I just did online traffic school to “disappear” a stupid ticket I got on the San Mateo bridge. It was incredibly easy and painless, and took just over an hour. That is an unbelievable improvement over snoozing through a droning lecturer for 8 interminable hours in some dingy hotel meeting room. (You can tell I’ve done traffic school before.)

Traffic School with GAMES and CARTOONS from only $16.95! InterActive! Internet Traffic School is an easy, fun California traffic school online.

I just read Bruce Sterling’s new book, The Zenith Angle, on the plane from Toronto to SF. I literally read it from start to finish without putting it down. It is a great yarn, and reasonably fast paced, but probably won’t make my top 10 list. I definitely liked the topical references to events and people I am familiar with, and the sly references to other scifi novels. Worth reading, if you want a beach book that has some technology in it.

Ben Zander did a fabulous job wrapping up an incredible two days at the World Business Forum. He is so energetic, and bubbling over with stories, that you can’t help but smile along with him. I had read his book, The Art of Possibility, and found it entertaining, although I do find his style of “anything is possible” just a little over the top. But I love music, and he did a wonderful job teaching a bunch of CEOs how to listen to and even make beautiful music in less than 2 hours.

He started with a great Happy Birthday demo, finding a guy with a birthday tomorrow and making him come up on stage. Then he made us sing the song about 5 times, each time adding elements like crescendo, emphasis, arm movement, facial involvement, and finally standing and performing. It was great.

He always asks the question: What assumptions are you making that you don’t know you are making. This helps you figure out what box you are in, and think outside it.

He rehashed some things from his book: give everyone an A, live in possibility, and remember rule #6.

He loves telling stories about kids – they haven’t learned what’s not possible yet. Look at the kids for possibility. He did a great imitation of a kid learning a sonatina, nodding his head with the beats and making it increasingly more musical.

He explained that nobdy is tone deaf, unless they are totally deaf. And, everyone loves classical music, they just don’t know it yet. He then played some Chopin, again, adding elements and explaining more each time he played it, until the last time was incredibly moving.

He finished with us all singing Beethoven’s Ninth, starting with handouts showing phonetic pronounciation of the German text, then translating it for us, then working the musicality.

I had to run for a plane just before he finished, so I missed the finale, but I’m sure it was tremendous.

Anne accomplished incredible things in the last 4 years at Xerox, reluctantly taking the helm of a failing company and turning it around spectacularly. She is also clearly level 5, not taking any credit. She did a short and heartfelt speech, then took questions from a great editor from Fortune. Notes:

From intro: she never sought CEO job, and was insane to take it.

Nothing focuses the mind like the sight of the gallows. Took job with mixed conviction and uncertainty.

Spent first days listening to custs, emps. Focused on custs to figure out what to do.

Emps need to know what they are signing up for – comms essential.

It’s the customer, stupid. 5x more expensive to get a new cust vs keep old one. Keep 5% more custs and increase bottom line 25%.

Find out what custs are saying. Nothing is more important. Starts at top – she had lunch w 30 today, 2 more tomorrow, Boston on Fri. All execs visits custs. They rotate cust exec of the day, take responsibility for fixing underlying problem with any cust that calls HQ that day.

Invest. Didn’t take a single dollar out of R&D. Bit the bullet and now reaping the rewards. Half revs last year from prods introd in last 2 years.

Alignment. For cost cutting, ask if customer would pay for this. 90% emps visit custs on reg basis.

Deliver value. Don’t just sell stuff, make sure it has ROI. About information not technology.

Serve. Prove cust svc above and beyond. “Very satisfied” custs 6x more likely than “satisfied” to stay w Xerox. Doing six sigma work w custs to make them more satisfied.

Creation of customer value is the heart of growth. It’s the customer, stupid.

Questions:
Optimism is important, but must be tempered with realism.

Brutal facts were tough, from custs, emps, and analysts, but consistent. Had to make tough decisions, eg outsourcing, but data was pretty clear.

Vast majority of her time w custs and emps, 2 major constituencies.

She faced lots of skepticism about ability of an insider to make the changes required – made her mad. Fact the culture was painted as the enemy was insulting to the emps and her, so she wanted to prove them wrong.

None of the customers had this skepticism, though. Very supportive.

She tries to make a point of not just visiting cust CEOs, but folks w day to day interaction w prods. Learn who the honest critics are, cultivate them. Can be tough.

Be “problem curious” and look for opptys to solve problems. Point of reviewing info is to find probs quickly and solve efficiently.

Since she was not classically trained as a CEO, she was plenty humble, got lots of advice. Warren Buffett, Jack Welch.

When she was starting the turnaround, had lots of town meetings, and invited people to leave unless they were not only prepared to contribute, but actually enjoy it. Neutral or checked out is worse than challenging direction. At least they’re engaged.

She does do formal emp evals, but tries to give constant feedback. Emp dev and succession planning restarted in last couple years.

Custs not buying next new thing, or upgrading. Only looking at closed loop ROI.

Michael is another dynamic speaker, with the teaching style of a great professor. This was the first time I ever heard a lucid and logical definition of “strategy”, and I was left with a lot to think about. Notes:

HBS professor on Strategy, institute of strategy and competitiveness

Too many orgs either never had a strategy, or lost it
Most probs self inflicted
Constant pressure to move away from strategy to greatest error: imitation. To stay on strat requires powerful leadership

Competition to be the best vs comp to be unique. More than one way to be best, need to be unique.

Lots of flawed concepts of what strategy is: what is important, or what you want, or what you do. Strategy is about your sustainable advantage.

Start with the right goals. Create economic value: command prices greater than the full cost of production. Only meaningful measure of success is Return On Invested Capital. Growth is good only if roic maintained. Accounting asjustments obscure true cap cost. Shareholder value is result of economic val – pleasing today’s shareholders is not the goal.

CEOs are supposed to buffer co from investors – cap markets always advance bad strategy, usually too short term or imitative “best practices”.

Fundamental unit of strat is industry structure, and relative position within industry. Have to focus on roic vs industry average.

Compet advantage is basically higher prices (differentiation) or lower cost. Which of these will be your fundament economic strategy model? How much of your advantage is due to price vs cost? Totally diff things.

Five tests of good strategy:
Unique value proposition
Different, tailored value chain
Tradeoffs – know what not to do
Activities that fit and reinforce each other
Continuity, not reinvention

Examples: southwest air, enterprise rent-a-car

Strategy is about choices, tradeoffs. What customers, which needs of theirs, and at what relative price? Can’t meet every customer request – strategy is about which custs to listen to.

Best practices are not strategy – do best practices in non strat areas, where you make no choices. Where you have advantage, can’t just do best practices.

Look for tradeoffs, they are what creates sustainable advantage. You can’t put in every feature. Celebrate the tradeoffs.

Time required, continuity, to build assets, messages, and unique skills around strategy

Strategy allows you to change faster! Strat is not rigid, just a direction. Can continuously improve realization of strategy. Easier to exploit change when you know where you are trying to go.

Key lesson is: never copy anyone else. Figure out what you do, and how you will take advantage of change to support your own advantages.

Many barriers to strategy. Forces blow towards conventional wisdom, imitation, customer requests.

Most fundamental job of ceo is to understand strategy and communicate, communicate to everyone. Also must be good at saying no – strategy is tested every day, must turn down good things in a nice way bc not in strategy.

Best public co ceos actually recruit shareholders, visiting investors, to align with strategy. Explain to street the strategy to build economic value, and its benefit to shareholders long term. And get the board on the bus – board responsible for long term health of business.

The more you outsource, the less competitive advantage you have. Compets can outsource too, lose advantage.

Lou read a prepared speech, so it wasn’t as dynamic as some of the others to begin with, but he was great at handling questions posed by the idiots they had “moderating”. A true level 5 leader, he constantly discounted his own contributions and praised his team. And his focus on the nuts and bolts of execution, and willingness to change long-established practices, really made an impact. Notes:

From the intro:
10 yrs at ibm starting 93, stock went up 8x in that time

Ability to drive change is key
Timeframes radically and permanently compressed
Main criteria for compet success is responsiveness

1993: 8.1b loss, largest ever to date
150k jobs lost since 86
Still great tech
Fundamental prob: success syndrome
Insular, inward looking, rigid behavior
Case study of decentralization run amok – 256 GL systems, 70 ad agencies, etc

Ibm couldn’t change while the world changes
Elephant wouldn’t dance
Prev mgt had decided to break up ibm

What to do:
Stop bleeding
Find growth engines
Decided to keep company together
Only way was to deliver on complete solutions, use advantage of size

Had to systematically change every process – about as fun as setting your hair on fire and putting it out with a hammer

Classic level 5 deprecation – he didn’t do anything that great.

3 fundamentals: focus, execution, and leadership

Focus means selective and committed – lack is one of the most common causes of mediocrity
Belief grass is greener somewhere else – kodak going into pharma
Execs don’t want to fight tough battle to win at base biz – but a lot easier than winning at new biz
Ability to say no to acquisition fever
A good portion of ibm success is due to all the deals they didn’t do

In finance, survival of the fattest divisions, not enough resources for new growth initiatives, process to fund them is painful
Must protect future initiatives, esp when budgets are tight, even if it means starving cash cow a little

Execution:
Basics are well known, don’t change much
So, no company is insulated from hand to hand combat in the trenches
Execution underrated
Great cos do great day in and day out execution to grind compets down
People do what you inspect, not what you expect
Must measure progress against targets and hold people acvcountable
Org must do something diff to improve, but cos don’t like to chg

Vision statements are easy, strategy harder, but execution seps leaders from pretenders

Personal leadership:
Undervalued element of institutional transformation
Enterprises not managed, they are led, and driven, by indivs with passion
Execs must have visibility at all levels of inst
Communication and openness, respect
About passion, personal commitment
Not charisma, or substitute for good team
If you don’t absolutely hate losing, you will rationalize every bad thing – always an excuse

Company had lost connection betw winning and the other things they wanted – benefits, etc. You can’t have the other stuff unless you are winning.

Culture is not part of the game, it is the game.
Nobody is original when it comes to cultural statements, but behavior is diff
Culture is what people do wo being told
Changing dna doesn’t happen by mandate
Can only chg conditions, explain requirements, chg comp programs – then invite workforce to change

He really feels IBM is an institution, contribs to society, would be a tragedy to break up.

What would he have done differently? Make a tech decision wrong early on and ceded networking mkt to Cisco. A few other examples, but record pretty good.

If you aren’t making mistakes, you aren’t taking enough risk, and risk is important to stay competitive.

Real problem is that leaders don’t do what they say. Ceo touts investing for the future, then cfo cuts budgets. People figure this out pretty fast.
Must have systems and execs to supprt statements, show commitment
Then check conditions, comp plans, culture, to see how it is aligned

Odds of someone coming from outside to take over a large co in distress are long. Boards need to be much more focused on succession planning from inside.

Strong believer in empowering emps to manage on principles, not rulebooks. Had a huge book on how to work across biz units – go burn it. Use principle: if a customer wants something, do it for them. Figure out cost allocation later.

Legislation doesn’t make dishonest people honest. And, it can impose a very heavy burden, esp on sm and med cos. Need to be careful to preserve our competitiveness.

First 90 days: try to build relationships, enlist help of existing team. Have to make decisions, but try to avoid bet the company decisions.

Passionate about public education: 1983 report “a nation at risk” – if a foreign power imposed our education system on us, it would be an act of war. And it’s not getting better. There are no more unskilled jobs – have a crisis here. We have to fix this.

Jeremy is a great speaker, and closed out the day well. There were a few surprises, but many of them I didn’t capture here, they are in the book.

His book: Stocks for the long run

Since 1802, stocks have returned 6.8% in real terms, blowing away bonds, gold, etc. Stocks also win almost every time period, and definitely every asset class.

If you lok at holding risk in short run, stocks risky, but at 20yr holding period, lower risk than bonds due to inflation risk.

PE ratio of market avg is 14.8, now it is 22.8. Tech stocks hijacked the PE and kicked it up.

Right now, S&P stocks ex tech are above March 2000 levels.

But, PE won’t return to 15. Why? Tx costs lower, market more liquid, lower taxes. Could justify 20-22 on earnings after option costs.

Assertion by McKinsey: new cos in S&P provided most of the growth in the index. He did the detailed research: wrong! If you held the original s&p from 1957, you would beat current s&p on total return.

Why? When cos admitted into s&p, they are overvalued bc they are new.

Div yielding stocks have outperformed index over time. Winning stock for the long run: philip morris.

Sectors that contract relative to s&p often outperform, profitable but unsexy.

In 50’s, diff betw retirement and life expectancy was 1.6yrs, now is 14.4yrs. Number of workers per retiree falling from 5 to 2.5. Worse in other countries.

With aging pop, who will produce the goods? And more important, who will buy the assets, eg retirees will sell stocks to finance retirement (not enough wealth in young people).

To make this work, retirement age must go to 73! Most optimistic productivity estimates might reduce this 2-3yrs.

There is hope. Answer is: developing countries. If assume 6% growth in dev countries, our retirement age only needs to go up a couple years. By end of century, India+China wealth could exceed US, Europe, and Japan combined. Growth does not guarantee returns, must start w low vals. By the middle of this century developing countries will own most of the world’s capital.

Conclusions: stocks in middle of range. Expect 5-6% returns after inflation in long term (5 years).

Philip is a marketing guy, and the worst speaker at the conference so far, and the first I considered walking out on. But when you’re packed in the middle of a row, you just have to sweat it out. A few notes, but it really wasn’t worth much:

Secrets from J Paul Getty:
1) Wake up early in the morning
2) Work hard during the day
3) Find oil.

Marketing and innovation are drivers of top line. Mktg shd obviate the need for selling. Create value.

Message:
Marketing performance has been disappointing
Need New Marketing, not old mktg
Holistic mktg
Tech enabled mktg
Strategic mktg

Lots of bad news on marketing, has become only promotion. Low accountability.

Jim gave an entertaining and dynamic talk. Below are my notes. I omitted stuff that was just a rehash of his book.

He accepts 1 on 25 requests to speak, likes this group.

What makes an enduring great exec, and how can you become one?

Built to last is wrong title, bc comparison cos also lasted. Also, bc seeds of greatness were early, conclusions were interesting, but also depressing and useless.

Good is the enemy of great. Greatness is a matter of conscious choice, not circumstance.

He didn’t believe in leadership, but his team found level 5 leaders at gtg cos, and made him listen.

Lincoln was level 5, humble for self, but with the will to win at all costs for the cause of preserving union.

One of the first steps up the ladder is examining your relationship with the window and the mirror (credit and blame). Level 5 points to the window to give away credit, mirror for blame.

He considers Lou Gerstner level 5. Started at IBM at level 4 – took the job for his own reasons. Then he fell in love with IBM.

Somewhat more optimistic that level 5 leaders can be made. But you need the cause to be passionate about.

The path is when you start to make level 5 decisions vs level 4.

Keep track of level 5 choices in a level 5 journal. Notice when you capitulate to your selfish will, and when you do the right thing even though it is hard.

If you have cancer in your arm, you have to have the guts to cut off your own arm. Darwin Smith, Kimberly Clark, when he sold the mills.

Lots of lawyers in the level 5 group. Most disciplines know how to give answers, law teaches how to ask questions. Have someone track your statement to question ratio, and try to double it over the next year.

Lots of people know a level 5 at a lower level. Problem is not lack of level 5, problem is lack of level 5 at the top. Culture of level 4 in the 90’s.

Increasingly finding that charisma is a leadership liability, not necessity, but can be overcome, eg sam walton.

Few have the discipline to understand the difference between what they are good at and what they can be the best in the world at.

Understand what to stop doing. Have a stop doing list.

Constant dualities: humility vs will. Preserve core values vs change cultural practices. These execs are “and” people. Short term “and” long term. Preserve and stimulate growth.

In the end, luck is still a factor, you may not finish first. Only you know if you are really making the right choices. In the quiet moments, check your conscience, and you will know if you made level 5 choices.

Okay, JD didn’t speak at the conference. I had lunch at the Rockefeller Center Cafe, and these words were engraved on the tablet in the center. I thought they were apropos, and worth repeating:

I believe in the supreme worth of the individual and in his right to life, liberty, and the pursuit of happiness.

I believe that every right implies a responsibility, every opportunity, an obligation, every possession, a duty.

I believe that the law was made for man and not man for the law, that government is the servant of the people and not their master.

I believe in the dignity of labor, whether with head or hand, that the world owes no man a living, but that it owes every man an opportunity to make a living.

I believe that thrift is essential to well ordered living and that economy is a prime requisite of a sound financial structure, whether in government, business or personal affairs.

I believe that truth and justice are fundamental to an enduring social order.

I believe in the sacredness of a promise, that a man’s word should be as good as his bond, that character – not wealth or power or position – is of supreme worth.

I believe that the rendering of useful service is the common duty of mankind and that only in the purifying fire of sacrifice is the dross of selfishness consumed and the greatness of the human soul set free.

I believe in an all-wise and all-loving God, named by whatever name, and that the individual’s highest fulfillment, greatest happiness, and widest usefulness are to be found in living in harmony with His will.

I believe that love is the greatest thing in the world, that it alone can overcome hate, and that right can and will triumph over might.

Notes on Jack Welch’s interview at the World Business Forum.

He is itching to do something, but prob not as CEO
Prob of finding CEOs of major corps is a failure of existing mgt on succession planning, and grooming talent
Strategy is leaders first, strategy second
Too many ceos get involved in the details of the biz – get promoted, but still do old job – shd focus more on people development, big picture
His job: get in the skin of everyone at the co, understand them
Have a few important initiatives, repeat over and over
Live with the people, every day
People are the whole game – get that right, everything else easy
More that 50% of his time evaluating people
He always walked factory floor, had lunch w the union leader
Get good people, measure them
5 e’s: Energy, energize others, edge (make decisions), execute, emotion – care more about people
Winning is good, real good, greatest thing for this society, drives economy

Tipoff for failure of people: cared more about self than org
Size of office, pomposity, need for authority, all red flags

When he started, had oppty to see both great biz and crappy biz. Must feed the opportunities, starve or find homes for the crappy ones.

Biggest kick is seeing people succeed. Like raising kids. Huge rush, straight in the veins, people becoming successful.

Practice of getting rid of bottom 10%? Prob is lack of candor in orgs. Hardly anybody gets real between-the-eyes appraisals. Huge problem of false kindness – honest appraisal is the kindest thing to do.
With a candid appraisal system: top 20%, middle 70%, then bottom 10%. Hang on to top, tell mid how to get to top, but bottom 10 can’t spend a lot of time on. Tell them they are there, and they will prob leave to find a better home.
Never pass an oppty to write down an appraisal with a bonus or event
Greatest and kindest thing is to let everyone know exactly where they stand.

If you don’t share the beliefs of your org, get out. Being frustrated stinks.

He is working in nyc schools, principals leadership schools, getting principals to think of themselves as ceos. Some opposition from unions, but principals are great.

Preach every day: advantage of big co is can take big swings (risks) wo killing the co. Most big cos just manage their size, not use it. They are slower than startups, and most don’t use their advantage of size and risk ability vs startups.

On R&D: 25% on pure research, 75% on improving existing prods. New ceo is doing more.

His theory on corp scandals: a few bad apples. Virtually all were cos that were new, or changed dramatically. So they didn’t have the processes and culture to keep things in control.

Offshoring: opposing it is the dumbest argument ever put out. Protectionism is in vogue in election years. The US must remain competitive, numbers prove it. Remember Ross Perot and “giant sucking sound” in 91, never happened. Stopping 2 jobs from going overseas will kill 20 here.

360 evals work the first time, maybe second time. Then system falls apart, people get it. Ask yourself, do we have candor in this org? Does everyone know where they stand?

Nobody he ever asked to leave was surprised.

Mistakes he’s made: record at picking people was at below 50% when he started, got up to 75-80%, but still a lot of failures. On biz, his system didn’t work for kidder peabody, culture clash. Didn’t buy a high tech company because he didn’t want to explain to factory workers in Cleveland why SV engrs get twice as much.

Stock options are a wonderful way to differentiate. Another way to get candor into the org. Good news for those not getting opts: can go to mgr and ask how to become one of the best.

Who you put in to lead what is important is more important than any speeches. All emps can rank the mgrs better than you can, if a turkey is in charge everyone will ignore it. So six sigma was run by the best. Then options went to six sigma folks (made sure best were in the program).

Top 1 or 2 in every market, but biz units would narrow the markets to be #1. Solution: Don’t have more than 10% share in any market – don’t allow it. Expand the market for growth – this chg made growth jump from single digits to double.

When doing a 1-2 day bus review, use these charts:
What is compet field, and mkt share in it
What have done in last year to chg shape of chart
What are you scared of in next 12 mos, what can you do to ace them out
Eval management. Bring in six sigma managers to tell stories of quality. Could see 100 people. Take their ideas to the next plant.
Always look at the people directly and ask them questions.

Made his leaders teach. Had 3 week courses for several thousand emps per quarter. Bring in live examples of leaders from GE and use live biz models. Transfers lots of ideas and practices. At every quarterly mtg of top mgrs, agenda item of best generic idea to share.

How to create cultures: have beliefs, stick to them. Hierarchy is half luck, half practice. Don’t care where you are, give people voice and dignity, you’ll be okay, in any culture. Don’t be a horse’s ass.

He was always a sponge, learning from everyone. NIH is the worst disease. He learned from other ceos, eg sam walton. Every company is proud of what they do best. They will be thrilled to tell you all about it.

These guys did a clever study that demonstrates that people really do find cell phone conversations more annoying than in-person conversations, even when the content and volume are identical.

Why Mobile Phones are Annoying (Jakob Nielsen’s Alertbox)

A funny column about useless meetings. He also has a good one about N.A.D.D.

Rands In Repose: Agenda Detection

The Wikipedia just celebrated 200,000 articles. I spent a bit of time browsing around, and it’s pretty amazing. Worth checking out.

Main Page – Wikipedia

A very good article by Jakob Nielsen on information pollution and the possibility of IM following email footsteps.

ACM Queue – IM, Not IP (Information Pollution) – A steady dose of realtime interruptions is toxic to anyone’s health.

Clarke is one of my favorite writers, and this is a pretty interesting interview. Interesting enough that I’ll forgive his incorrect derivation of the word “boot” as in “boot a computer”.

My understanding of the correct derivation goes something like this: the computer needs some initial code to even know how to begin loading the operating system and figure out how to execute programs. This is seemingly a logical impossibility, similar to pulling onself up by one’s bootstraps, and so computers are said to be “booted”.

OneWorld South Asia – Humanity will survive information deluge

I really need to go back and re-read a bunch of his stuff.

Wired 11.12: The Second Coming of Philip K. Dick

We enjoyed visiting Coonawarra Valley in Australia, and tasted several fine wines. We sent home a case of Hollick. We particularly enjoyed the Wilgha Shiraz, but we also bought a couple bottles of the sparkling Merlot – more for the novelty, but it was a nice wine.

(05/02) The wines of Hollick, Australia

Some interesting tidbits on brainstorming research. Most interesting: “Group brainstorming, used day in and day out by countless business owners, really doesn’t work that well, according to Paulus. You’re almost always better off directing your employees to brainstorm individually.”

Inc.com | A Perfect Brainstorm

Someone in my office asked how this worked. Below is my answer.

Fido Puzzle

This works because any number minus an anagram of it is guaranteed to be a multiple of 9 (4321-3214=1107=123*9). So, if you tell me all but one digit of the result (e.g. 107), I can deduce the missing one by adding up the digits mod 9 and subtracting from 9 (9-8=1). I’ve always loved number theory.