagon and perform.” Not just perform as in act or make what you’re saying more interesting to the listener, but perform in the sense of do your job to your utmost.

You do your utmost by analyzing what the audience wants. If you’re giving a speech to MBAs, make it funny, cheese it up; they’ll get bored otherwise. If you’re giving a speech to kids, feel free to be silly, fun, and/or gross. If you’re giving a speech to the Board, or to the CEO, don’t cower and not take risks. Get to the point quick, but don’t lose the value of the delivery compared to what’s delivered. Case in point…

Peter Norvig’s Gettysburg Address PowerPoint gives you a sample of what the Marty Stoller Experience was all about. Norvig went through the Gettysburg address and applied the standard PowerPoint breakdown of the speech. Scroll through it and you can see what we do with typical management communications; we steal all energy from it. Remove the emotion, the person, and the performance from what you’re saying; antiseptically deliver content. Terrible!

What made Stoller a master at getting us out from the PowerPoint drudgery and into the rhetorical mindset was his fantastic preparation before class. When asked why he didn’t have more classes, he responded, “I can’t do that much psychoanalysis on that many people. 80’s about all I can handle.”

Indeed, Marty would try his best to deliver the value one’s bidding points for a class deserved. The lessons were tailored to the individual. If someone really was too shy or too scared to perform as he wanted him/her too, he’d back off and try to cajole them to open up. He succeeded on a number of occasions.

He also was not scared of getting rather “vituperative.” If someone did not prepare due to a ski trip or hangover, he’d let him/her have it. If someone was not progressing at the pace he felt possible, he’d be on ‘em.

Going to Marty’s class was like going to camp. It was fun. It was informational and based in the rhetorical sciences. It was a challenge. And, it was hard work. But, like camp, it tends to fade to some extent once you’re away from it.

The key takeaways from the class were that you need to take more risks (don’t get stuck reading from notes or PowerPoint slides in life) and you need to perform for the audience by getting into their heads before the presentation.

So, it is with great sadness and remorse that I learned that Marty has died of brain cancer after nearly six years of battling it. I’m sorry I didn’t get to see him again, but the memories of him are deeply etched. My condolences to his family and friends. Thank you Marty!

Posted by wayofgo at 05:57 PM | Comments (1) | TrackBack

March 29, 2005

Way of Go MBA lesson 5 - Finance basics pt II

Just as the finance rule "a dollar today is worth more than a dollar tomorrow" has many axioms, the rule "a safe dollar is worth more than a risky dollar" is full of meaning. The idea generally is that the safer your dollars are, the more they are worth; the riskier your dollar, the less they're worth.

What is a risky dollar? Let's say you have two investments. One is in a t-bill and another is a share of stock in a company. The t-bill will get paid with a high degree of certainty. It is said to be risk-free (and barring civil war or alien attack, certainly seems secure).

The stock you hold in a company, however, is not risk-free. A company can go bankrupt, a company's value can go down. It is risky business being in business. So, a dollar in a t-bill is more certain to get paid than a dollar in a company.

But, why do people hold stock in companies? Why not be risk-free? Ignoring inflation for the moment, the potential that a t-bill will pay you more than it's supposed to is nil. While the investment is risk-free, it's also capped. An investment in a company, however, is not capped. While a company can go downhill, it can also appreciate considerably. The value of your share in a company can span from $0 to $1,000,000 (in some rare cases, no warranties, guarantees, etc.), although the probability of good things or bad things happening depends on a variety of factors.

How to WOG this rule into other realms? One easy example is to look at one's career this way.

A friend of mine has had a steady career, slowing moving up the corporate ladder by being relatively risk-free (at work mind you). His career progress is like a t-bill. It doesn't grow fast, but it grows steadily over time. As long as his employer continues to employ people, he's bound to inch his way up the corporate ladder one rung at a time.

Another friend has done quite the opposite. Taking chances, moving from one city to another, burning and building bridges with abandon, her career has been stellar, leaps above my corporate rung climber friend mentioned above, but, she's also been at the bottom of the ladder more than a few times.

There's all sorts of outcomes with either approach, but we'll cover than soon enough in Decision Sciences. Steady, risk averse progress is fine for some people. Others need more excitement, drama, or progress to fulfill their ambition. There's a balance between the two.

Some proverbs on the topic include:

"More risk, more reward"
"More risk, more risk"
"Loose lips sink ships"
"A ship is safe in a harbor, but that is not what ships are built for"
"Eagles may soar, but weasels don't get sucked into jet engines"

(if you're the owner of one of these, please let me know and I'll attribute your work)

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March 25, 2005

Way of Go MBA lesson 5 - Finance basics

Since we already picked on Finance, let's look at one of the first rules of Finance - "a dollar today is worth more than a dollar tomorrow."

This is true if a dollar buys less tomorrow than today, which has been the case for quite some time (although, it's not always true). One of the big measures in finance is the Big Mac (from McDonalds). If you can buy fewer Big Macs in the future with the same dollars you have today, then the rule is true. Looking at historical Big Mac prices can tell you a lot.

Now, let's Way of Go (WOG) this rule. Wog this rule over to Marketing and Operations and modify it slightly. Inventory that you can sell today is worth more than inventory you can sell tomorrow. Mind share that you can gain today is worth more than you can gain tomorrow. Generally true for both, except...

The other rule from WOG is "timing is everything." The question of importance is how much more is that dollar worth. If you have two dollars tomorrow, is that better than a dollar today? If that inventory is sitting because you're driving up demand (Enron! cough cough), isn't that better (not for society, but for profits) than inventory today? If that mind share waits for the product to be available, then isn't that better than mind share for vaporware?

To be continued...

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March 22, 2005

First steps to getting your Way of Go MBA

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Way of Go MBA lesson 3

Once you have your ultimate goal firmly in mind, you can start to employ the strategic thinking from the Way of Go to what you are doing (or any other strategic planning model for that matter). Note, your success is tantamount to knowing the goal and keeping it in mind.

The lessons from the Way of Go suggest that you explore the many different strategic avenues available to you via GO'S RULES. Looking at the spectrum of strategy from its various axes, you can get a better sense for the whole of what you need to do.

This is the part of the Way of Go where synchronic analysis is necessary. Before embarking, you sit down and look at the situation as-is. It's called synchronic, because it is with - syn - the time - chron - you're in right now.

Contrast this to diachronic thinking: dia- meaning through. Diachronic thinking is watching the past and the future and looking for the trend. It is going with the flow. It's striking while the iron is hot.

You do synchronic thinking when you're reevaluating what you should do. Before making the big investment, deciding what school to go to, who to marry, etc. you best do some reflection out of the emotional roller coaster - diachronic influence - that brought you to where you are.

Rock, then roll.

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Way of Go MBA lesson 2 - The Five Whys

Determining what it is you want is no simple matter. One nice technique is to ask "The Five Whys." Let's take an example: "I want to be rich."

Why 1: Why do you want to be rich?
Answer 1: I want to be rich so that I don't have to work anymore
Why 2: Why don't you want to work anymore?
Answer 2: Because I hate my job and I prefer to play
Why 3: Why do you prefer to play (one of two paths to explore)?
Answer 3: My work isn't fun. My play is fun.
Why 4: Why can't you have fun while working?
Answer 4: This job wont let me
Why 5: Why don't you leave this job and find one that is more fun?
Answer 5: Hmmm. I suppose that'd be easier since I can't retire right now

That's a quickie version. Whenever you get stuck wondering what your goal is, this technique is always good; although, sometimes you don't need to make it past the third why.

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Way of Go MBA lesson 1

Business school tells you all the time to maximize for profit. Gain the highest NPV possible. Or, if you're a Real Options fan, create the greatest option value. Of course, this is not how business really works.

People are more interested in their own ego, who they're up against, becoming famous, their own security finanacially, or etc. Game theory offers some measuring of this, but for the most part, game theory seems to be a theoretical exercise that doesn't gain you much, save for some cool exceptions (e.g., auctions).

What people really measure their success against is particular to them. Some people really do just want money and more of it and have a risk neutral attitude toward it. Some people are altruistic. Some are bastards.

So, one place where business school really needs some help is determining the function that maximizes one's return. The Way of Go would suggest that the key is to know what you are trying to solve. If you're trying to just win a game, then increase your odds or cheat. If you want to get better at the game, whatever it is, then obviously this route of trying to win one particular game isn't going to work.

You can't have strategy without a goal. You can have tactics. You can do cool things. You can be oblivious. But, you cannot make good use of the Way of Go or any of the other stuff from business school until you determine what it is that you want to do; what it is that floats your boat.

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Way of Go MBA Intro

I thought this book was once going to be a perspective on my MBA from Kellogg from the standpoint of Go. Ainh! Nonetheless, a blog is a fine way to explore the topic.

First, the rules one learns in business school, for the most part -- the rules *you remember* once you graduated from business school and are out there for a few years -- are the same ones that apply in Go. No, you don't learn how to do financial statements in Go. No, you don't learn about how to lead a team in Go. But, you do learn strategies for analyzing financial statements and leading that are similar in nature to strategies one learns in Go.

Yes, you need a good deal of abstraction to do this. Yes, it's not always clear to get out of the surface details of something to get at the root elements in common, but I can assure you they're there. Leigh Thompson from Kellogg did a lot of work on the difference between case learning and "analogical learning" - that is, learning from the similarities in strategies between cases. Analogical learning won out.

This and other reasons seems to me are the reasons one should read the Way of Go, aside from all the other stuff in the book. Chock full of...

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