Weekly Digest #2 [Eric Schmidt, Investing Advice, Automation, Apple & Branding]
A snapshot of article summaries that we enjoyed reading ( Nov 12— Nov 17)
“It is a curious thing, Harry, but perhaps those who are best suited to power are those who have never sought it. Those who, like you, have leadership thrust upon them, and take up the mantle because they must, and find to their own surprise that they wear it well.”
— J.K. Rowling (Harry Potter and the Deathly Hallows)
On Travel — Schmidt considers travel to be a formative intellectual experience in his early childhood which made him develop a global focus. He also attributes his personal success to his interest in network economics and platforms which follow laws of economics.
On Scott McNealy — A strong leader with charisma. I learnt that his impassioned speech could get people to do stuff which they would otherwise rationally not do. A belief in the mission with the right motivation worked and it is still relevant today.
On importance of praise — No simple formula for success or being a great leader but being nice to people makes them less likely to quit. All great leaders have not praised enough including a simple “Thank you” which makes it an underappreciated management tool.
On managing hiring scale: In a growing company, you can systematize strategy, hiring and pretty much everything if you have a scale model. At every stage, we improved the process. Hiring started informally but after many examples, 4–5 interviews were enough to identify talent.
On bringing an innovative stamp to Google: Schmidt believes he did a good job of keeping things organized. A small action of allowing everyone to voice their opinion in a meeting and consensus building for alignment with cultural values of Google.
On failure with social networks : Schmidt takes the blame for the rise of Facebook under his watch. As they did not use it, they did not possess the collective capability required to build the network. But with the YouTube acquisition they have undone this gap.
On synergies between search and hedge funds : The data would require people’s permission to be used for other activities like hedge funds. Anything inconsistent with the values of the company would increase disconnect with employees. Would not do anything in secret
On voice assistant devices : Would appreciate a device that can engage in a high level of conversation that knows everything with intelligence through minimal text interface and predominantly voice interactions.
On Blockchain : Great platform for Bitcoin and other currencies. A great platform for private banking transactions where there is lack of trust. An interesting area would be on top of the blockchain: Ethereum managing to do a synchronization of global activity.
On effective altruism: Healthcare, education, governments are not run well as compared to businesses. The ability to measure things and outcomes is better. Invest money and time with groups that have an actual measurable impact.
On reforms for American corporate governance : longer time frames so that people are focused on the right incentives. Need long term shareholders in corporations which would produce better governance.
On structural reform in politics : Power should be allocated where majority of the people reside (rural areas) to bridge policy making gap between government and the rural population.
On the “balkanization” of the Internet : Tough to look at splintering of the Internet into multiple internets. A likely scenario could be bifurcation into a Chinese led internet and non Chinese led internet led by USA.
On Chinese tech oligarchs : The scale of the companies, the services, their products and leadership is phenomenal. However, with all this, it also comes with a different government regime that encourages censorship, controls and limits.
On building a smart city: The idea is to come up with urban settings to address multiple problems of traffic, roads, safety, education system and housing cost control. Innovation in city building is difficult unless we exempt few rules or build completely new cities.
On housing problem in the Bay area: There is no growth slow growth view which hurts immigrants and benefits incumbents. Need to look at building skyscrapers in select areas as the area is not going to be less desirable in the future.
On Google books: There was a plan to scan all books in the world and make it available online. However, there were rightholder issues in many cases and we couldn’t come to an agreement with the book publisher industry through a legal process
On Venture Capital: Its about entrepreneurs. Need to have a pretty good map of where all the activity is going to be in different areas. An example could be sensors. Businesses that can be built on top of them and solve problems by augmenting human decision making capability.
On his greatest talent in business: Systems thinking and analyzing how people behave. A key part of leadership is organizing as in to get people to do things. The best way to get people to do stuff is to have it be their idea.
On his media diet: He uses news aggregators as opposed to newspapers which was an earlier preference. He advises to read multiple stuff and carefully examine the source of the information.
On career advice : He attributes major things to luck. The best things in life come from the people you work with, hang out with and network. People who you hire and your board members matter a lot if you are an entrepreneur. Corporate success is a team sport.
Undervalued Financial Advice: There is a plethora of financial advice available all over the world which makes it difficult to distinguish the signal from the noise. Keeping the big picture in mind, there are a few pieces of undervalued financial advice. Rule 1: Avoiding the allure for more. No matter how much money we make, there will always be a temptation to want more. This can be an unhealthy obsession when it leads to out of control lifestyle inflation. Rule 2: Envy is more expensive than gratitude. Envy has a stronger hold on our relationship with money than most people realize and such feelings trump our ability to be grateful for what we already have. We don’t compare ourselves with our ancestors but with our neighbors. Rule 3: Time and health matter more than wealth. All the money in the world does not matter if you don’t have the time and money to enjoy the wealth. William Vanderbilt was a wealthy person who suffered from constant anxiety from the burden of wealth. Rule 4: Stay married. People who are married and stay married tend to build more wealth than people who don’t marry or get divorced. Obviously, nobody married with the assumption that it won’t work out, but a financially compatible partner does have a positive impact. The above rules might seem extremely generic with no reference to increasing wealth or principles to save already acquired wealth. However, it is always the behavior with wealth that matters more than the process of acquiring wealth that ensures sustainability.
The inequality of automation: People assume that automation will affect every locality in the same way. No one has raised the question how the impact may be unequally distributed across cities, regions or geographies. The question gains importance as the knowledge that certain places will lose more jobs could allow workers and industries to prepare for the change and help city leaders plan their economies. The researchers carefully analyzed the workforce of American metropolitan areas and calculated what portion of jobs in each area were likely to be automated in coming decades. They found that small cities will have higher portions of their workforce replaced by machines than large cities. The reason being that in larger cities, there is a bigger share of managerial and knowledge professionals which makes the job difficult to automate. It was not clear to economists, howsoever, whether a more specialized workforce would lead to more or less automation. In some cases, specialization makes it easy to break the jobs into repetitive unitary tasks while in some cases it becomes difficult due to highly specific skill set requirement. To find a way, researchers studied data on what portion of a city’s jobs boiled down to routine tasks versus specialized expertise. Through data-sets from Oxford on likely jobs to be automated and comparing it with the data from U.S. Bureau of Labor Statistics on the composition of each city’s workforce, they were able to predict how many workers would be displaced in 380 metropolitan areas across US. The results showed that Boston, with a 54% impact score, is among the least susceptible cities to be changed by automation. That is likely has to do with the multitude of hospitals and research universities. Same is the case with the two large cities that top the list of those most impervious to robots: Washington DC and San Jose, California, in the heart of Silicon Valley. In contrast, smaller cities tend to have larger shares of cashiers, retail salespeople, receptionists, and food-service workers — the types of jobs that can be more easily automated. Las Vegas, Puerto Rico etc. are all at risk of major job losses due to automation. The researchers talk of a spectrum from a job like CEO that requires extreme special skill set to that of a janitor, which is so cheap in pay that automation will not provide any benefits. Between these extremes of white and blue collar jobs, people will be forced to move to jobs towards extremes of higher wage distribution. Since such such jobs exist only in big cities, we will continue to have further urbanization as people will move to bigger cities to avoid being hit by automation.
Apple’s failure in India: Apple has repeated same mistakes in India which it did in China. Extreme reliance on its brand equity, marketing older and inferior versions of iPhone in India and thereby losing customer loyalty. The iPhone has lost its sheen to cheaper counterparts with better features. No brand recognition, lack of a product lock-in ecosystem and no real attempt to customize to address customer needs in the Indian market has compounded their problems. An example would be the struggles of Siri in identifying Bollywood songs and recognizing Indian names. iPhones appeal to people for their status and the accompanying social gratification and not its technical superiority. Apple’s innovation strategy also needs a strong rethink. An incessant focus on perfection is anachronism at its best in today’s fast world. You need to launch a minimum viable product, obtain customer feedback and constantly iterate and improve. There is no time to launch the perfect product in today’s world. The legacy of Steve Jobs was that he refused to listen to customers and utmost secrecy within departments. Jobs’ tactics worked well for him but now as the world has changed, it needs more agility. Innovations in iPhone include adding faster sensors, processors and sizes. The opportunity for Apple in India is to use it as an experimental ground to test their products. Products which need market validation like virtual reality sets, medical devices, TV sets, etc. India can provide critical insights on such products. Experiments with new ideas in new markets is always an obvious possibility for any business leader. A relook at India as a market to experiment and get feedback could serve as a starting point to build more innovative products rather than dumping leftovers in a prime market.
Name changing & Branding: We have seen a lot of brands recently going through a change of names owing to multiple reasons. But does such a strategy pay off? There are several risks that a brand takes when it walks on this path and payoffs are not always guaranteed. Dunkin Donuts , IHOP and Weight Watchers have all gone this route with an aim to refresh their identities and signal a new philosophy. The decision to rename a company is a tricky proposition, but businesses continue to do it with varying degrees of success. The biggest one is possible to stay relevant with the changing times. Kentucky Fried Chicken changed to KFC in 1991 to drop the stigmatized ‘fried’ term from its name. Customer preferences were changing and brand had to be in sync with them. Weight Watchers too did the same by shifting to WW to emphasize its slogan — Wellness that Works. This was mostly to be relevant to changing definition of fitness today which goes beyond weight loss. The next cited reason is to attract new generation customers. Companies need to be cautious as they do not wish to antagonize and alienate the old ones as people have a lot of emotional connect with brands which you do not want to disturb. Distancing oneself from disaster is the third reason why a brand might go for a name change as the terrible happenings in the past attract a lot of negative publicity which impacts the brand and the negative connotation sticks with it. Accenture used to be Andersen Consulting, which was linked to the Enron scandal. The helps create a psychological distance from the negative incident and sooner done the better. Fourth reason for name change is to communicate your brand values. Whether it’s one product category or entire image overhaul, rebranding can help communicate a different message to consumers in an era when the message matters. People want their brands to live and breathe certain values and a name change can signal that perfectly. The last possible reason for brand name change is to slightly tweak one’s brand image. This is a perfect way to keep your old customers while also attracting new ones. You do not lose your core proposition but also alter the message you wish to convey ever so slightly. The article gives the perfect example of Walmart that went from all-capital letters to lower-case letters and placed more emphasis on its star logo — signalling a shift from the dominating retailer to this friendly neighborhood retailer , it adopted a different personality and gave the opportunity to people to think differently about it.
Investing as a game: There are five levels of the game: Apprentice — learning the game, Expert — mastering the game, Professional — making the game fit to your strengths and weaknesses, Master — Changing the game as a part of self expression and at scale & Stewardship — Mentoring the next generation. Apprentice: learning how to model and value companies, diligence and interview industry sources and management teams with the guidance of a mentor, identifying the key drivers of a company or a stock. Expert: Here the analyst moves from processing other people’s research agendas to generating ideas. Filtering other people’s ideas represents an ability to identify key drivers of the game by looking at the underlying reality. Professional: At this stage, an investor starts consolidating multiple influences into a unique strategy going beyond his or her mentor. For an investor focused on one game only, returns will be less sustainable. Its important the level 3 investor gets exposed to level 4. Master: The small minority of managers who reach this level are absolutely return oriented. They define success in terms of what they can achieve over decades, not relative to what others are achieving in the given moment. People at this level have a different mindset. Some attributes of the masters include being open minded with a point of view, an ability to shift perspective that involves an empathetic mind, risk tolerance, range of urgency and patience, aggressive and conservatism, a firm adaptation to the pace of the market. Some attributes of the masters include being open minded with a point of view, an ability to shift perspective that involves an empathetic mind, risk tolerance, range of urgency and patience, aggressive and conservatism, a firm adaptation to the pace of the market. Steward: These level 5 investors have achieved mastery at investing that allows them to turn their attention to take care of the playing field. Warren Buffett is one example of the family. An authority of the highest order who can take responsibility for the system itself. Like every game which requires certain levels to be accomplished to reach the next level, investing is also like a game that needs to be played with the right temperament.
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