Seems like a lot of decision-making going on these days makes little sense.  Government, corporations, individuals… not that they/our decisions ever made much logical sense before.  

I bring this up because I just finished an interesting book that deals with irrational behaviors and gives some very startup relevant observations.  In case you didn’t know, I’m a little bit of a bookworm.  Scratch that, I’m the kind of bookworm that actually got grounded from books when I was a kid.  All embarrassing revelations aside, I really enjoyed one particular part of this book that talks about how sticking with past commitments can be irrational.  The book by the way is written by brothers Ori and Rom Brafman and is called “Sway: The Irresistible Pull of Irrational Behavior”. 

In the epilogue, Ori and Rom talk about Intel and the 1985 decision made by CEO Andy Grove and cofounder Gordon Moore to get out of memory chips and into microprocessors.  The turning point came when Grove asked Moore “If we got kicked out and the board brought in a new CEO, what do you think he would do?”.  Moore answered with no hesitation that “He would get us out of memories”.   It’s pretty easy to see the logic when put that way.  Do nothing and die or do something and see what happens.   Maybe the stat that 50% of all VC backed CEO’s get fired in the first year after investment could be skewed a little if we all started thinking more along these lines.  There are some other tips in the book on communicating with VC’s if you’re interested.

That’s it for my poolside deep thoughts (this was actually written on Sunday).  

Update on the fund:  We start “officially” fund raising this week, so don’t screen my calls and project some good thoughts our way.

Lindsay Swiggum, 18

Lindsay Swiggum, an 18-year old senior at Apple Valley High, is part of the youth group I pastor.  She recently took 1st place honors in the state speech competition in the category of “Original Oratory.”  The following is her original work that won her state.  I am very impressed with Lindsay’s writing talent — and you should see her give this speech live!  She’s electrifying! Enjoy.

The story is told about the Young Priest who had a life-long ambition: he wanted to move from one island to another…by walking on water. It was his goal, his spiritual quest. He practiced and practiced, and over and over he failed–but he never quit. Finally, after devoting years of his life, he did it! He walked on water. Triumphantly, he went to the High Priest–”Father,” he said, “I have accomplished my life’s objective. I can go from one island to another…by walking on water.” “Really,” said the High Priest. “You spent your whole life practicing that? Why didn’t you just take a boat?”

Now, this solution would certainly have been far easier and more practical. It would have saved both time and effort. However, that would have meant that the Young Priest abandoned his goal and quit. And in just about any society, quitting is a dirty word. It means that you gave in and gave up! And we can’t have that. But sometimes we should.

In his book, Sway: The Irresistible Pull of Irrational Behavior, author Rom Brafman explains that in some personal and professional instances, quitting is absolutely the right and proper thing to do; and while it is critical in life to remember what’s attainable and what’s not, it is also important to realize sometimes it takes more courage to intelligently stop and change course than it does to blindly trod on.

So, for today, let’s dive head first into the quitting dilemma and analyze how often it can be a wise move to quit. Let’s, first examine the problem. Next, the causes and implications. And, finally, take a look at a boat right off shore that might help us sail toward a solution.

To paraphrase Shakespeare, to quit, or not to quit. That is the question! Well, there’s no question that quitting has a bad name. We hear that winners never quit! We’re told that America is founded on the never quit philosophy. Quitters are losers, even traitors. And that’s the essence of our problem. Our perception of the word is so negative that the possible advantages are rarely considered and for those who refuse to see the benefits of quitting, the results can be devastating.

Carsten Wrosch, associate professor of Psychology at Concordia University writes in the 2008 journal Psychological Science that “they followed 90 teenagers for one year and found that those who could not renounce hard-to-attain goals showed increased levels of inflammatory molecule C reactive protein which is directly linked to heart disease, diabetes, and early aging in adults.” They also the two areas where teenagers refuse to lose or quit is with grades and body image. Unfortunately, losing weight and body image often become such an obsession that we sacrifice good health in the process.

Now, I understand that no one likes to be thought of as a quitter, and parents certainly don’t want their children to quit what they’ve started, but when the cost exceed the gains, we need to consider quitting! Because winners do quit. Bill Gates quit Harvard law school to build computers. Best-selling author Michael Crichton walked away from Harvard Medical School degree because he felt that the life of an author was worth a shot. Both quit something to pursue something else. They didn’t stop. They re-directed their passion. It’s like W.C. Fields once said, “If at first you don’t succeed, try, try again. Then quit. There’s no point in being a darn fool about it.”

But why are we so reluctant to quit? The dictionary defines ‘quit’ as, “To stop trying and accept defeat.” I read and thought, no wonder society looks down on quitters. From our vantage point quitting means objectives have failed, efforts have been wasted, and dreams have been crushed. According to Seth Goden in his book The Dip: When to Quit and When to Stick there are times when the urge to immediately quit is wrong: when we’re stressed out by lack of time, lack of money, lack of energy, or lack of courage. But he pinpoints two Life Conditions that can put us in deep water. He calls them, The Cul-de-sac and The Cliff.

The first, the Cul-de-sac, is when your life goes around in a circle. You don’t move forward and you don’t move backward, you just stay in one continuous, unfulfilling circle to nowhere. Phil Knight realized he was in a Cul-de-sac when he was pursuing a career in Accounting by the insistence of his father. Well, he left that. He quit and created Nike!

The second Life Condition might be worse. It’s called The Cliff, where you have nowhere to go but down, and all life offers you is constant disappointment. For example, did you know that 80% of teenage girls who are in a physically abused in a relationship continue to date their abuser? When the outcomes are constantly hurtful, harmful, or hateful aren’t we definitely in over our heads?

Well known Hall of Fame coach, C. Vivian Stringer, knows first-hand how quitting can be life changing. The coach of the Rutger Women’s Basketball Team tells her story in her autobiography, Standing Tall. About a year after her daughter, Nina, was born the small child was struck with spinal meningitis. She was left unable to walk or talk. Together, she and her husband worked to provide the best possible care for Nina, but then, her husband died of a sudden heart attack.

About a month after his death, she remembered that she had forgotten to cancel a motivational speaking engagement. She tells how she only had 25 minutes to drive there and it was snowing heavily. About 15 minutes into the drive, she realized that she was going in the wrong direction. She said, “I put my head on the steering wheel and cried. I was supposed to talk about preparation and teamwork. What am I going to tell them?” Finally, she said, “Tell them the truth.” And she did. She told them about her daughter, her husband, the drive, about how life is a struggle. Vivian Stringer says that she had to learn to quit. Quit thinking that her life was based on basketball wins, quit thinking that asking for help is a sign of weakness, and quit demanding that life always be fair.

Life isn’t always fair. Each of us knows that. We know that life’s seas are often rough and the sky is often dark. So maybe we need a boat one that is right off shore and equipped with the following. First, a strong sail, a sail that will keep you moving forward, or slow you down if you need to be cautious. Second you need a rudder. Life needs direction and re-direction and a rudder will help you steer. Third you need an anchor so you can stop and take a look at the seas around to see where you are and where you are going. And finally, four, you need a good friend, a shipmate; someone who’ll going to be there for you for motivation.

Throughout my life, my motivation has always been my younger brother Alejandro. We adopted him into my family when I was only six years old. About a year after he came home, we found out he was developmentally and cognitively delayed. The doctors said he would never walk, talk, or communicate.

In order to come to terms with his disability, my family had to utilize each part of the boat and understand the wisdom that quitting sometimes offers. First, the sail provided a lesson for the doctors because they were thinking too fast. They had to quit jumping to the conclusions that Alejandro would never be able to walk, talk, or communicate. It may have been a long process but after 12 years of therapy, Alejandro is walking, talking and communicating. Maybe not at an age appropriate level, but in his own, special way.

Second, the rudder provided a lesson for Alejandro’s teachers. Through out his education Alejandro’s teachers have tired to teach him to tell time and count money, however, they had to quit those goals and understand those are skills he cannot comprehend. They had to re-direct their teaching path and understand that simply teaching him the task of writing his last name was a much better goal.

Finally, third, the anchor provided a lesson for my family. We had to quit thinking of all the things Alejandro would never do, and instead see the beauty in his life through his everlasting smile, incessant laughter, and unconditional love.

So, if you are in a cul-de-sac, on a cliff, or going in a direction that is plain questionable, my advice to you is quit it! And then, just maybe, there might be blue skies, and smooth sailing ahead.

http://swaybook.com

If this were not a marketing blog and just a book review blog, this book would have scored a 7 or an 8. It is a really interesting book and how the authors/brothers describe the decision making process that we make everyday is definitely a shock. I had thought that I would be able to pull a lot of the psychology out of this book and transfer it towards marketing, but that wasn’t exactly the case. However there were some very interesting marketing cases in this book. One such case was when Nathan’s hot dogs was not selling as well as their competitors and so they hired doctors dressed up in their doctor garb to stand outside Nathan’s eating dogs and saw their sales skyrocket. They go into depth about why we are swayed to make the decisions we are and use convincing evidence.

This was a fun, quick read over the holidays and made me think, but probably not the best marketing book on the shelf.

Who knew that financial compensation had the same effect on the brain as snorting a line of cocaine?  After reading “Sway” you know this, as well as a number of other surprising facts.  This must-read is subtitled The Irresistible Pull of Irrational Behavior.  While it isn’t a career coaching book its lessons are applicable to jobseekers:

Hot dog company Nathan’s couldn’t get people to try their hot dogs so they paid doctors to eat it.  If doctors liked it, then they must be okay for the common folk, and hot dog sales took off.  This is how the Brafmans demonstrate value attribution.  Jobseekers, think about who is giving you referrals and recommendations.  Get a highly regarded person in your corner and let value attribution work for you.

My heart is still in my mouth regarding the story of the toddler who died after doctors in the ER repeatedly missed her symptoms.  Diagnosis bias caused them to overlook what the symptoms could mean and instead see only what they had predetermined.  Jobseekers, if you’ve already diagnosed your search as beyond repair, then it is.  You will see only what is wrong.  You will be too easily discouraged.  You will miss opportunities that do arise.  Change your search first and foremost by changing your thinking.

Anecdotes from politics, sports, business and everyday life teach other lessons in commitment, loss aversion, the chameleon effect and more.  Jobseekers, you don’t want to go down a road that’s not working just because that’s what you’ve always done (commitment).  You also don’t want to play it so safe that you don’t take enough chances to win the job (loss aversion).  Finally, the chameleon effect warns us that we take on the characteristics that others ascribe to us.  So jobseekers, in this often tumultuous job market, keep company with people who believe in you so you live up to their high expectations.  Avoid the naysayers, lest they convince you to be less than you truly can be.

Friends occasionally seek my advice on raising venture capital, knowing I’ve been involved with a range of VC financings – from seed, through A, B, and C rounds, to investments by a “strategic partner,” to venture debt financing, through to trade sales.

Today I pass along four sources of advice – with a bit of my own advice thrown in for good measure – ranging from advice for the person wanting to plan for all their VC rounds as they are just starting out (analogous to the plan-ahead friend seeking advice on the process of finding that perfect person to marry,) to advice for the person just days from making a big VC pitch (analogous to the last-minute friend seeking advice the night before he’s going to propose!)

So whether you’re the long-range planner or the last-minute proposer, maybe you’ll find one of these right for you.

“Raising Venture Capital for the Serious Entrepreneur” by Dermot Berkery

Dermot’s advice is for the long-range planner.  Dermot was the first person my wife Jules and I met when we landed in Ireland on the first of April 2001.  Gratefully, he didn’t immediately laugh when we told him our plan to move to Ireland without jobs – “On spec?” he asked  – with our 6, 9, and 12 year old boys.  Rather he copped on right away that this was not an April Fools Day joke.  Months later, a fellow Irish VC described Dermot thusly:  “Des, Dermot’s an oxymoron because he’s both a highly successful venture capitalist and he’s a good person.”

On that April day, Dermot gave sage advice on our move to Ireland – a move he’d made a few years earlier with his American wife and three children.  Last year, Dermot packaged into this book his sage advice for entrepreneurs needing to raise venture capital.  Dermot’s advice, based on his time at Delta Partners, is less about “How to raise venture funding for the business you’ve created” than it is about, “How to create your business such so you’ll be able to raise venture funding,” a subtle but key difference.  Dermot talks about organizing the business around fundable “stepping stones,” each a “proof point” that a VC will require.

For those just starting out and wanting to plan the entire funding process in advance, the price of Dermot’s book will be the best investment you can make.

“Due Diligence” and “Prep for Series B” Posts From Jeff Bussgang

If your planning window is a bit shorter, you’d do well to RSS Jeff’s blog, “Seeing Both Sides; VC Perspectives From A Former Entrepreneur.”   Jeff, a partner at Flybridge, consistently provides advice intended to make the process go more smoothly for those of us still on the “seeking venture funds” side of the table.   Two of his recent posts are particularly relevant.

The first details the three stages of the due diligence process, with a couple of key takeaways for me:

1.    After seeing what the due diligence process will entail you might just decide not to even seek venture funding!  Better to decide this up front and plan your cash flow accordingly.

2.    If you decide to proceed with seeking venture funding, Jeff lists the requisite data / information you will need to have collected well in advance of the due diligence process.  Life will go better if you collect this data as you are actually running the business, not waiting until you approach the funding process.

Jeff’s second post details the process of going through a Series B fundraising, relevant for a couple of reasons:

1.    I’ve found that VCs often try to reduce risk by answering as many Series B questions in the Series A round. (Ditto answering Series A questions in the Seed round.)  Therefore many of these “later stage” questions will be asked early in the process. Be prepared.

2.    Jeff shows you the type of “proof points” that you’ll need to put into your operational plan early on.  If you wait until it’s time to do the funding round, you may find it too late to collect the data required.

“12 Steps to Short-Circuit the Fundraising Marathon” by Scott Painter

Scott Painter’s advice – contained in a post by Carleen Hawn  – deserves respect because he’s had so much success in raising venture capital.  Painter calls it a numbers game, claiming you’ll have to make 120 pitches to get one VC check.

I’m not sure I agree with his “high numbers” process, just like I don’t agree with the process of sending out 1,000 resumes to land a new job.  But Scott’s 12-step process has two key takeaways for me:

1.    He has a technique for determining exactly which VCs actually take the time to look at your PowerPoint, and for preventing the VC from forwarding it to others.

2.    He then has an intriguing three-meeting process he has used to successfully cement the deal.  Check it out.

“Three Tips For Making A Winning Pitch to a VC” by John Zagula

Ignition Partners’ John Zagula’s advice is perfect for those who have not followed the longer-range planning advice of the above three elders and now find themselves just days away from making a big pitch to a VC.  Zagula tells how to make that the pending pitch a winning one.

Rather than offering a slide-by-slide recipe, Zagula’s post, contained in a brief article in Xconomy,  provides just three tips on how to make a pitch interesting and relevant.  In particular, I like his first tip about beginning with a personal story that is relevant and impressive.

I passed Zagula’s advice along to a friend who promptly binned the 25+ slide presentation they’d labored over for months.  Starting from scratch they followed a technique I learned from my wife; “blank slide” the entire presentation using 3 by 5 index cards, writing just one key point on each card – “Great team”  “Defensible IP” “Cash positive in 9 months” – then organizing the cards into a logical order, and finally writing a crisp, interesting presentation – a story, really, based on the flow of these cards.

So if you’re early in the process, buy Dermot’s book before you even start out.  No matter what stage your business is at, take time to ready Jeff’s two posts so you’ll at least know what you’re in for.  If you’re at the stage of sending off presentations to investors, use Scott’s technique for controlling and monitoring who is reading the presentation.  And if you’ve already developed a presentation, determine if it meet’s Zagula’s criteria for interest and relevancy; and be prepared to start over from scratch!

In all four cases, you’ll be glad you listened to the advice these guys have to offer.

The rules for this meme thing are :

• Grab the nearest book.
• Open it to page 56.
• Find the fifth sentence.
• Post the text of the sentence in your journal along with these instructions.
• Don’t dig for your favorite book, the cool book, or the intellectual one: pick the CLOSEST.

My book is Sway: The Irresistible Pull of Irrational Behavior by Ori Brafman and Rom Brafman.

The fifth sentence on page 56 of Sway is “Now, the results of the experiment were surprising.”

Oddly enough I am on page 56 of this book, so I’m going to include sentence later in the paragraph that I highlighted because I don’t much like that one. “‘The intruiging idea,’ Dan Ariely, one of the study’s authors, told us, ‘is that expectations change the reality we live in.’”

I’m now supposed to ask 3 bloggers that I know of to do the same:

• Sandwiched
• Words & Music
• Book Addiction

From AtGoogleTalks (54 minutes):

Ori Brafman and his brother Rom Brafman visit Google’s Mountain View, CA headquarters to discuss Ori’s book “Sway: The Irresistible Pull of Irrational Behavior.” This event took place on June 13, 2008, as part of the Authors@Google series.

Why is it so difficult to sell a plummeting stock or end a doomed relationship? Why do we listen to advice just because it came from someone “important”? Why are we more likely to fall in love when there’s danger involved? In Sway, renowned organizational thinker Ori Brafman and his brother, psychologist Rom Brafman, answer all these questions and more.

Drawing on cutting-edge research from the fields of social psychology, behavioral economics, and organizational behavior, Sway reveals dynamic forces that influence every aspect of our personal and business lives, including loss aversion (our tendency to go to great lengths to avoid perceived losses), the diagnosis bias (our inability to reevaluate our initial diagnosis of a person or situation), and the “chameleon effect” (our tendency to take on characteristics that have been arbitrarily assigned to us).

* * *

From FORAtv (54 minutes)

As a communication specialist, I’m particularly interested in surprising information about the effects of communication. I’m fascinated by those books like The Tipping Point, Blink, How We Know What Isn’t So, Freakonomics… the books that explore the irrational in human behaviour.

I’ve been talking recently about how we should be extremely clear and honest in our dealings, both in business and in our personal lives. This doesn’t mean that you spill every thought that passes through your mind, but it does mean you don’t hide things deliberately to make someone feel differently about you and your recommendations. I dubbed this concept ‘radical transparency.’ (I found out today Andy Beal got there first…)

I figure that all relationships fare better when everyone knows exactly where they stand.

Well, it turns out that I may be mistaken in how much this creates good feeling between people.

One insight comes from a study quoted by Lois Kelly, author of Beyond Buzz, in her great blog. In the study by Michael Pirson and Deepak Malhotra published in MIT Sloan Management Review, the authors conclude that transparency is overrated in terms of building trust, and what is important is that people feel the company has the necessary competencies, they feel the company cares about them, and they feel that the company shares similar values.

Another insight comes from a chapter I was reading this morning from Ori and Rom Brafman’s new book Sway – The Irresistible Pull of Irrational Behaviour, published last month. In situations where you would expect evaluations of someone’s performance to come pretty strongly from the outcome of a situation, it turns out that the evaluation comes more from the amount of time and care that the person has showed.

For convicted felons, they rated their lawyer highly if they spent a lot of time with them on the case, despite the ‘negative’ outcome. Car dealerships rated their suppliers based more around the care and respect the reps showed them, rather than on whether they paid a fair price for their inventory, or if they had been stocked with cars they could easily sell.

Even venture capitalists judged the Chief Execs of their ventures more by how much the CEOs provided information in a timely manner, than by how much return the VCs received on their investment.

There seems to be a pretty clear message here.

Before we judge that a customer (internal or external) is only interested in hard numbers or pure performance we need to work harder at:

• making sure we treat them and our shared relationship with respect
• listening carefully to their needs
• showing how much we share common values and goals

You don’t get much harder-nosed business people than venture capitalists. If even they get swayed by being treated well by their clients, maybe our idea of how we treat hard-nosed business people needs changing.

There are situations where we’re sure we will only be judged by objective performance (completing the project on budget, or system uptime). Maybe a focus on the three intangibles above can make the whole relationship run smoother.

Another example where it pays to treat people like people.

NB Lois’ blog had something interesting on practically every post. Trends and research in marketing tend to apply to any kind of senior business communication. Well worth keeping up-to-date in, even if you don’t think it’s your field.

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~ Focusing on your outcome without manipulating people

~ Using numbers in business communication

~ Dealing with people’s expectations of your profession