Expertise: Complex or Simple?

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Success is simple. Do what’s right, the right way, at the right time. — Arnold Glasow

Art is the elimination of the unnecessary. — Pablo Picasso

Beginners hardly know anything, while experts know a lot. Thus skills start out simple and get complicated as you learn them. Right?

Oddly, it’s the other way around. Beginning efforts are inefficient, arbitrary, and random. And randomness can generate enormous complexity. Expertise, on the other hand, is simple and straightforward. The expert knows what to do directly and effectively.

A professional will know many more things about a given skill than an apprentice, but those things are discreet and focused. The beginner’s mind casts about in all directions for a way through a situation the expert has already solved.

The first time I tried a crossword puzzle, it took two hours and a dictionary. Within a year, I was tossing them off — in pen no less — in five minutes. (Competition puzzlers often can complete them in less than two.) My crossword skills went from inefficient and ignorant to knowledgeable and focused. Beyond the puzzle-solving techniques I’d learned, I’d also internalized a vocabulary of special words for filling in the odd corner. But those skills and words were specific: instead of struggling with a dozen approaches, I had particular ways forward; instead searching through reference books, I could call on a short list of words from memory.

Blood-flow studies demonstrate that beginners’ brains are much busier than those of professionals: learners are all over the map, while masters are homed in. “ . . . [E]xtensive practice over a long period of time leads experts to develop a focused and efficient organization of task-related neural networks, whereas novices have difficulty filtering out irrelevant information.”

Basically, the pro sees the problem as a pattern with a solution, while the newbie sees a jumble of noise. One sees a map; the other sees a maze. The expert finds pathways; the beginner wanders around.

Expertise, then, tends to be elegantly efficient and simple, with few wasted moves — it’s economical — whereas students must slog slowly through their own ignorance.

Think of the inexperienced marketer or administrator, who takes too long to explain a situation, and the seasoned pro who encapsulates the problem in a phrase. Or the office assistant who makes a series of mistakes that his boss clears up with a couple of quick decisions. Or your golf partner’s swing, with its inefficiencies, compared to the fluid power of Rory McIlroy or Jason Day.

Of course, no two problems are the same, and even the experts must slow, sometimes to a crawl, as they approach new questions. In that respect, everyone is a beginner. But the pros have tools of experience they can wield at all times to cut quickly through the randomness of novelty.

What about all that knowledge and lore, the sheer number of facts to be learned? Doesn’t that make expertise more complicated? True, your acquired skills involve a library of facts a beginner won’t have. But those facts greatly simplify the process, enabling you often to see at a glance into the essence of a problem, turning it from a puzzling predicament into a process quickly fulfilled. Your store of knowledge makes things easier, not harder, and you complete tasks more quickly, with less total energy expended.

To attain the simplicity of mastery in any field or profession:

  • Relax … and practice: Your brain will find its way through the maze of ignorance to the exit of competence, and it will do so automatically — all you have to do is practice. There’s no need to force things; your mind will grow the particular skills it needs in good time. (Still, it’s possible to “master mastery”, as with the suggestions that follow.)
  • Find mentors: Don’t re-invent the wheel if you can befriend an expert who will teach you how it’s done. Of course, you can also study books and other media that describe the skills you’re learning. All these resources will speed things up tremendously.
  • Find the general principles: Every skill has a set of fundamentals which serve as shortcuts to learning. If you can master these, you’ll become expert faster. (You’ll know you’re becoming competent when you discover how to break the rules now and then for even better results.)
  • Find simpler ways: Once you have the basics down, think of how you can do them more efficiently — how to perform the action with fewer steps, how to say it in fewer words, how to focus in on the important data. This will move you quickly toward the end goal of polished mastery.
  • Find the 80/20 Rule in your field: As you practice, you’ll discover areas where your efforts generate much higher returns. If 20 percent of your work gets you 80 percent of your return, then increase the 20-percent activity.
  • Search for expertise in others: When partnering or hiring, look for people who have an easy grasp of the topic, who respond to challenges in a relaxed and confident manner, and who ask questions and incorporate the answers quickly into their process. Effective mastery depends, not only on your own skill set, but on the competency of your co-workers. Leverage each others’ contributions to multiply the results.

The goal is to be effective — to arrive at the solution without wasting time, energy, or money. While the student puts in hours, the master gets results. A few well-placed words, a stroke of a pen, a simple phone call, a single idea that solves a dilemma, an elegant motion by a craftsperson — these are the home runs, the three-point baskets, the hat tricks in the game of expertise. Practice the simplicity of mastery, and your scores will soar.


UPDATE: The seven fatal thinking flaws, and how to transcend them



Your Livelihood and the American President

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Running a brilliant campaign does not translate into running a brilliant White House. — Gail Collins

Does it matter to your bottom line what the government does? Absolutely. Legislatures and bureaucrats and presidents and prime ministers can screw up an economy with the stroke of a pen. Witness, for example, the run-up to the Great Recession of 2008: the U.S. set low interest rates, encouraged home buying (and strong-armed banks to provide loans to incompetent borrowers), spent nearly $2 trillion on a useless military venture in Iraq, then blamed Wall Street when the bottom fell out … and then bailed out the Street’s investment bankers while workers and small firms on Main Street had to suck it up.

Okay, but does it matter to your bottom line who is the U.S. president? Yes and no. Great power does flow through the White House, but it’s like water through a firehose that’s hard to point at problems without backsplash or getting knocked over. Over the past century, a few Chief Executives have managed to wield enormous influence (for better or worse): Wilson, FDR, Johnson, Reagan, Bush. But most have come and gone without leaving much of a mark.

A finer-grained question is: does it matter to your income stream which party a president belongs to? Campaign contributors tend either to be labor groups or corporations, neither of which are keen on draconian measures that might cause job losses or declines in revenue. So there’s a political limit, despite all the rhetoric, to what either party can do to the economy once it controls the White House.

In fact, it may not much matter which party holds the office. Sometimes a Democrat can be good for business (as with Clinton’s budget surplus), and sometimes a Republican can be bad for it (witness Bush with Iraq and the Recession). What’s more, it’s hard to tell what kind of administrator a candidate will turn out to be, and it’s often just as hard to foresee what policies they’ll instigate once in office. Meanwhile, situations can change suddenly — Pearl Harbor in December 1941 … 9/11 … the recent upheavals in technology — with unpredictable results for White House policy.

On top of that, the Constitution was written deliberately to throw sand in the gears of political change, impeding the government from rushing headlong into wild-eyed projects that might do more harm than good. This applies to the Executive as much as to the Legislature. Sometimes the American government breaks through and hurtles toward disaster, but usually progress is glacial. Thus one change of government probably won’t result in enormous shifts in society or the economy.

In recent years, though, the purview of the White House has widened. Under George W. “I Am the Decider” Bush, overly broad use of signing statements — which are meant merely to outline a Chief Executive’s plans for implementing legislation — enabled him to get away with backdoor line-item vetoes. Then the administration pushed through Congress laws that vastly increased federal power to spy on, arrest and/or kill U.S. citizens, often without warrants.

In 2009, Barack Obama — a constitutional scholar who as a candidate railed against Bush’s assault on civil liberties — became president and added to Bush’s power grab, especially in the overuse of Executive Actions.

Every president feels beleaguered by ongoing assaults from political opponents and will cast about for any influence that may win the day. No sitting president willingly lets go of arbitrary clout inherited from previous administrations; worse, there’ll be an enormous temptation to expand on it. Basically, if a Chief Executive exceeds the limits to his authority and nobody calls him on it, the next president will do the same … and then some.

The overall result is an ongoing expansion of Executive power, with no sign that it will slow down. In that respect, it doesn’t matter which party occupies the Oval Office; presidential prerogatives will likely continue to grow. More and more edicts will be handed down arbitrarily, rulings that could cause your company, or your career prospects, to lurch crazily.

What’s a business owner or employee to do?

  • Don’t waste a lot of time worrying about who will be the next president. Their behavior and influence is hard to predict and often vastly different from what they promise. Besides, fretting about events you have virtually no influence over is a waste of resources. Instead, put your energies where they can do some good — work on your career. Hold a steady course despite the changing winds.
  • Assume taxes and regulation will continue slowly to increase, no matter who’s in office. They have done so for decades, and there’s no sign they’ll halt or reverse course. Any compliance process you can computerize will simplify the burden and save some of the time and money you’d otherwise lose.
  • Assume recessions will recur under Democrats and Republicans alike. The Fed tends to tweak interest rates to stretch out economic booms, and the resulting busts become that much deeper, regardless of who’s in office. Resist the temptation to invest or make expensive purchases at the end of a boom simply because you’ve been doing well and there’s no sign of trouble. You’ll find yourself over-extended just as your income drops.
  • Assume 5% unemployment is the best we’re going to get. Rarely does the rate fall much lower, and soon enough it begins to swing upward, often doubling within a year or so. At 5% get ready to batten down the hatches.
  • Never assume a strong economy, or a good job or business, will continue indefinitely, unmolested by national turmoil or bad governance. As they say in poker, “Take some chips south” — squirrel away cash from the win streaks, and you’ll still have resources after a loss.
  • Never assume Washington will save you! They’re much more likely to cause problems than fix them; at best, their help is a mixed blessing. It’s better to have yourself on your side: you’ll retain the best ally you can get … for both bad times and good.


How to Reduce Event Attendance

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The mistakes of the fool are known to the world, but not to himself. — Charles Caleb Colton

Most of us go to events from time to time — festivals, concerts, conventions, street fairs — and many of these get promoted by email. If you’re on a list for, say, a monthly swap meet, you’ll receive a notice in your Inbox from the promoter, and it’s often written in a breezy, upbeat and chatty style that’s sure to charm and attract customers.

Yes, making money is probably one of the main purposes of the promoter. No problem with that, of course. The trouble lies elsewhere. Here’s an example of what you might get:

“Okay, our regular meet is all set up for the end of the month! Get ready, because it’s gonna be a great one. Usual start time, but we’ll have some extra-special guest vendors that you’ll love. Admission is $20 this month because of extra expenses, but rest assured you’ll think it was worth more. We look forward to seeing all of you. Do come to the main tent and say hi.”

What’s wrong with it? … Yes, you in the back.

“There’s no date listed.”

Exactly. I’ve lost count of how many announcements I’ve received that bubbled with excitement about an event but forgot to mention the date. Or the time. Or the address. Or the price.

The above sample omits nearly every particular. This is surprisingly common. Promoters seem to assume that their list members already know the recurring stuff, so why bore them with the same details?

Here’s a why: List members themselves often need the basic information. Your regulars are a motley bunch, some of whom have not been with the group long, or have poor memories, or have always caught a ride with someone else until now. Etc etc.

Here’s another why: Your regulars may want to forward the email to friends and new recruits, but they won’t if it’s an embarrassment of non-information.

If the promoter fails to list everything anyone might need to know about the event, attendance will suffer — not merely from missed opportunities for marketing to newbies, but from regulars unsure about the date or time or address or cost. Instead of the hoped-for increase in patronage, the turnout drops.

A big difference between professionals and amateurs is that pros tend to be methodical and detail-oriented, whereas amateurs are in it for the fun, confusing enthusiasm for competence. If there’s money involved, the event organizer needs to behave like a professional. But if thoroughness makes them impatient, they’ll hit “Send” too early … and prove they’re an amateur.

When it’s a one-person operation, that person will write the announcement, and then proof-read it … if she or he has time. The problem is that most amateur writers think if they understand what they’re writing, so will everyone else. They believe they’re communicating simply because they’re typing.

I’ve received unclear or incomplete email announcements, replied asking for clarification, and been scolded for not reading the email. This tells me the promoter sincerely believes all the info is included even when it isn’t. This illusion can be very persistent; amateurs fall prey to it all the time.

Also, it’s extremely poor practice for promoters to get huffy with their customers about anything, especially communication problems, which could easily be the promoter’s fault.

If organizers simply assume they’ve announced events properly, they’ll never connect the dots between incompetent emails and lost gate. Besides, with so many variables — weather, time of year, competition, economic conditions — who can prove that it was the weak email announcement that put the brakes on attendance?

The announcement is one of the variables you can control. It is, after all, a part of marketing, which is critical to the success of your event. It’s hard to imagine it not affecting attendance.


Always include the basic details:

—Date and time (“Saturday, March 12, 8:00 a.m.”)

—Event and location (“Monthly Swap Meet, 123 Main St, Anytown”)

—Cost and benefits (“$20 gets you admission and a free raffle ticket.”)

—Any special notes (“Be sure to bring a warm jacket” / sunscreen / bug spray / box lunch / etc)

If you must issue an update or correction, be sure to include the basic details again, revised as appropriate. Do these things and it becomes easy for people to pop the event into their calendars … and forward the message, with its complete event info, to those they want to invite.

Always write for the first-timer. Read your own writing as if you were a newbie who doesn’t know the least thing about your event. This exercise can show you what you’re omitting that you’ve assumed everyone else knows. (And you’d be surprised how much the regular attendees don’t know about what’s going on.) Assume that your list members are like students in a classroom, where most of them aren’t paying attention. Be clear, and always include complete event information, so a beginner — and any regular who’s unsure about the latest event particulars — will have no doubts or hesitations about when and where to attend, what to bring, etc.

Always have someone else check your writing. Well-constructed sentences give off a professional air, while goofs and awkward phrases reek of amateurism. It’s easy to scan your own work and see no problems: you wrote it, it looks good to you, it must be getting the point across. We’re all a bit blinded by the majesty of our own verbiage. But be warned: our writing, unchecked, can and will rise up to humiliate us, the lovely words betraying confused or embarrassing meanings we never intended. Meanwhile, punctuation and spelling mistakes can slip past the best of us. A second pair of eyes will catch a lot of potential problems.

Don’t be the one left standing in the middle of a sparsely attended event, shrugging his shoulders — “But I told them about it!” — oblivious to the amateur mistakes he made. Let somebody else make those errors. Get your email promotions in hand … and watch your gate improve.


Future Jobs

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You have to trust that the dots will somehow connect in your future. — Steve Jobs

Let’s assume, for purposes of discussion, that computers and robots will capture most of the jobs we work at today. Might there still be something left over for us humans to do? Yes. Here are a few starter ideas:

Driverless vehicle leaser: Uber plans one day to upgrade its service with driverless cars, removing the person behind the wheel and thereby reducing the already low per-mile cost by another dollar. For a time, anyone who owns such a car may be able to lease it to Uber or other fleets. Some owners may become fleet managers in their own right. Talents needed: perseverance, entrepreneurial spirit, ability to repair computerized machinery.

Cyborg stylist: Already we replace old body parts with improved ones: plastic eye lenses (to eliminate cataracts), sophisticated controllable prostheses (to substitute for damaged limbs), cochlear implants (to repair hearing), face transplants, etc. Any of these improvements can alter a recipient’s appearance and body image. To deal with that, specialized stylists will help users select clothing, makeup, and hair that hide, complement, or improve their partially mechanical appearance. Talents needed: fashion background, good color-matching and materials knowledge, creativity, strong people skills.

Hyper-transit tour guide: New forms of mass transport loom on the horizon — hyperloops, maglev suborbital vehicles, scheduled space liners — and consumers will need guidance on how to make proper use of the new vehicles. Tour guides will inform and reassure them, and some will oversee groups that board the newfangled transit systems for vacations, junkets, and professional travel. Talents needed: good grasp of technical underpinnings of new transit systems, strong presentation and people skills.

Wrist TV accessorizer: Those cyberwatches everyone’s buying come with a variety of straps, but what about matching jewelry and clothing? Plus you’ll want to look your best when using your watch to video-conference. Consultants will station themselves at department and specialty stores or be available by appointment. Talents needed: fashion sense, good sales skills, strong people skills.

Financial planner for the unemployed: Within thirty years, it’s likely most people in Western nations will be out of work, rendered obsolete by sophisticated computer-controlled processes. It’s also likely that some sort of national minimum income will fend off wholesale rioting and food panics. But this won’t be enough, as each person will have a unique financial situation and will need advice on how best to parlay government payments, pensions, retirement accounts, and any spare investment income into a livable budget. Talents needed: strong background in finance, strong people skills, good sales skills.

Space station vacation planner: As with hyper-transit tour guides (above), there will be big demand for people who can apply the human touch and smooth a customer’s path to a rewarding experience on a space station or orbital cruise ship. Talents needed: experience in the travel industry, good grasp of basics of zero-gee and zero-atmosphere environments, strong grasp of ship functions, strong people skills.

Robot maintenance: Most repair jobs will probably be done by other machines, but every now and then the repairer will have trouble mending itself, and that’s when people can step in to help. Talents needed: strong computer and mechanical skills.

Craftsperson: No matter how wonderful the woodworking and metallurgy of robots, people will still want things created by human hands. Talents needed: experience with materials, knack for creating unique and beautiful items, strong marketing skills.

Artist: What’s true of craftspeople is true of artists: we’ll still want human-made paintings and music to go with our collections of art by automata. Talents needed: originality, strong technical skills, strong marketing skills.

Sports player: Robots will probably play football for our amusement, but we’ll still want to see what humans can achieve on the field. Thus sports will continue to employ people. Talents needed: roughly same as today, including top-tier athletic skills, ability to take orders, working well in groups.

Explorer: More and more, machines are sent to investigate remote areas (including outer space). But we won’t really trust the resulting data until we can go there for ourselves. Talents needed: perseverance, fearlessness, unquenchable optimism, tremendous energy and stamina, strong sales skills (to generate grant money for the trip).

Consultant: It’s likely (though this may be wishful thinking on my part) that future humans, after conferring with intelligent machines on difficult questions, will want a second opinion from a real person. Talents needed: creative problem-solving skills, large knowledge base in the relevant field, strong computer skills, strong people skills, good marketing skills.

Business owner: Once automation throws most of us out of work, you’ll do better if you can own the machines and the profits they generate. Done right, this will afford you a better living than that enjoyed by others, most of whom will be dependent on some kind of government dole. Talents needed: good business administration skills, good negotiating skills, entrepreneurial spirit, ability to plan ahead (read: starting now) in anticipation of the sea change in the workplace that will sweep across the coming generation. The sooner you own all or part of a profitable business, the safer you’ll be.

Of course, these won’t be the only jobs performed by humans in the near future. There are many other possibilities worth considering.

The worst thing is to declare, “Machines will never replace me!” (That’s a classic case of famous last words.) The best thing is to plan ahead for a brave new world that may cause both trauma and wonder and will reward those who are prepared. Don’t assume one of the above jobs will be yours for the taking, but instead see now to your future financial security.

It’s wise to remember that computerized machines, though they may usher in an era of untold abundance, are not there to make you happy. They’re there to make their owners happy, and that won’t always comport with your personal needs. You can accept the largesse of some upcoming economic miracle, but it may not last forever or unfold in a totally benign manner. Don’t expect developments always to favor you, and do expect that you will have to perform at least some work or oversight to maintain your lifestyle.

To see to your well-being, now and in the future, avoid passive reliance on developments and, instead, make sure of it yourself. That way, you’ll greet whatever comes, not with trepidation, but with anticipation.


Peter Thiel vs. the Conformists

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The best problems to work on are often the ones nobody else even tries to solve. — Peter Thiel

In this time of accelerating change, the question for business is, “What’s the next big thing?” And most companies look about to see what the successful ones are doing and copy it. This, though, is a recipe for obscurity.

Or so declares Peter Thiel in his book Zero to One, a #1 New York Times bestseller that has generated loud buzz among thought leaders of the Internet Age. Thiel and his team launched PayPal; then he sunk money into a tiny start-up called Facebook; later, he founded Palantir Technologies, which sells big-data analytics to governments and corporations; he runs a venture-capital firm or two, plus a couple of charitable foundations; today he’s worth zillions. His “PayPal Mafia” went on to start Tesla Motors, SpaceX, YouTube, Yelp, LinkedIn, and others. When Thiel talks, people listen.

Zero to One spells out seven areas where start-ups must excel:

Secrets: “Have you identified a unique opportunity that others don’t see?” This is the essence of Thiel’s argument. Your basic task is to think deeply in areas overlooked by the market. In your favor: most people don’t dare swim against the current, while most great fortunes are made by those who take the plunge.

Technology: “It is better to risk boldness than triviality.” Thiel urges you to develop something ten times better — a game changer that people will climb over each other to get, something that helps you obtain a monopoly in your market.

Team: “What important truth do very few people agree with you on?” Thiel asks this of every prospective employee. He searches for brilliant people who think for themselves, play well together, love what they’re doing, and can present that effectively to clients. A founder, meanwhile, should be given free rein, despite inevitable eccentricities that crop up in this type of person, as it is the founder’s vision that focuses the team on creating the company’s success.

Monopoly: “Competitive markets destroy profits.” There is no money, and no glory, in competing against other companies by selling the same product, even if it’s somewhat better — you end up vending commoditized items with no profit margin. “A valuable business must start by finding a small niche and dominating a small market. . . . Paradoxically, the challenge for the entrepreneurs . . . is to think small.” Take your 10x improvement to a targeted niche whose members truly appreciate what you’re selling. From there, you can scale up and network your new monopoly to larger customer bases when people flock to your design.

Timing: Think carefully about when to launch. Economic conditions, fashions, and government activity can help or hinder, and it’s foolish not to plan accordingly.

Distribution: “Sales matter just as much as product.” Thiel chides start-up nerds for neglecting marketing. Each product requires a different approach: costly items need high-touch customer service, while inexpensive ones benefit from media campaigns. Again, innovative thinking is the rule. (He praises Tesla Motors for solving a distribution dilemma by controlling its own showrooms.) Thiel also believes branding is critical to good outcomes and a part of effective communication with customers — another thing nerds overlook.

Durability: “What will stop China from wiping out my business?” Your ideas must stand the test of time. Quarterly reports just don’t get it, and resting on one’s laurels is a path to bankruptcy.

“The essential first step is to think for yourself.” — Peter Thiel

Late in the book, Thiel ponders the various paths to humanity’s future, and though he won’t predict paradise or disaster, he insists we must not simply wait for it to arrive but instead create the future we want.

PayPal overcame critical security threats by developing a partnership between big-data computing and expert human pattern recognition. Thus Thiel is a big fan of such collaborations — he recommends using computer systems that do deep data searches and flag interesting bits for people to evaluate. In this way, companies can blend the inherent cognitive strengths of humans and machines into their production.

Which brings me to my only major criticism of the book — namely, that Thiel thinks computers will be inherently limited for decades to come, and that we’ll need inspired human input for the foreseeable future. “Actionable insights,” he believes, “can only come from a human analyst (or the kind of generalized artificial intelligence that exists only in science fiction.)” This is undoubtedly true — for now. But Thiel argues that totally superior machine intelligence is a far-off dream: “Even if strong AI is a real possibility rather than an imponderable mystery, it won’t happen anytime soon: replacement by computers is a worry for the 22nd century.”

And yet … and yet … Recently a super-computer defeated the world champion of Go, a board game widely considered the most complex of all, more challenging even than chess (a game also recently mastered by computers). As well, medicine and the arts and other fields are beginning to yield to digital simulations of human insight. Computers aren’t quite there yet, but they’re working hard on it.

So again, Thiel is probably right — for now. But very likely he underestimates the advent of the moment when computers consistently outperform our last undefeated mental power. 

The end of human cognitive dominance will be a moment in history hard for us to accept, much less transcend. We may (if I’m right) or may not (if Thiel is right) be the last generation of great entrepreneurs before intelligent machines take over all our work for us. What will be our purpose when machines can outperform us in all respects, including our vaunted mental abilities?

In the meantime, Thiel’s suggestions should stand us in good stead — especially to combine big data with human judgment as businesses invent the next great innovations. Let’s not miss out on that adventure.

Every time we create something new, we go from 0 to 1. — Peter Thiel

* * * *

UPDATE: Y Combinator prez Sam Altman on how to do a startup



Three Ways to Bid

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If you work for an employer — like 93 to 97 percent of American workers — you get your pay from a salary or wage. If you work for yourself — free-lancer, contractor — your pay depends on the deal you strike with the client. That deal can take three forms:

HOURLY: You get paid for how much time you put into the work.

Advantages: You know in advance what your hourly income will be. If the job is bigger than expected, you’ll get paid more. Your rate is secure.

Drawbacks: You don’t now how much money you’ll make on the entire job, since the total number of hours is uncertain. And your rate is the upper limit on how much you can make per hour of effort. Also, your client doesn’t know how much the job will cost until it’s over, which can cause said client to balk at your bill.

When to use: Take your pay by the hour if the work is open-ended.

BY THE JOB: You get paid for results.

Advantages: You know ahead of time how much revenue you’ll receive. If the job takes less effort than expected, you’ll still receive the same amount. Your total payout is secure. Also, your client knows how much the project will cost ahead of time.

Drawbacks: You don’t know for sure what your pay rate will be, as the job could take much longer than you hoped. Worse, after expenses, you could lose money.

When to use: Take your pay by the job if you have a good idea of what your total hours and expenses are likely to be.

BY PERCENTAGE: You get paid a portion of your client’s revenue or equity.

Advantages: There’s no fixed limit on how much you can earn. If revenues — or stock value — go through the roof, so will your take-home. A lot of billionaires get started this way.

Drawbacks: You could earn nothing if the client’s business fails. Also, your equity participation can get seriously diluted, especially if you’re working for a start-up that goes for a second round of funding and renegotiates the cap table. And most start-ups don’t get very far, so don’t hold your breath.

When to use: Take your pay as a percentage of revenues and/or equity if the client’s company looks to blast off like a rocket and/or if the client is having serious cashflow problems right now but should get nicely into the black in the near future. (Bear in mind that most established businesses won’t do this kind of deal.)

…Of course, you can mix and match these pay methods to suit, taking a portion in up-front money and the rest as stock options or a piece of the company or a slice of revenues, then adding hourly consulting fees if the client has a last-minute need for extra help. 

In any case, your final bill can be hell to collect. Not every person you do business with — no matter how charming — is honest. The last bill is the easiest to welch on, as they often don’t expect to need your services anymore, and they know that most small contractors will give up the chase. Also, a client may sail into tight straits, and your bill gets tossed overboard.

That said, most people on salary never get rich, and the biggest opportunities find their way to independent contractors. So go ahead, make a bid.


Victory or Profits?

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Popular business theories often rely on the notion that success is binary: that you either defeat other businesses or you are defeated. This idea enables sports coaches to consult with Fortune 500 companies, but does it really cover all the bases? 

“Do or die” has an elemental, romantic appeal to corporate CEOs, most of whom are highly competitive and love a good battle. And it’s true that the marketplace can be ruthless. But that’s not all there is, and out-and-out market victory certainly isn’t the only source of profitability. Let’s look at some of the popular shibboleths and see if we can improve on them:

  • Grow or Die: This idea comes mainly from the 1973 book Grow or Die by George Land. The author described how all living systems, including businesses, go through growth spurts when they discover and exploit new resources, then stall out when those resources run dry, at which point new approaches to resource discovery and management must be developed. It helped publicize the S-curve, which shows how growth starts slow, speeds up, then slows down again. These concepts have proven popular and useful to business strategists. But still we’re left with that catchy binary book title, which seems to imply that all companies, and life forms in general, must constantly enlarge or they will be destroyed. By that reckoning, the oldest and most successful creatures would be the size of Massachusetts, generating their own Zip Codes and a sizeable gravitational field.
    • Better: Adapt or Fade. The point is profits, not constant growth. It’s not how big you are but how much you return to your stakeholders. To that end, especially in today’s innovative marketplace, the adaptive and creative firms will do best. That S-curve will show the growth of your margin, not merely your bulk.
  • Go Big or Go Home: This is a metaphor from sports, where outcomes are always binary (except in hockey). But it’s not a solid match for what companies face in the marketplace. Competition is only one aspect of commerce, and second- and third-place firms often earn more profit than the leader. But “Go big” appeals to men, who are fueled by testosterone and thrive on competition. For many leaders, the only thing that matters is total victory, as if they were in a war where the loser submits to unconditional surrender. Markets don’t usually work that way.
    • Better: Own Your Niche. Find the spot in the market where your company has a natural monopoly because of its uniquely useful products. The focus is on serving the clients and making a profit, instead of trying for some arbitrary notion of “victory”. (But you can still feel dominant in your particular corner of the market, if you need that buzz.)
  • Take or Give: Givers, says Adam Grant in his book Give and Take, prefer to give more than they get, and their team thrives. Takers, on the other hand, believe it’s a dog-eat-dog world, and they must grab as much as they can and give as little as possible, which disrupts group efforts. Clearly, you want a Giver on your team. But Grant’s thesis suggests a binary takeaway, namely, that the energy of your labor is exactly counterbalanced by the energy stored in the money you make. This is a zero-sum game, and it represents an attitude that goes all the way back to 17th-century Mercantilists, who believed that trade only worked if they “got more than they gave”, as if cash and product were worth exactly the same to both sides of an exchange that was more competition than cooperation. It’s also an attitude popular among fiscal liberals, who tend to think the rich got that way by cheating. In fact, Grant suggests that the only real flaw in a Giver is the tendency to give too much, as if he or she should pull back, now and then, and be a Taker — at least, long enough to pay for some nifty stuff. It makes the Giver look like the Nicest Loser.
    • Better: Create Value (rather than hijack it). Grant’s main point is that we work best when we’re not constantly calculating what we’re getting from our labors. If, instead, we focus on producing for the team, our pay will tend to reward us naturally over time. This seems a wise and fruitful attitude. And Grant — a Wharton Business School professor — no doubt understands exchange theory quite well. He’ll likely agree that when you make value generation your goal, you’ll do much better in the long run than when you act like a leech.
  • Dominate the Market: If you control the market, you ought to be able to dictate price and guarantee huge profits. Or so they say. The binary implication is that you own your market or it owns you. In fact, giant companies with overwhelming market share often get trapped paying for their enormous infrastructure by cranking out low-margin items. Meanwhile, small competitors can adapt and innovate quickly, so their goods and services are more likely to be uniquely valuable and command higher margins.
    • Better: KIP (Keep It Profitable). Yes, a huge corporation with a low margin may take more total profit than a small company with a big margin. And, yes, a big margin on big revenue is better than a big margin on small revenue. But as a general matter, it’s more important to be profitable than large. Size, as scientists would say, is an “emergent property” of success. But it’s not required.

In short: stay adaptive, develop your own niche, focus your team on creating value, and point your firm toward profit rather than size, and you’ll sidestep most of the grinding headaches that come from trying to steamroll your competitors in a “do or die” fight to the finish. 

Let someone else take home the laurels, and you bring home the bacon.