Category Archives: Business

His review of Cassidy’s book How Markets Fail in the New Republic a couple months ago is superb. He clearly describes basic economics, what a free market can do, and where it falls short.

Excerpt:

…in the course of producing and distributing goods and services, market outcomes generate incomes, wealth, status, and power. Any modification of market outcomes modifies the allocation of incomes, wealth, status, and power. So it is no wonder that the discussion has become thickly encrusted with ideology. And one convenient way to turn subtle argument into ideology is to create dichotomies where there are originally fine gradations of more and less. For example: are you for or against “the free market”?

He also touches in passing on the issue I’m sure the more introspective workers in the finance industry must ponder: How much good am I doing in the world?

I have read that a firm such as Goldman Sachs has made very large profits from having devised ways to spot and carry out favorable transactions minutes or even seconds before the next most clever competitor can make a move. Deep pockets in a large market can make a lot of money out of tiny advantages…A lot of high-class intellectual effort naturally goes into trying to invent ways to find those tiny advantages a few seconds before anyone else.

Now ask yourself: can it make any serious difference to the real economy whether one of those profitable anomalies is discovered now or a half-minute from now? It can be enormously profitable to the financial services industry, but that may represent just a transfer of wealth from one person or group to another. It remains hard to believe that it all adds anything much to the efficiency with which the real economy generates and improves our standard of living.

And so: “…our poorly regulated financial system is not only dangerously unstable, but also too big and too complex, absorbing talent and resources that could be better used doing something else.”

Imagine a world with 50% fewer bankers / brokers and 50% more entrepreneurs.

Generally a few billion dollars, Daniel Gross says, in a short Slate piece:

The real alchemy of finance is to endow those skilled at finance to wield authority in adjacent or even unrelated areas. That's the general theory of Davos, bankers sharing their theories about nonbanking subjects. Stick around and you'll hear a lot of conventional wisdom on globalization, climate change, poverty reduction, financial crisis, but it somehow sounds deeper and more weighty because it's delivered by an extraordinarily wealthy CEO, a private equity executive, or hedge fund manager rather than by a journalist.

His case-in-point is George Soros, who we listen to on topics ranging from U.S. politics to philosophy, even though his views in these areas may not be unusually insightful.

The truth is we listen to rich people on a range of issues not for their insights but because a billionaire is in a position to actually implement the conventional wisdom. Is Bill Gates the most original voice on education reform in America? No, but whatever he does believe, banal or not, matters, because if he wants to make a difference he can.

Still, Gross's point is well taken: expertise is context-specific, and billionaires rarely have the most interesting things to say.

In the business world investors are looking for TheGuy, according to Randall Stross:

The guy. No special emphasis on either the or guy, but no intervening pause, either. TheGuy. That’s the person needed to head a start-up once it has grown beyond a seed. To wit, a stud, ideally, a big honkin’ stud or a total fuckin’ stud. He (or yes, she) will not lack for balls, at least in one sense, but in another will work his nuts off, or his ass off. A high-hustle guy. A total can-do guy. A winner. Smart. Someone with integrity off the charts. Scrappy. A kick-ass dude, a nail-eatin’, nut-crushin’ decision maker, a competitor with killer instincts. Someone who attracts and hires A’s, unafraid to hire above himself. A player. A hitter.

You can abbreviate it: They’re looking for an entrepreneur who has “it.”

When businesspeople don’t have “it,” you can tell. From the Vanity Fair profile of Arthur Sulzberger:

Here, in a nutshell, in the words of a veteran Times staffer, is what is supposedly wrong with Arthur: “He has no rays”—rays, as in the lines cartoonists draw around a character to suggest radiance, or power. In the comics trade these lines are called “emanata.” The emanata deficit is a standard insider lament about Arthur, although most Times people need a few more words to make the point.

“It” means more than “very smart.” Besides suffering from word inflation, “smart” doesn’t capture energy, zest for life, incredible get-shit-done capabilities, and general radiance that seem to accompany these people. It’s the total package.

In the sports world, elite athletes who always take care of business often earn the “it” label. I once watched a football game and heard the announcers say the quarterback has “it.” They went on to say, He is a baller, He is a player, He is a competitor, He is hyper talented. But none of these things seemed sufficient. At a loss, they said again, “He just has ‘it.'”

Finally, the “it” quality lives large in the world of beauty. Supermodels seem just normally beautiful at first. Why do the cameras never tire of them, then? Supermodel beauty involves, among other things, “uncanny symmetry and harmony to their features so that once you start looking at them it becomes difficult to stop.” It’s regular high ranking beauty plus this other harder-to-describe stuff (“harmony to their features”?) that make it work.

You know it when you see it.

Life is a sales call. Every day we're trying to sell something to somebody — from as little as convincing someone to join you for dinner to as big as selling a potential employer on your credentials. That's why it pays to study sales and psychology.

Most sales activity these days happens over email. So it's important to think through how you can craft emails that get the response you're looking for.

My friend David Cohen, executive director of TechStars (apply to Boulder now!), blogged about a good technique to use that he calls "the easy out." If you've been emailing someone who is not responding and you've followed up by phone and still are not getting an answer, try this:

You can send an email that says something like “It’s been some time and after several attempts, I haven’t received a response from you about my proposal. I realize this may not be a fit for you, but I was hoping you could just let me know for sure with a quick reply so that I can cross you off my list.”…

Magically, you’ll find that providing the easy out sometimes triggers action. Psychologically, it feels like a last chance to the recipient. I’ve noticed that the easy out is generally effective at separating the “maybes” into “No” and “I really am interested – I’ve just been busy.” Most people won’t ignore the easy out (if they receive the message), and their reaction can be telling of their true intentions.

I'll be writing about this topic more later in the year. Let me know if there are other situations where you are interested in how to get the attention of a busy person.

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• Imagine if the SAT lasted two days, covered everything you've ever studied, and decided your future. Welcome to China.
• When things go wrong or when your expectations are not met, the first words out of your mouth should be: "Hmmm. Interesting."
• Cool time lapse video of a guy who drove from Los Angeles to New York.
• What's the difference between liberals and libertarians? Arnold Kling outlines the key points.
• Long piece on Dave Eggers. "I need eight hours to get 20 minutes of work done…and seven hours of self-loathing."

James Kwak's excellent post The Myth of Efficiency is rooted in the idea that for most professionals "the length of their workday isn’t set by a clock, but by their sense of when they’ve done enough for the day."