The Last Days of Target Canada

Friday, April 29th, 2016

Target Canada failed big:

Roughly two years from that date, Target Canada filed for creditor protection, marking the end of its first international foray and one of the most confounding sagas in Canadian corporate history. The debacle cost the parent company billions of dollars, sullied its reputation and put roughly 17,600 people out of work. Target’s arrival was highly anticipated by consumers and feared by rival retailers. The chain, whose roots stretch back to 1902, had perfected its retail strategy and grown into a US$70-billion titan in its home country. Target was a careful, analytical and efficient organization with a highly admired corporate culture. The corporation’s entry into Canada was uncharacteristically bold—not just for Target, but for any retailer. Under Steinhafel, the company paid $1.8 billion for the leases to the entire Zellers chain in 2011 and formulated a plan to open 124 locations by the end of 2013. Not only that, but the chain expected to be profitable within its first year of operations.

(Hat tip to David Foster.)

Lawyers and Salesmen

Thursday, April 28th, 2016

One of the things the Z Man has learned in life is that the salesmen for a company will be the most honest with you about their company:

That’s not to imply that salesmen are all honest in their sales pitch. That’s not what I mean. I’m talking about life inside the company. Ask a sales guy, who is not selling you something, about his boss and his co-workers and he’ll usually give you the unvarnished truth. Often, they are the guys who know the flaws best, because they have to work around them to make deals.

That’s the thing with sales people.  They work for themselves, even though they take a salary and are employees. Some portion of their pay, maybe the bulk of it, is derived from their performance as a salesman. All sales people have quotas and have to produce. Otherwise, they get fired. There’s no hiding in the bureaucracy for them. That means self-deception is not of any use to them. They have to know the defects of their firm and its products in order to mitigate them in front of clients.

The weird thing about salesmen is they never assume they are the cleverest guy in the room. Paranoia is a healthy trait in sales, as there are a million little things that can scuttle a deal. Working from the assumption that there could very well be someone in the room who knows something you don’t is a good way to avoid surprises. You ask more questions and you listen better. If you’re walking around thinking you are Wile E. Coyote, a safe could fall on your head.

I used to fish with a guy who made his living selling cars. He got into it as a way to pay for college. He would sell cars on the weekend and at night, while going to school during the day. When he finished college, he found that he could make a better living selling cars than anything else so he kept selling cars. Eventually he settled into selling BMW’s and Mercedes. He was able to make a nice, middle-class living at it, without too much stress.

Making small talk one day I mentioned something about lawyers and he laughed and told me that lawyers are his best clients, followed by stock brokers. I naturally assumed it was because they made a lot of money and had expensive tastes. That was not it at all. He told me that overselling a lawyer was one of the easiest things to do in car sales. They walk around thinking they know everything and so they fall for every car sales trick in the book.

So, where’s he going with this?

I’ve been thinking about this watching the political ructions. Donald Trump is a salesman and a very good one so he is doing extremely well as a novice politician, because politics is about sales. His competitors are mostly lawyers, who never took him seriously, because they are lawyers and smart. Everyone knows this so surely the smart lawyers will have no problem with the sales guy and his cheap theatrics.

The commentariat is similarly full of lawyers and people who went to law school.

[...]

Now, the guys in the sales department have a different experience. They also have high verbal skills, but they spend their days losing many more deals than they win. They face the reality of their limitations every day. They also know that if they don’t sell, they don’t eat. There’s no failing up in their business. It’s why the sales guys can feast on lawyers. They have no illusions about themselves.

It’s another reason to wonder if the recipe for the managerial state contains ingredients that poison the stew. Failing up is a feature of the managerial class. They go from one failure to the next, rarely ever answering for their blunders. The economic team that advised Obama on the stimulus, for example, landed cushy positions in the academy. Tim Geithner is making millions influence peddling for Wall Street. This despite being 100% wrong about in their predictions.

A system based on mediocrities walking around convinced they are the smartest people in the room will inevitably become unstable.

Take the First Fall

Thursday, April 21st, 2016

When was the last time your feedback improved someone else’s life?

The problem is that we forget we’re giving feedback to a fellow human being, not an advice-taking robot. Even when we’re well-intentioned, the message gets lost in the transmission. It’s like the old saying “What counts is not what’s said, but what’s heard.” We respond emotionally to criticism, even if it’s just implied criticism. (Are you sure you still fit into that dress?) This makes it difficult to help others improve. In other words, we fail to understand and appreciate human nature.

According to Roger Fisher and Alan Sharp’s Getting It Done: How to Lead When You’re Not in Charge, there are three different kinds of feedback:

  • Appreciation
  • Advice
  • Evaluation

Their advice is not to mix the three:

  1. Express Appreciation to Motivate
  2. Offer Advice to Improve Performance
  3. Evaluate Only When Needed
  4. Take the First Fall

Manly Courage in the Face of Physical Danger

Thursday, April 14th, 2016

Tom Wolfe’s The Right Stuff describes some of Jocko Willink’s (@jockowillink) appeal as a business consultant:

America seemed to be full of businessmen like [Ed Cole, the president of Chevrolet] who exercised considerable power and were strong leaders but who had never exercised power and leadership in its primal form: manly courage in the face of physical danger. When they met someone who had it, they wanted to establish a relationship with that righteous stuff.

Me trooper

Monday, April 11th, 2016

When I see a new gadget, I generally say, “Me want it, but me wait,” but a good ad might push me over the edge — and some good behind the scenes bits might push me even harder:

The Art Of The Deal

Monday, March 28th, 2016

Scott Alexander started Trump: The Art of the Deal with the question: what exactly do real estate developers do?

They don’t design buildings; they hire an architect for that part. They don’t construct the buildings; they hire a construction company for that part. They don’t manage the buildings; they hire a management company for that part. They’re not even the capitalist who funds the whole thing; they get a loan from a bank for that. So what do they do? Why don’t you or I take out a $100 million loan from a bank, hire a company to build a $100 million skyscraper, and then rent it out for somewhat more than $100 million and become rich?

As best I can tell, the developer’s job is coordination. This often means blatant lies. The usual process goes like this: the bank would be happy to lend you the money as long as you have guaranteed renters. The renters would be happy to sign up as long as you show them a design. The architect would be happy to design the building as long as you tell them what the government’s allowing. The government would be happy to give you your permit as long as you have a construction company lined up. And the construction company would be happy to sign on with you as long as you have the money from the bank in your pocket. Or some kind of complicated multi-step catch-22 like that. The solution — or at least Trump’s solution — is to tell everybody that all the other players have agreed and the deal is completely done except for their signature. The trick is to lie to the right people in the right order, so that by the time somebody checks to see whether they’ve been conned, you actually do have the signatures you told them that you had. The whole thing sounds very stressful.

The developer’s other job is dealing with regulations. The way Trump tells it, there are so many regulations on development in New York City in particular and America in general that erecting anything larger than a folding chair requires the full resources of a multibillion dollar company and half the law firms in Manhattan. Once the government grants approval it’s likely to add on new conditions when you’re halfway done building the skyscraper, insist on bizarre provisions that gain it nothing but completely ruin your chance of making a profit, or just stonewall you for the heck of it if you didn’t donate to the right people’s campaigns last year. Reading about the system makes me both grateful and astonished that any structures have ever been erected in the United States at all, and somewhat worried that if anything ever happens to Donald Trump and a few of his close friends, the country will lose the ability to legally construct artificial shelter and we will all have to go back to living in caves.

Battle Leadership

Saturday, February 27th, 2016

In his fourth podcast, Jocko Willink (@jockowillink) shares some stories from Battle Leadership:

Battle Leadership Page 11
Battle Leadership Page 12

Jocko Podcast

Thursday, February 25th, 2016

I enjoyed Jocko Willink’s (@jockowillink) interviews with Tim Ferriss and Joe Rogan, and I found that he took their advice and started his own podcast.

The first episode is clearly a learning experience. The second covers David Hackworth’s About Face. The third touches on H.J. Poole‘s The Last Hundred Yards.

The Little Guy Will Pay for It

Tuesday, February 23rd, 2016

Michael Burry, the real-life star of Michael Lewis’s The Big Short and its film adaptaion, sees another crisis coming:

I am shocked that executives at some of the worst lenders were not punished for what they did. But this is the nature of these things. The ones running the machine did not get punished after the dot-com bubble either — all those VCs and dot-com executives still live in their mansions lining the 280 corridor on the San Francisco peninsula. The little guy will pay for it — the small investor, the borrower. Which is why the little guy needs to be warned to be more diligent and to be more suspicious of society’s sanctioned suits offering free money. It will always be seductive, but that’s the devil that wants your soul.

[...]

The biggest hope I had was that we would enter a new era of personal responsibility. Instead, we doubled down on blaming others, and this is long-term tragic. Too, the crisis, incredibly, made the biggest banks bigger. And it made the Federal Reserve, an unelected body, even more powerful and therefore more relevant. The major reform legislation, Dodd-Frank, was named after two guys bought and sold by special interests, and one of them should be shouldering a good amount of blame for the crisis. Banks were forced, by the government, to save some of the worst lenders in the housing bubble, then the government turned around and pilloried the banks for the crimes of the companies they were forced to acquire. The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough. And the interest the Federal Reserve pays on the excess reserves of lending institutions broke the money multiplier and handcuffed lending to small and midsized enterprises, where the majority of job creation and upward mobility in wages occurs. Government policies and regulations in the postcrisis era have aided the hollowing-out of middle America far more than anything the private sector has done. These changes even expanded the wealth gap by making asset owners richer at the expense of renters. Maybe there are some positive changes in there, but it seems I fail to see beyond the absurdity.

[...]

The postcrisis perception, at least in the media, appears to be one of Americans being held down by Wall Street, by big companies in the private sector, and by the wealthy. Capitalism is on trial. I see it a little differently. If a lender offers me free money, I do not have to take it. And if I take it, I better understand all the terms, because there is no such thing as free money. That is just basic personal responsibility and common sense.

[...]

Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.

[...]

The idea that growth will remedy our debts is so addictive for politicians, but the citizens end up paying the price. The public sector has really stepped up as a consumer of debt. The Federal Reserve’s balance sheet is leveraged 77:1. Like I said, the absurdity, it just befuddles me.

Now he’s investing in… water?

James Patterson Inc.

Friday, February 5th, 2016

I wasn’t familiar with James Patterson Inc., but this 2010 article describes the publishing juggernaut’s dominance:

Like most authors, James Patterson started out with one book, released in 1976, that he struggled to get published. It sold about 10,000 copies, a modest, if respectable, showing for a first novel. Last year, an estimated 14 million copies of his books in 38 different languages found their way onto beach blankets, airplanes and nightstands around the world. Patterson may lack the name recognition of a Stephen King, a John Grisham or a Dan Brown, but he outsells them all. Really, it’s not even close. (According to Nielsen BookScan, Grisham’s, King’s and Brown’s combined U.S. sales in recent years still don’t match Patterson’s.) This is partly because Patterson is so prolific: with the help of his stable of co-authors, he published nine original hardcover books in 2009 and will publish at least nine more in 2010.

There are many different ways to catalog Patterson’s staggering success. Here are just a few: Since 2006, one out of every 17 novels bought in the United States was written by James Patterson. He is listed in the latest edition of “Guinness World Records,” published last fall, as the author with the most New York Times best sellers, 45, but that number is already out of date: he now has 51 — 35 of which went to No. 1.

Patterson and his publisher, Little, Brown & Co., a division of the Hachette Book Group, have an unconventional relationship. In addition to his two editors, Patterson has three full-time Hachette employees (plus assistants) devoted exclusively to him: a so-called brand manager who shepherds Patterson’s adult books through the production process, a marketing director for his young-adult titles and a sales manager for all his books. Despite this support staff and his prodigious output, Patterson is intimately involved in the publication of his books. A former ad executive — Patterson ran J. Walter Thompson’s North American branch before becoming a full-time writer in 1996 — he handles all of his own advertising and closely monitors just about every other step of the publication process, from the design of his jackets to the timing of his books’ release to their placement in stores. “Jim is at the very least co-publisher of his own books,” Michael Pietsch, Patterson’s editor and the publisher of Little, Brown, told me.

[...]

To maintain his frenetic pace of production, Patterson now uses co-authors for nearly all of his books. He is part executive producer, part head writer, setting out the vision for each book or series and then ensuring that his writers stay the course. This kind of collaboration is second nature to Patterson from his advertising days, and it’s certainly common in other creative industries, including television. But writing a novel is not the same thing as coming up with jokes for David Letterman or plotting an episode of “24.” Books, at least in their traditional conception, are the product of one person’s imagination and sensibility, rendered in a singular, unreproducible style and voice. Some novelists have tried using co-authors, usually with limited success. Certainly none have taken collaboration to the level Patterson has, with his five regular co-authors, each one specializing in a different Patterson series or genre. “Duke Ellington said, ‘I need an orchestra, otherwise I wouldn’t know how my music sounds,’ ” Pietsch told me when I asked him about Patterson’s use of collaborators. “Jim created a process and a team that can help him hear how his music sounds.”

The way it usually works, Patterson will write a detailed outline — sometimes as long as 50 pages, triple-spaced — and one of his co-authors will draft the chapters for him to read, revise and, when necessary, rewrite. When he’s first starting to work with a new collaborator, a book will typically require numerous drafts. Over time, the process invariably becomes more efficient. Patterson pays his co-authors out of his own pocket. On the adult side, his collaborators work directly and exclusively with Patterson. On the Y.A. side, they sometimes work with Patterson’s young-adult editor, who decides when pages are ready to be passed along to Patterson.

League of Legends Prodigy

Wednesday, February 3rd, 2016

ESPN looks at League of Legends prodigy Faker — a young pseudonymous Korean eSports “athlete” who has mastered the popular PC game:

When I ask the group why Faker is regarded as the best player in the world, MonteCristo, who goes by Monte, jumps in: “How would you grade a professional athlete? Like, what makes LeBron great?”

I rattle off a few words: athleticism, skill, decision-making.

“It’s the same. It’s exactly the same,” Susie says.

The League equivalent of athleticism is called mechanics, which refers to a player’s ability to use his mouse and keyboard to make swift movements, like dodging shots. In this respect, Monte says, Faker is peerless. He points me to a video of what is widely seen as the greatest play in League history, clipped from a 2013 game between SK Telecom and the KT Bullets. Faker is dueling another player, Ryu, and they’re both playing the same champion, a ninja named Zed. After a brief skirmish, Faker’s Zed appears about to die, so he darts away. Then, just when Ryu thinks he has the fight sewn up, Faker unleashes a startling set of moves, cutting down his opponent in a blinding flash. The audience goes nuts. “He used six different abilities in the span of two seconds,” Monte says.

Even more impressive, DoA adds, is the breadth of Faker’s champion pool, which makes it easier for him to adapt to new patches to the game — the “meta,” in eSports parlance. Because Riot upgrades League every few weeks, players live in perpetual fear of having their favorite champions’ skills diminished. Imagine if the NFL suddenly announced next year that rushing touchdowns were worth only five points, or if MLB expanded the strike zone for left-handed pitchers. Although the constantly changing meta keeps the game fresh, it can be agonizing for professionals. Some players never recover from an ill-timed patch.

That’s one of the reasons the average eSports career is so short. Professional players typically retire before their mid-20s; like figure skaters, they peak long before then. Older gamers must battle slowing reflexes and fatigue, as well as injuries to their necks and wrists. “As a male teenager, it’s easy to play video games for 16 hours,” Monte says.

Because many Korean players skip college, their career options after retiring are limited. “A lot of pro gamers don’t come from wealthy backgrounds,” Susie says. “A good number of them are doing this because they’re supporting their families.” Increasingly, she says, players realize they have limited time to capitalize on their skills, which is driving some of them to leave the country. Although most professional gamers in Korea earn five-digit salaries and a few elite players make over $100,000 (Monte says Faker probably makes more than twice that; SK Telecom declined to comment on his salary), Chinese teams boast massive war chests. One squad, Invictus Gaming, is owned by the son of Wang Jianlin, the richest man in mainland China. This winter, Invictus added four Korean players to its roster.

Pro players also make money by streaming, allowing fans to watch them practice while advertisements pop up. One retired player in China, Wei “Caomei” Han-Dong, has said he makes more than $800,000 a year streaming. Korean teams have begun to stream a little, but in general, “they think it’s inefficient,” says Lee “CloudTemplar” Hyun-woo, a retired-gamer-turned-caster. “In Korea, to make money you have to put up results.” Demand is out there, though. This February, a minor scandal flared up when a Twitch user started streaming Faker’s practice games without permission.

Diversity Policies Don’t Help Women or Minorities, and They Make White Men Feel Threatened

Saturday, January 9th, 2016

U.S. companies spend millions annually on diversity programs and policies. Are they working? Not really:

A longitudinal study of over 700 U.S. companies found that implementing diversity training programs has little positive effect and may even decrease representation of black women.

Most people assume that diversity policies make companies fairer for women and minorities, though the data suggest otherwise. Even when there is clear evidence of discrimination at a company, the presence of a diversity policy leads people to discount claims of unfair treatment. In previous research, we’ve found that this is especially true for members of dominant groups and those who tend to believe that the system is generally fair.

All this has a real effect in court. In a 2011 Supreme Court class action case, Walmart successfully used the mere presence of its anti-discrimination policy to defend itself against allegations of gender discrimination. And Walmart isn’t alone: the “diversity defense” often succeeds, making organizations less accountable for discriminatory practices.

There’s another way the rhetoric of diversity can result in inaccurate and counterproductive beliefs. In a recent experiment, we found evidence that it not only makes white men believe that women and minorities are being treated fairly — whether that’s true or not — it also makes them more likely to believe that they themselves are being treated unfairly.

We put young white men through a hiring simulation for an entry-level job at a fictional technology firm. For half of the “applicants,” the firm’s recruitment materials briefly mentioned its pro-diversity values. For the other half, the materials did not mention diversity. In all other ways, the firm was described identically. All of the applicants then underwent a standardized job interview while we videotaped their performance and measured their cardiovascular stress responses.

Compared to white men interviewing at the company that did not mention diversity, white men interviewing for the pro-diversity company expected more unfair treatment and discrimination against whites. They also performed more poorly in the job interview, as judged by independent raters. And their cardiovascular responses during the interview revealed that they were more stressed.

How did Elon Musk learn enough about rockets to run SpaceX?

Saturday, January 9th, 2016

How did Elon Musk learn enough about rockets to run SpaceX? Rocket scientist Jim Cantrell explains:

Once he has a goal, his next step is to learn as much about the topic at hand as possible from as many sources as possible. He is by far the single smartest person that I have ever worked with, period. I can’t estimate his IQ but he is very very intelligent. And not the typical egg-head kind of smart. He has a real applied mind. He literally sucks the knowledge and experience out of people that he is around. He borrowed all of my college texts on rocket propulsion when we first started working together in 2001. We also hired as many of my colleagues in the rocket and spacecraft business that were willing to consult with him. It was like a gigantic spaceapalooza. At that point we were not talking about building a rocket ourselves, only launching a privately funded mission to Mars. I found out later that he was talking to a bunch of other people about rocket designs and collaborating on some spreadsheet level systems designs for launchers. Once our dealings with the Russians fell apart, he decided to build his own rocket and this was the genesis of SpaceX.

I knew he read textbooks, but I didn’t know exactly which textbooks: Rocket Propulsion Elements, Aerothermodynamics of Gas Turbine and Rocket Propulsion, Fundamentals of Astrodynamics, and the International Reference Guide to Space Launch Systems.

Hundreds of Flying Robots

Friday, January 8th, 2016

We don’t think about them that often, but above us are hundreds of flying robots that play a large part in our lives on Earth:

In 1957, lonely Sputnik circled the Earth by itself, but today, the worlds of communication, weather forecasting, television, navigation, and aerial photography all rely heavily on satellites, as do many national militaries and government intelligence agencies.

The total market for satellite manufacturing, the launches that carry them to space, and related equipment and services has ballooned from $60 billion in 2004 to over $200 billion in 2015. Satellite industry revenue today makes up only 4% of the global telecommunications industry but accounts for over 60% of space industry revenue.

[...]

About two-thirds of active satellites are in Low Earth Orbit. LEO starts up at 99 miles (160 km) above the Earth, the lowest altitude at which an object can orbit without atmospheric drag messing things up. The top of LEO is 1,240 miles (2,000 km) up. Typically, the lowest satellites are at around 220 miles (350 km) up or higher.

Most of the rest (about one-third) of the satellites are much farther out, in a place called geostationary orbit (GEO). It’s right at 22,236 miles (35,786 km) above the Earth, and it’s called geostationary because something orbiting in it rotates at the exact speed that the Earth turns, making its position in the sky stationary relative to a point on the Earth. It’ll seem to be motionless to an observer on the ground.

[...]

A small percentage of other satellites are in medium Earth orbit (MEO), which is everything in between LEO and GEO. One notable resident of MEO is the GPS system that most Americans, and people from many other countries, use every day. I never realized that the entire GPS system, a US Department of Defense project that went live in 1995, only uses 32 satellites total. And until 2012, the number was only 24—six orbits, each with four satellites.

How Useful Is the Theory of Disruptive Innovation?

Wednesday, January 6th, 2016

In The Innovator’s Dilemma and The Innovator’s Solution, Christensen and Raynor discuss 77 cases of disruptive innovation. Andrew A. King and Baljir Baatartogtokh interviewed experts on each of those cases and discovered something:

Many of the theory’s exemplary cases did not fit four of its key conditions and predictions well. A handful corresponded well with all four elements (notably, for example, the disruptions by Salesforce.com, Intuit’s QuickBooks, and Amazon.com). However, a majority of the 77 cases were found to include different motivating forces or displayed unpredicted outcomes. Among them were cases involving legacy costs, the effect of numerous competitors, changing economies of scale, and shifting social conditions. Discussions with our industry experts also helped us to identify the most generally applicable elements of the theory of disruptive innovation as well as to define other ways managers can guide businesses through stormy times.

[...]

Before surveying and interviewing experts on each of the 77 cases, we identified four key elements of the theory of disruption: (1) that incumbents in a market are improving along a trajectory of sustaining innovation, (2) that they overshoot customer needs, (3) that they possess the capability to respond to disruptive threats, and (4) that incumbents end up floundering as a result of the disruption.

[...]

In summary, although Christensen and Raynor selected the 77 cases as examples of the theory of disruptive innovation, our survey of experts reveals that many of the cases do not correspond closely with the theory. In fact, their responses suggest that only seven of the cases (9%) contained all four elements of the theory that we asked about.