Tuesday, February 28, 2017

Why You Should Turn Down That Well-Paying Job

I remember being young and broke, going to an interview for an internal auditor job at a bank. The bankers who interviewed me were enthusiastic; they were authentic bankers. I did my best to pose as a banker, but as often happens to posers I was found out. The bankers asked me for a “writing sample.” I showed them my poetry. It was not to be.

Some people become accountants because they want a secure job. There is much to be said for pragmatism; better to be an employed accountant than a wanna-be actor. But is that the right comparison? Here is the issue: Somewhere tonight, maybe around 3 AM, some guy will be laying awake thinking about accounting. He lives and breathes accounting; it occupies his thinking even in his spare time. If things get competitive for accountants, he is going to dominate. His rivals are acting like accountants; he is the real thing.

Competitive advantage goes to the authentic. Their job is their avocation. They would do it, if need be, without pay. The authentic persist at getting through the tough parts of their vocation. They ponder it during the quiet times, so the magic of insight makes their work more creative. The gardener out on a cold morning; the writer typing away when she should be sleeping. Such people will take their vocation as far as it can be taken. By contrast, those who merely pose will not. As in the old adage “you cannot coach passion,” no amount of posturing can outdo authentic dedication.

The practical reader is objecting at this point, noting that there is a big economic difference between being an authentic accountant and an authentic writer. This contrast brings to mind a corollary adage: “Every person has a special gift.” As each of us grew up, we searched for that gift – the activity that seemed authentic to us. Our parents hoped that it might also be an activity that pays. How fortunate is the authentic accountant! His passion lines up well with economic gain. Meanwhile there goes the authentic musician, waiting on the accountant as he dines. Don’t get me wrong; I love the arts and admire the authentic artists. But though all of us may have a gift, some gifts pay better than others.


Does this mean that only some of us can follow our calling? That depends on how long we search. My failed attempt to be a banker left me broke still, but the upside was that I kept searching. Life is a “sequential search” process. We search, one by one, trying to match our gifts with the opportunities of the world. When we settle on an occupation, we also stop our search. If we stop the search at the first pragmatic job, then we are posing - and will surely be out-competed by the authentic. But if we keep searching, we increase the chances of matching our gifts with opportunity. Of course not all jobs pay the same. But better to keep searching for a way to remain authentic, than to settle early for mediocrity. Search enables authenticity.

The lesson: Ask “what do you do well?” and then search to see how that ability fits the opportunities of the world. You will have failures along the way if your search is thorough. But the upside of each failure is that you'll be required to keep searching, again increasing your chances of finding a match between your passion and the opportunities of the world.

More dangerous than failure is that you might, early on, score a well-paying job for which you are not authentic. Turn it down. Search enables authenticity.


For an academic treatment of the sequential search strategy, see Levinthal and March’s paper.

Wednesday, February 15, 2017

Learning without Logic

After Napster was shut down in 2001, the brand was reborn in 2003 as a subscription online-music service run by Roxio’s Chris Gorog. Chris and his team quickly amassed a large catalog of songs, enabled radio streaming, established partnerships with online platforms like yahoo, built an entrepreneurial organization, and expanded internationally. As record stores became history, Apple’s iTunes, illegal music downloads, and a few subscription services like Napster offered different visions of the future. But by 2005 the verdict was in. Illegal downloads continued apace, iTunes was a clear success, and subscription services were not. As one Washington Post writer put it (in 2005), Napster’s subscription model was not a viable alternative to music ownership: “When music is good, you want to know that it can’t be taken away from you.” The final nail was Steve Jobs' declaration: "Nobody wants to rent their music." The experiment had been run, and the music ownership model beat subscription services.

But wait. With the explosive growth of services like Pandora and Spotify, the pundits are now saying that subscription models are the future. Even Apple has launched such a service. What about the lesson we learned from the failures of just a few years ago?

The problem here is that a failure is a datum, not a logical argument. Data do not speak for themselves. Failures can have various causes, and so it takes logical reasoning to explain why failures happen. Perhaps the early subscription services were ahead of their time, such that limited bandwidth might have made them less attractive than they are today. Or maybe the smartphone is a necessary complement to such services.  Whatever the diagnosis, logic is required to sort out why firms succeed and fail.

Unfortunately, most observers skip the logic part. It is mentally easier to jump to the “obvious” conclusion: If the business failed, the business model must be wrong. Full stop.  You can easily tell when this skip happens. The person will name an example as if it were a reason. Is online grocery delivery a viable model? No: Webvan. Is internet search a viable business? No: Alta Vista. These examples are data, not logical reasoning. But it is hard to rebut those who argue by citing examples, because you look the fool trying to say that a failure somehow might have made sense. Like Gerald Grow’s cartoon, we replace reasoning with dueling examples: I shout “iTunes!” you reply “Spotify!”


The result? We often “learn” without logic, and so we often walk away from great ideas. The Apple Newton failed, leading many to say that there was no market for smart handheld devices - yet now we all own them. Early attempts at remote alarm systems failed, leading many to conclude that such services could not be profitable; now they are commonplace. Even internet search, possibly the most lucrative business in history, was initially panned after a spate of failures among early movers – Lycos, Alta Vista, Excite, and others. Often firms fail.  But that may not mean, logically, that we should abandon their business models entirely.

To diagnose well, we need to systematically contrast failures and successes - as is done in good academic research. The popular maxim “fail fast and cheap,” A/B testing, agile development, root-cause analysis and similar approaches are designed to show us successes and failures without destroying the firm. These techniques routinely are used in Silicon Valley firms these days, and are making their way into the global business lexicon. Sometimes such techniques are very effective for learning. But keep in mind that these techniques simply provide us with data. It is up to us to explain the data, and that requires logic.


The academic research on this topic can be found in the research of Jerker Denrell.