Insights #12: May 2019

Distilled lessons, ideas and wisdom from the past month

Content summary
1: Why increases in happiness tend to wear off over time, and how to slow the process
2: A theory that explains why people dismiss major problems
3: Hidden mechanisms that promote and prevent success
4: The classic explanation for why well-run companies are vulnerable to disruptive innovation
5: Tips on effective brainstorming
6: Why the proactive pursuit of happiness may actually make people miserable
7: How to build a good company culture
8: Why people apply different criteria when explaining the actions of themselves and others
9: Sales tips and strategies for early-stage companies
10: An approach to decision making in flat organisations

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1: Your brain is wired to suck the joy out of good news

Writing on Medium, Livie Campbell looks at the fleeting nature of happiness.

While people have a tendency to assume that certain events (such as getting married, buying a dream house or getting a promotion) will unlock lasting happiness, in reality any impacts tend to be fleeting, with happiness eventually regressing to previous levels as a result of a process that psychologists call ‘hedonic adaptation’.

As author Yuval Noah Harari writes in ‘Sapiens’, ‘some scholars compare human biochemistry to an air-conditioning system that keeps the temperature constant, come heatwave or snowstorm. Events might momentarily change the temperature, but the air-conditioning system always returns the temperature to the same set point’. Studies have shown that, for most people, the initial excitement of getting married wears off after two years,  while the boost delivered by a new job fades within one.

Hedonic adaptation works both ways (sudden drops in happiness also tend to wear off with time) and so it does play an important (protective) evolutionary role in helping people to deal with life’s knocks. The downside is that it can lead people to lose appreciation for what they have and unnecessarily question their choices.

However, certain steps can be taken to temper the process. Research suggests that happiness is primarily determined by three factors: genetics (and personality), circumstances and ‘intentional activities’, referring to the things that people do and how they think. Perhaps surprisingly, circumstances are thought to account for just 10% of long-term happiness levels, with genetics responsible for around half, meaning that 40% is related directly to factors over which people have some degree of control.

Studies suggest that a number of approaches may be used to slow the process of hedonic adaptation to positive changes, including:

 

2: Solution Aversion

Troy Campbell, Assistant Professor in Marketing at the University of Oregon, suggests that one reason that people deny (or do not believe) problems (and the evidence supporting them), both personal and societal, is that they have an aversion to the proposed solutions. While this is not likely to be the only cause of denial, it is often an important factor, is frequently overlooked and helps to inform approaches to addressing major impasses relating to health, the environment and social injustice.

‘Almost all problems have a narrative that points to a solution. If the dominant or exclusive narrative around a problem points to an aversive solution, the solution aversion hypothesis predicts denial will be much more likely.’

Screen Shot 2018-03-27 at 11.23.38SOURCE:  M.R. Trower

Denial is likely to stem from two aversions:

  • Ideological Solution Aversion (ISA): where solutions force people to admit a logic that runs counter to a cherished ideology (e.g. government-enforced environmental regulations threatening the freedom of markets).
  • Tangible Solution Aversion (TSA): where a solution is tangibly undesirable or overwhelming (e.g. having to give up fatty foods or alcohol).

People often arrive at conclusions they want to arrive at (as explained by Ziva Kunda in the 1990 paper ‘The Case for Motivated Reasoning‘)  by selectively constructing their justifications. In certain cases, maintaining logical coherence requires that they simply deny the existence of the problem.

The role of solution aversion is often overlooked as the advocates of a solution tend to view it as neutral or even attractive, leading to incorrect or unhelpful conclusions about certain groups. However, an important implication of the theory is that ‘we should not just view some people or groups as simply anti-science, anti-fact or hyper-scared of any problems. Instead, we should understand that certain problems have particular solutions that threaten some people and groups more than others.’

Solution aversion may thus be addressed in several ways:

  • Alter the solution, for instance by emphasising free market approach rather than taxes to address climate change, or allowing people to maintain at least part of what they want to hold on to.
  • Clarify the solution to address misconceptions. 
  • Ideological affirmation: affirming an overall ideology before proposing a solution that conflicts with it in some way (the opposite approach is often taken and an entire ideology attacked).
  • Reward substitution: pairing something nice / desirable with a solution in order to reduce its negative impacts. 

Solution aversion may also work in reverse, so that people that view a solution as attractive exaggerate the problem (a case of ‘if you have a hammer every nail looks like a problem‘ rather than ‘if you have a hammer every problem looks like nail‘). This may be positive if it leads to more action being taken to address a problem, but negative if its causes resources to be inappropriately allocated.

 

3: The obstacles that speed and slow our path

Writing in the Financial Times, Tim Harford looks at some of the mechanisms through which successes and setbacks can help or hinder later endeavours. 

Conventional wisdom suggests that early advantages compound over time to significantly alter outcomes. For instance, in ‘Outliers’ Malcolm Gladwell details how children born early within a school intake period, and who are thus older and more developed when they begin, tend initially to perform more strongly in sporting activities. This often leads to them being placed in elite groups and receiving better training, resulting in a huge advantage that relates solely to luck.

In other cases, a deserved success can lead to unfair advantages. For instance, recognition for team endeavours tends to flow disproportionately to members that are already renowned, regardless of their contributions. Sociologist Robert K Merton named the tendency of ‘well-deserved acclaim’ to be ‘followed by unearned praise’ as the Matthew Effect, referring to the biblical verse ‘For to every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away.’

Obstacles can also seemingly lead to better outcomes. For instance, studies have shown that when transport strikes force people to explore new routes, many find more efficient options that they permanently switch to. In some situations, research has found that ‘near-winners’ in some form of pivotal competition (e.g. the awarding of prestigious research grants) tend to do better than ‘near-losers’ in the long term, perhaps because their failure boosts their determination or forces them to rethink their approach.

Nevertheless, some initial disadvantages do appear to lead to permanent setbacks. As an example, researchers have found that entering the workforce during a recession generally limits career progression over the long-term.

Harford writes that ‘Often failure is simply failure, and a setback is exactly what it seems. But sometimes the obstacle that has been placed in our path might provoke us to look around, and perhaps to discover that a better route was there all along.’ In any case, such mechanisms may be useful to bear in mind during a number of activities, including dealing with setbacks and recruiting. 

 

4: The Innovator’s Dilemma 

In The Innovator’s Dilemma, Harvard Business School Professor Clayton Christensen argues that the very approaches that make companies successful in established markets can make it difficult for them to develop or fight against ‘disruptive’ technologies.

The book makes a distinction between two type of innovation: ‘sustaining’ and ‘disruptive’. Sustaining innovations improve features of products in ways that customers have historically found valuable. Disruptive innovations change the value proposition in a market, typically offering lower performance in one or more aspect that mainstream customers care about, but advantages in certain respects (they are often cheaper, simpler, smaller and more convenient) that are valued by some (often new) customers. Disruptive technologies are generally lower margin and commercialised in emerging markets or market niches. For example, within the camera manufacturing sector in the 1970s a better sensor that improved the quality of photographs produced would represent a sustaining innovation, while digital cameras would be disruptive.

Established companies tend to be effective at developing sustaining innovations. Such companies are often well-managed and do what theory suggests they should: solicit feedback from their most important customers and base their decisions on this, stay abreast of industry trends and competitor movements, and pursue opportunities that offer the highest financial returns (i.e. develop higher-margin products and move into big markets). However, for a number of reasons, the capabilities and approaches that help them develop sustaining innovations can prevent exploration or hinder development of emerging disruptive innovations:

  • By responding to customer feedback, companies cannot justify investing in low-margin alternatives until customers show signs that they want them.
  • Large companies can only maintain growth rates (impacting share price, employee opportunities etc) by pursuing large markets. As they grow, it becomes increasingly difficult to enter emerging markets, even if these have vast future potential.
  • Decisions based on quantification of opportunity and return, as well as careful planning, do not deal well with markets that do not yet exist.
  • Large companies develop cost structures that make it difficult to achieve profitability in low-end markets.
  • They focus on competing with established competitors rather than new entrants.
  • The processes and values that emerge to make a company effective in what it does are hard to change (regardless of its resources and capabilities).
  • The best staff do not want to be involved in initiatives that are not central to an organisation.
  • An organisation is unlikely to persevere if it encounters difficulties in non-core initiatives, while these are the most likely to be scrapped if resources become constrained.

Established companies therefore find it difficult to commit resources to exploring disruptive innovations and  naturally focus upmarket, developing higher performance products that tend to be more complex and more expensive.

However, the danger in this approach is that the functionality of their products can eventually exceed what the market needs or is willing to pay for. Over time, the performance of disruptive technologies can improve to deliver sufficient (even if lower) performance in traditionally valued aspects, alongside other benefits. The advantage of high-end solutions can thus be eroded, and buying decisions evolve to be based on new criteria, typically moving from functionality to reliability to convenience to price. By the time that markets for disruptive innovations become sufficiently attractive for large companies to enter, it is generally too late for them to successfully do so (first mover advantages are much stronger for disruptive than sustaining innovations).

The implication of this theory is that large companies are generally disrupted not because they lack resources, are lazy or poorly managed. In fact, disruptive technologies are often initially developed in large companies (e.g. Kodak invented the digital camera), even if mostly commercialised by new entrants (many of which are established by frustrated employees of incumbents). As Christiansen writes, ‘The very processes and values that constitute an organization’s capabilities in one context, define its disabilities in another context‘. Moreover, the theory suggests that many widely-held principles of good management (such as ‘always listen to your customers’) are only ‘situationally appropriate’.

Christensen suggests that disruptive technologies should be developed by focused organisations that are aligned with the needs of target customers and small enough (and with appropriate cost structures) to value the market opportunity, otherwise resources are likely to be diverted elsewhere . Such entities (most likely autonomous spin-outs or start-ups) also offer the advantage of not being restricted by established values and processes.

He also advises that, in pursuing disruptive innovations, the best approach is to find or develop new markets that value the disruptive attribute, rather than wait for developments that allow them to compete as a sustaining innovations in established markets. Organisations should plan to fail early and inexpensively on such initiatives – the final applications are typically unknown and so they must conserve resources to be able to iterate towards a successful outcome.

 

5: No joke! Yes, you can learn from the seriously applicable ways that The Onion brainstorms its ideas

Writing on TED, writer Brian Janosch shares the process for brainstorming employed at satirical publication The Onion.

As Janosch points out, brainstorming generally involves an inherent conflict by asking people to simultaneously engage in intense internal mental activity and external verbal activity. Balancing these requirements, and unlocking both internal and external creativity, is a fundamental challenge.

At The Onion, team members are initially tasked with generating ideas separately and at their own pace. This means that they can benefit from inspiration occurring at any time, rather than just during the brainstorming session. Moreover, this approach makes it more likely that everyone will contribute (traditional approaches to brainstorming favour extroverts).

All ideas are amalgamated onto a single list and then a short meeting held to identify the best ones, which are then further developed by the wider team in a dedicated meeting. Janosch suggests that ‘by intentionally creating excess, you automatically set a quality standard but you also prevent people from getting precious about their ideas’.

Significant consideration is given to the design of the idea prompt. In order to generate the largest number of good ideas, prompts should avoid being too vague (to give direction) and too specific (to avoid creating a perception that there is a single correct answer). Open-ended questions are often useful.

Participants should be instructed to keep their suggestions as concise as possible. Brief ideas (short enough to fit on a post-it note) force people to convey the key elements clearly, and are easier to digest and build on for others.

All ideas are anonymised. This helps to separate them from people or personal feelings, meaning that they are more likely to be assessed objectively and on their own merits.

 

6: How to Create a Great Team Culture (and Why It Matters)

In an article on acmqueue, writer and entrepreneur Kate Matsudaira looks at how team leaders can create a good team culture.

As she notes, a culture will emerge whenever people work together, regardless of whether deliberate efforts are made to shape it. Moreover, a great team culture can be hugely motivating.

In ‘The Culture Code’, Daniel Coyle suggests that good teams emerge when members feel safe, are willing to take risks and are aligned around common goals and values. While different teams will often require different approaches, Matsudaira sets-out a number of generally applicable guidelines for achieving this: 

  • It is the responsibility of leaders to aim for a culture and provide guidance that others can follow. This includes quickly addressing behaviours that run counter to the desired culture. Matsudaira notes that ‘every day, people are looking for signals in their environment about what is the norm. As a leader, it is part of your job to set the example for those around you.
  • Leaders should seek to foster trust and collaboration among team members. This may be done through:
    • Encouraging team members to communicate with each other and solve problems among themselves, instead of using the leader as a mediator. This creates trust and cohesion, while preventing ‘favourites’ from emerging and politicking.
    • Reward and recognise collaboration and peer coaching.
    • Create opportunities for people to get to know each other as people, not simply co-workers.
  • Leaders should think about and establish the purpose, value and advantages of the team (e.g. collaboration or learning) and then take active steps to support these (e.g. formalising mentoring sessions or streamlining decision-making processes).
  • Leaders should make people feel valued and important, for instance by:
    • holding weekly demo meetings in which a team members can share a recent accomplishment. This helps people to understand what others are doing and promotes collaboration.
    • Regularly scheduling teaching slots in which every team member shares something that they have recently learned. This helps to give everyone a voice.
    • Marking every team win with a (small) face-to-face celebration – this brings the team together and recognises / rewards individual successes.
  • Leaders can influence culture but should involve others (e.g. through delegation of tasks) to create a sense that everyone is contributing to and influencing the process. She writes that ‘This is where truly great leadership comes from. You establish a culture that enables your team to be the best it can be, and then you allow the team to take that culture and run with it.

Matsudaira notes that culture arises through every day actions rather than one-off gestures. Regardless of the scope of the initiative designed to promote it, ‘culture comes from shared experiences. The what doesn’t matter nearly as much as the why.’

 

7: Why the quickest route to happiness may be to do nothing

Writing on the BBC website, David Robson explores the potential dangers of actively pursuing happiness.

While many people argue that achieving and sustaining happiness results from deliberate effort (in particular, self help books espouse the benefits of happiness and the duty of everyone to pursue it), research suggests that the approach may be wholly inappropriate and even lead to feelings of stress, loneliness and personal failure.

In fact, it appears that the more people strive for happiness, the harder it is for them to find it. Studies conducted by psychologist Iris Mauss, of the University of California, Berkeley suggest that a desire for and pursuit of happiness (involving constant assessment and questioning of feelings) may simply highlight its absence, leading to disappointment and diminished wellbeing. It may also increase feelings of loneliness or disconnection by encouraging people to shift their focus inward, resulting in reduced engagement with others, who may also be viewed particularly negatively if perceived to impact on happiness in any way.

This may be why, for instance, many people feel especially low or stressed at ‘special’ times of the year such as Christmas. Similarly, ‘big’ life events are often disappointing, with unexpected positives commonly the greatest source of happiness.

Additional research suggests that consciously pursuing happiness can lead to perceptions of not having enough time (to do the things necessary to be happy). Happiness is a nebulous goal, it is difficult to feel that it has been maximised and even when it is obtained people seek to prolong it. Actively pursuing it therefore means that there is always more to do, making happiness a burden rather than something that can be enjoyed.

Of course, in many situations (such as leaving an abusive partner) taking steps driven by a desire for happiness will be good for overall wellbeing. Similarly, mental health issues should be addressed through available treatments. However, in other cases, the research suggests that approaches such as avoiding social media and accepting rather than trying to eliminate negative feelings (see Seneca for some Stoic wisdom) may boost wellbeing more than trying to be happy. As Mauss notes, ‘When you are striving to be happy, you may become judgemental and unaccepting of negative things in your life… you almost berate yourself for feelings that are incompatible with happiness’.

 

8: Fundamental Attribution Error: Why You Make Terrible Life Choices

Author Nir Eyal looks at the fundamental attribution error, a cognitive bias that causes people to apply different filters when judging themselves and others. In essence, it describes the tendency to view the actions of others as a result of ‘who they are’, while justifying our own actions on the basis of circumstance. This has two forms:

  • When things go badly for us, we tend to point to circumstances outside of our control. When others fail, we are more likely to assume that this was a result of their poor choices or character.
  • When we succeed, we are likely to assume that it was a result of talent and hard work, but will point to luck or privilege when explaining the success of others.

As an example, most people have pushed through queues on public transport when in a rush, telling themselves that their behaviour is justified by their time constraints. Most people have also been on the receiving end of a hurried push, but dismissed the ‘offending’ person as rude and inconsiderate.

Several factors explain the prevalence of this bias. Our understanding of other people and their circumstances is inherently limited, while we are fully aware of the stresses and constraints that we face. Moreover, linking our successes to our attributes brings several benefits, including boosting confidence and optimism, as well as encouraging beneficial risk taking. However, it can also lead to unnecessary anger and judgement of others. 

Eyal suggests a number of remedies to counter this tendency:

  • Remembering the significant role that luck plays in any endeavour.
  • Empathising by placing oneself in the shoes of the other person rather than making quick judgements.
  • Giving people the benefit of the doubt by choosing to assume an alternative explanation for their behaviour, rather than simply linking it to their character.

 

9: When Sales Isn’t Just Selling: Advice for Founders in Early Markets

Venture capital investor Martin Casado look at the challenges start-ups face when moving from trying to establish product / market fit to building a repeatable and scalable sales process. As he notes, only very rarely do new products generate large amounts of inbound interest from launch, and even when they do it can lead to the incorrect assumption that no sales function is needed.

Casado offers the following advice for companies going through this process:

  • ‘Sales’ is often interpreted as convincing people to buy something that they may not need, and so startups often hire overly ‘salesy’ people. However, the early sales process is not about selling to whoever will buy or even those that like the idea. ‘Sales in early markets should be about finding the few right customers who want it badly enough, so that they have the internal fortitude to work with a startup, put an unproven product into production, and weather the inevitable hiccups along the way’.  
  • Given the complexity of the conversation (covering technical aspects of the product, company capabilities etc), initially the founders or early executives should be involved. ‘If the founders can’t sell (or at least convince a customer they want to buy it), it’s unlikely that anyone can.‘ 
  • The sales process should be closely tied to product design, so that conversations can feedback into this and inform iterations. Without product / market fit, throwing additional resources at the sales function is unlikely to improve results.
  • Early sales staff should be hired to identify the customer set and oversee the process. They do not need to be technical as they should focus on qualifying customers, working out who to speak to and navigating the purchase process. They should liaise with other people, including founders, who will do the actual selling. Strong networks / contacts are less valuable in startups as the identity of eventual customers is unknown.
  • ‘Sales engineers’, who have a deep technical understanding but are also good with people and in tune with the business landscape may be good options when scaling-up the organisation from just its technical founders.
  • A sales lead should not be hired until there is some traction and data emerging on how to scale the sales process. Casado notes that ‘hires that are too early almost inevitably leave and it can be hugely disruptive in terms of lost time and culture – Because a sales team that’s starving for oxygen is one of the most disruptive forces in a company: They’ll sell things the company isn’t building, they’ll pressure the product manager and developers to fast-track or implement that “one feature that will get a deal done”, or they’ll sell to people who don’t really need your product.’ 
  • Typically, sales leaders can either drive sales directly or build teams, but rarely both. A strong sales lead will be good at maximising contract value, managing a pipeline and knowing when to expand into new markets. 
  • If a company cannot build an effective direct sales team, it is unlikely that any parters (e.g. integrators or resellers) will be able to do so.

 

10: No Kings: How Do You Make Good Decisions Efficiently in a Flat Organization?

Other Interesting Things

Loopy: A tool for thinking in systems

Founder Books: a list of business books recommended by leading entrepreneurs.

 

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