The Coach's Corner

Archive for 2019

“Moneyball,” Part 2

March 11th, 2019 // Tom Doescher // 0 Comments

Tom Doescher - Doescher Advisors

In my last blog, I introduced the concept of “heuristics” and promised I would provide more insight from The Undoing Project, the latest book by Michael Lewis.

So, here’s a brief overview: In the 1950s, Nobel Prize-winning psychologist Herbert Simon suggested that while people strive to make rational choices, human judgment is subject to cognitive limitations, and people are limited by the amount of time they have to make choices/decisions. In the 1970s, Amos Tversky and Daniel Kahneman introduced and labeled the specific ways of thinking people rely on to simplify decision-making.

As I mentioned in my previous blog, this topic is quite technical, but it’s very important for business owners and senior executives to be aware of the practical implications present in the decisions they make every day. For that reason, I would highly recommend reading The Undoing Project.

To whet your appetite, I’ll share two basic examples of the impact of heuristic biases from the book.

Belief in the Law of Small Numbers: The power of this belief can be seen in the way people think of totally random patterns — like, say, those created by a flipped coin. People know that a flipped coin is equally likely to come up heads as it is tails, but they also think the tendency for a coin that’s flipped a great many times to land on heads half the time would also express itself if it were flipped only a few times — an error known as “the gambler’s fallacy.” If I flipped a coin a few times in a row and it landed on heads every time, what do you think it would land on on the next flip? Most people would say it will land on tails, as if the coin itself could even things out. Tversky and Kahneman would say this is a glitch in human behavior. In reality, if you were to flip a coin a thousand times, you would be more likely to end up with heads or tails roughly half the time than you would if you only flipped it 10 times.

Framing–Sensitivity to Negative Outcomes: If I gave you $1,000 and then gave you a choice between another gift of $500 and a 50/50 shot at winning $1,000, what would you pick? Most people pick $500, because it’s the sure thing. Now, how about if I gave you $2,000 and then gave you a choice between losing $500 for sure and a 50/50 risk of losing $1,000? Most people would take the bet. The bottom line is that the two questions are effectively identical. In both cases, if you decide to gamble, you’d wind up with a 50/50 shot at being worth $2,000. And in both cases, if you chose the sure thing, you’d wind up being worth $1,500. When the sure thing is framed as a loss, people choose the gamble. However, when you frame it as a gain, people choose the sure thing.

Hopefully these two examples give you a brief glimpse into heuristics. When you reflect on your business, think about those times when you’re quoting on new work or evaluating your team members. Are you basing your conclusions on objective data, or intuition? As a seasoned businessman, I realize more and more each day how many biases, rules of thumb, and gut feelings I have that are wrong.

Give the book a chance.

The Real Story Behind “Moneyball”

February 25th, 2019 // Tom Doescher // 0 Comments

Tom Doescher - Doescher Advisors

The other day I met with a client who shared information about recent discussions he had had with his team about bidding on new work. He believed the team was more focused on landing the project (top-line focused) than on the profitability. This is a common issue experienced by many businesses, and I was totally following him until he used the word “heuristics.” I made him repeat himself three times (he probably thinks I have a hearing problem), and then I asked him to spell it. To my knowledge, I had never seen or heard this word before. Later he sent me a September 27, 1974, article from the publication Science entitled “Judgment Under Uncertainty: Heuristics and Biases,” written by Amos Tversky and Daniel Kahneman. (Yes, this was over 40 years ago!)

I started reading the article, which my client said was a “little” heavy. Actually, it was really heavy; in fact, it caused me to relive the pain of my college statistics class. The good news is that he also recommended I read The Undoing Project by Michael Lewis, the famous author of three books that became successful movies, including Moneyball. I would be willing to bet that most of my readers are very familiar with the subject explored in Moneyball, which is a great story about the phenomenal success of Major League Baseball’s Oakland A’s that resulted after the cash-poor team changed its selection criteria for baseball players from decades-old traditional methods.

In the introduction of his new book, Lewis cites a very damning book review written by University of Chicago economist Richard Thaler and law professor Cass Sunstein about his original book, and quotes Thaler and Sunstein’s assessment: “… the author of Moneyball did not seem to realize the deeper reason for the inefficiencies in the market for baseball players: They sprang directly from the inner workings of the human mind.” Lewis goes on to explain that the ways in which some baseball experts might misjudge baseball players— the ways in which any expert’s judgments might be warped by the expert’s own mind — had been described years ago by a pair of Israeli psychologists, Daniel Kahneman and Amos Tversky. Lewis says: “My book wasn’t original. It was simply an illustration of ideas that had been floating around for decades and had yet to be fully appreciated by, among others, me.”

It reminds me of what King Solomon said in Ecclesiastes: “…  there is nothing new under the sun.”

I will stop there and, in my next blog, I’ll attempt to summarize The Undoing Project, which does a wonderful job of explaining and providing practical examples of the dangers of heuristic decision-making. As I read Lewis’s examples, my ears were ringing, recalling situations in the past where I may have made business decisions that weren’t grounded in adequate objective data.

What Is the Key to Leading a Healthy and Happy Life?

February 4th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

Believe it or not, for 80 years Harvard researchers have studied the question of what is key to a healthy and happy life. In 1938, scientists began tracking 268 Harvard students to try to determine the answer, and today the Harvard Study of Adult Development is still working on the project with the remaining 19 students, who are now well into their 90s. I will let the current study director, Robert Waldinger, share with you their surprising findings in this fascinating 12 minute TED talk.

Setting the Table

January 21st, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

If any family members or good friends were to come to me and say they want to open a restaurant, I would beg them to pick another business. But Danny Meyer, owner of the Union Square Cafe in Manhattan and author of Setting the Table: The Transforming Power of Hospitality in Business, has somehow survived — and even thrived — in one of the most competitive markets in the world. Recently I had the pleasure of hearing him speak, which provided some insight into his success.

I believe many of his philosophies, some of which are listed below, apply to all of us in business. As always, I will offer some editorial comments:

  1. Business, like life, is all about how you make people feel. It’s that simple and it’s that hard.
  2. Hospitality is the foundation of Meyer’s business philosophy. Virtually nothing else is as important as how one is made to feel in any business transaction.
  3. Understanding the distinction between service and hospitality has been at the foundation of Meyer’s success. Service is the technical delivery of a product. Hospitality is how the delivery of that product makes the recipient feel. (Editorial comment: In the past, I’ve shared David Maister’s famous concept of the difference between quality service and quality work.)
  4. Meyer credits several mentors for his success. (Editorial comment: Who are your mentors? The older I get, the more I am reminded of the impact made by those who mentored me, including my dad. I find myself quoting my dad, a career postal worker, more than ever.)
  5. Invest in your community. A business that understands how powerful it is to create wealth for the community stands a much higher chance of creating wealth for its own investors. (Editorial comment: As I’ve learned, investment in the community is also very important to your team members, especially those under 30.)
  6. Meyer has a list of traits he looks for in his managers, and it includes an infectious attitude, self-awareness, patience and tough love, and not feeling threatened by others.
  7. Meyer provides a great list of trust versus fear, including empowering v. ruling, giving v. selfishness, listening v. telling, and hopeful v. cynical.

When I heard Meyer speak, the comment that impacted me the most was related to his 5-step plan for addressing mistakes with a customer: Awareness, Acknowledgement, Apology, Action and Additional Generosity. It was this last step that really resonated with me. Meyer instructs his team to do something special for a guest whose experience has been less than stellar, such as offering them an extra dessert or even a complimentary meal, depending on how bad the mistake was. In my experience, this is where many of us fall short. We may already have lost money on the transaction, so giving more away isn’t natural — but I think Meyer is on to something.

Especially in today’s tech-dominated world, I strongly believe businesses that are able to provide a personal touch have a major competitive advantage. As an example, I have a client who recently purchased a pontoon boat, and he received a phone call from the owner of the boat manufacturer. How do you think he felt? How many other potential boat-buyers has he told — and will he tell — about his experience? Better yet, this client started calling his own customers, which has led to great success.

Alive at Work

January 7th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

Really, is that possible? To be alive at work? I know lots of business owners who wish their associates would share more ideas and be more creative. In fact, I’ve probably felt that way over the years myself. In his book, Alive at Work, author Daniel Cable offers some suggestions for those of us who want to love what we do.

Before I get to the main subject, I’d like to offer an observation. Let me start with a story. Probably 20 years ago, I had the privilege of hearing the famous MIT economist, Lester Thurow, speak at an executive forum. He said something that day that I’ve never forgotten. He stated that he’s often asked how he predicts the future. To answer those questions, he said he merely looks at what’s already happening, and then extrapolates into the future.

I’ve noticed in the past year or two that many of the “business” books I read make reference to the brain and how it functions. Cable, for example, quotes Gallup research that I’ve mentioned before, indicating that 80 percent of workers don’t feel they can be their best at work and 70 percent say they aren’t engaged at work. According to Cable, the reason for those numbers is the fact that many organizations are deactivating the part of the employee’s brain called the “seeking system,” which controls an employee’s drive and motivation. He suggests that the opposite of the seeking system is the “fear system,” which was created by the Industrial Revolution and is a result of the Command & Control approach to management. Cable goes on to say that when the seeking system is triggered, rather than the fear system, the chemical dopamine is released and employees experience an urge to explore, understand and contribute.

I’m going to stop there, but suffice it to say that treating your associates one way shuts them down and treating them another way causes greater engagement and excitement. Once again, I’m stepping outside of my area of expertise, but I personally experienced what Cable refers to as the “seeking system” and the related dopamine for most of my 40-year career at Plante Moran.

Cable also offers some great examples of companies that have embraced the seeking system approach. I’ve talked about many of these types of behaviors before, but I had no idea that doing the right thing can cause a positive reaction in the brain.

If you’re interested in this subject, I would recommend Cable’s book.

To close, I’m going to provide this quote from the book: “To prompt employees’ curiosity and learning through experimentation, a leader can start with the humble purpose of serving others and being open to learning from employees. When leaders express feelings of uncertainty and humility, and share their own developmental journeys, they end up encouraging a learning mindset in others.”

As I’ve mentioned before, my mentor, Ken Kunkel, has modeled this for the almost 50 years that I’ve known him, and he continues to have a positive impact on the world today.

 

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Tom DoescherYou’ll find stories from the trenches, business lessons, and pertinent questions to help you find inspiration, professional growth, and leadership savvy.

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