Profits and Validity, the Validity of Profits

I came across this stunner of a Peter Drucker quote earlier this week:

Profit is not the purpose of a business, it’s the test of its validity.

There are two ways to take this, both of which are important topics of conversation for anyone involved in the art and science of bringing cool stuff to life.

First is the sense that making money is not the measure of a business, but is rather a measure of how you do business. Profit is not the motive, it is output of an equation.

This interpretation easily takes on a slight moral tinge, however, and does force us to ask questions about various types of business operations and the profits they create. When it comes to entities such as hedge funds (or at least the ones that actually make money), does the end justify the means? Are they more valid than others due to the extreme magnitude of profits that they generate? At a personal level, I made a decision a long time ago that I would rather be part of a business organization that treated everyone involved—customers, employees, business partners, society, the planet—exceptionally well over one that didn’t, even if the consequence of doing so was a diminished financial return. I believe what we should aspire to is a business that constantly seeks ever higher levels of validity, where the the standard of what is valid is defined as activities which increase the happiness and well-being of all those directly and indirectly involved. A business that creates wealth in this way provides for those under its roof without harming those who live outside of it.

My second interpretation of Drucker’s saying comes from the worldview of venture design. Just as you don’t feed a puppy the kind or quantity of food you provide to a mature dog, so it is that a startup requires a different standard of care and feeding than does an endup. Too much money or resources or people too early can, ironically, cause your nascent venture to crash. It’s a lot easier to scale something once you have a deep understanding of what its value drivers are. Before that point, giving it all the things it desires is actually bad for it, as all of those extra people and resources require attention of their own, which distracts the entire endeavor from figuring out the existential question of what it is and what it should be.

In that light, I’m quite fond of Clay Christensen’s notion of being impatient for profit and patient for growth: in the early days of a venture, we should be striving for profitability as a way to ascertain whether we’re creating real value out in the world. If you believe that ventures are designed (as I do), and that constraints fuel creativity, then agreeing upon profitability as a hard constraint will help the people growing the new venture to focus—really focus—on understanding the key drivers of value creation: creating new experiences that bring value to a person’s life, and differentiating that experience from all other alternatives in a way that’s authentic and memorable. A business that’s profitable AND whose customers love what it does is a valid one.

Both interpretations of Drucker’s aphorism work well together, actually: profits alone are not enough, nor is providing the perfect product or service if it can’t sustain itself, and by extension, the people who create it and the society they live in.

I’m thinking out loud here, so would love to hear what other people think.

Ruminating on design principles for new ventures

Having spent the past 18 months of my life launching five new ventures here at IDEO, I’ve been thinking a lot about the design of new ventures. Meta design thoughts, if you will.

I don’t have any big revelations to share with you yet, as this post is the beginning of the process of pulling all of that together, but what I’m trying to pull together is a personal take on how to create new ventures on a routine basis. I have this for how to design and lead a creative culture at scale, I have a personal take on how to lead teams, and I have my own take on hardware and software product development. I’ve had a working model of new venture design for the past eight years, but it was largely tacit, so I’m going to take some time over the next few months to hammer it out as one would a sword of the finest Valyrian steel.

I suspect this will lead to a rethink of my Principles for Innovating listed down the side of this blog, which would be cool, as I haven’t rethought those in a few years, and during that time I’ve definitely rolled up more than a few new miles on the life experience odometer.

I just discovered Andy Weissman. How has the universe been hiding this guy from me? Or more apt, what rock have I been hiding under? No matter, on the point of making decisions about and in a new venture, I really like his post titled The Chaos Theory of Startups. Here’s my favorite passage:

Your framework for making decisions matters as much or more than the decisions themselves, because the “chaos” of the system makes most outcomes indeterminate (again, chaos theory: “long-term prediction [is] impossible in general”).

So you need a framework, a set of first principles. That then guide your decision making and problem solving.

Taken a step further, I’ve always thought the most useful thing a venture investor can then do for a company is simply help them come up with that framework, that scaffolding, to throw all those choices into. And not specifically to help make the choices themselves. After all, one of the primary ways venture investors can add value is through having seen dozens and dozens of these chaoses. Presumably, we are well-suited to help determine frameworks for decision making in future, similar chaotic scenarios.

I think there are lots of different frameworks or first principles for decision making; it’s not a limited set. This may mean that figuring out the framework may be the hardest question of all.

Scaffolding: that’s the metaphor I need to move this thinking forward. What’s a set of component parts (first principles), that I can assemble so that they can be used to construct decision-making frameworks to fit any situation? I don’t aspire to create a perfect framework at all—what I want is a bunch of stress-tested, bullshit-detected, thoroughly vetted building blocks that can be tailored to any design situation you may find yourself in.

I’ll be writing about this a lot over the next few months. Would love any thoughts, ideas, and inputs you may have. By all means, please drop me an email or leave a comment or send me a tweet.


Laughing: the killer app for teams?

Before you attend the TED conference, the organizers ask you to jot down three “Ask me about…” sentence completion phrases (kind of like tweets, but even fewer characters). These end up as a footer on your name badge. Cocktail party conversation starter. For TED 2015, one of my three was “Laughing”.

As someone who spends all of their professional time counseling and guiding creative teams, as well as helping to set up the conditions for them to thrive (in my humble opinion, organizational architecture is destiny, but that’s a blog post for another time), I’m fascinated by the role of laughter and humor in the life of a thriving team. While I don’t believe that every second of each day should be full of mirth, laughter, and frolicking leprechauns, my experience says that groups of people with a healthy team dynamic are able to share a laugh when appropriate. And at an interpersonal level, sometimes the best recipe for diffusing a difficult moment is the simple mix of an easy smile and a good laugh.

So imagine my delight at being able to listen to Professor Sophie Scott give her fascinating talk on why we laugh. She really knocked my hat in the creek.  Here’s my favorite part of her talk:

The fact that the laughter works, it gets him from a painful, embarrassing, difficult situation, into a funny situation, into what we’re actually enjoying there, and I think that’s a really interesting use, and it’s actually happening all the time.

For example, I can remember something like this happening at my father’s funeral. We weren’t jumping around on the ice in our underpants. We’re not Canadian. These events are always difficult, I had a relative who was being a bit difficult, my mum was not in a good place, and I can remember finding myself just before the whole thing started telling this story about something that happened in a 1970s sitcom, and I just thought at the time, I don’t know why I’m doing this, and what I realized I was doing was I was coming up with something from somewhere I could use to make her laugh together with me. It was a very basic reaction to find some reason we can do this. We can laugh together. We’re going to get through this. We’re going to be okay.

That’s it: if we can laugh together, we can get through almost anything, and it’ll be okay.

By the way, please give Sophie a follow on Twitter. She’s a hoot!

metacool Thought of the Day


“Like cement, the cultural foundation for new projects and companies sets early. Those who focus on raising outside capital and achieving fundable milestones have a very difficult time getting off that VC treadmill. Those who focus on creating value for customers and generating positive cash flow from the very beginning are able to make their own decisions independent of competing outside interests.”

Bryce Roberts


photo credit: Christopher Michel

Ride the High Country

“My father passed away in June of 2001. He was a kind and gentle man, and a great leader. My dad was a cowboy. He grew up in Southern Utah; he loved horses, and he loved to ride. There is a saying he taught us that captures much about the land he loved, and much about the spirit of leadership that was such an important part of his life. The saying is: ride the high country.

My dad knew that we live our lives in the valleys, but we don’t always have to ride there. We can ride the high country where the light is bright, and the sky is deep and blue, and where it seems you can almost ride forever. The meaning of this saying is: set your sights high. Get up out of the valleys and the shadows of everyday life and ride the high country. Soak up the light that is there, and let the wind blow in your hair, let your dreams soar, let your spirit for life, and for living, and for making a difference run free.”

Kim Clark

Mark Webber: the power of graft

Webber Monaco

Mark Webber retired from Formula 1 racing this past weekend.  He had a very successful career there, winning notable events such as Monaco, and also surviving the kinds of epic accidents which are unfortunately part and parcel of a life spent running at the edge.

I admire Webber and his achievements on many levels, not the least of which is his openness about what it takes to operate at the highest levels of accomplishment.  He makes it very clear that innate talent will only take you so far:

Maybe I did not have the most absolute natural flair and talent, but I knew that if I grafted and worked hard I’d soon get awesome results.  But I also smashed a lot of guys who had more talent than me, because they didn’t work as hard as me. I learned that about myself. How important it was to graft and just get my head down. I’ve been doing that for most of my career.

I love this usage of the word “graft”.  As a practitioner of American English, I understood “graft” to mean either something you do with stems of plants, or a way of gaining wealth or advantage nefariously.

There’s no career that’s on a rocket ship all the way through. There has to be adversity and testing moments. You don’t learn too much if you’re never challenged.  In British and Australian English—Webber is a proud Australian—graft turns out to mean something very different.  In an antipodean context, t’s about hard work, not corrupt dealings.  Graft: say it out loud a few times.  There’s some nice onomatopoeia at play there… conjures up the feeling of going “GRRRRRR!” like a tiger, or getting to the essence of the word “grit”, and the nice tie that word has to the essence of the entrepreneurial spirit, doing the most that you can with whatever you’ve got.  In that spirit, how perfect then is Webber’s Twitter handle: @AussiGrit

I couldn’t agree more with Webber says above.  Hard work isn’t the only answer, but when everything and everyone around you has similar circumstances, resources, and motivations, what’s going the make the difference?  Hard Work.  Graft.  GRRRRRRR!

So go out and graft, people.  Just get your head down and graft.

Why your creative culture needs a few kooks and spoon benders

A few weeks ago, I was hanging out with a person steeped in the art and science of bringing cool stuff to life, and they made a profound observation: every creative culture needs a few kooks and spoon benders.

I thought about it and agreed, but it didn’t really click until I witnessed the following rendition of My Way.  I’ll explain why this is so after you watch a few minutes of this video (be sure to watch through to the part with the drummer…):

Watching this, your reaction may fall into one of two categories.  Or you may start in the first camp and transition to the second, as I did:

  1. This drummer’s demeanor is annoying! He is an insecure, narcissistic, attention-seeker.  Were he a teenager, he’d be sporting blue hair.  Who does he think he is?  Why is he distracting from the nice vocals of the woman upfront?  And please stop with the twirling-drumstick trick, and what’s up with that stand-up cymbal?  Above all, get him away from me, and please don’t make me be in a band with him.
  2. This guy’s energy is inspiring, infectious, and makes me want to get out there and embrace my unique creative ability to make things happen!  In his stick twirls, manic expressiveness, and unabashed joy in banging on drums, I see myself on a great day, when the muse has arrived, I’m in flow, and creating like nobody’s business.  Give me more of this—let me watch that video again.  Oh, and I want a white tux jacket.

Here’s the deal: This drummer is a spoon-bender, he’s definitely kooky in mannerism and presence.  He’s deviant.  He’s not afraid to be what he is, no matter whether it’s a fit to his immediate social context.  We think spoon-benders are kooks and weirdos because doing something out of the ordinary is pretty strange, when you stop and think about it.  But since having the courage to do so publicly and risk criticism, embarrassment, and failure is the price of entry when it comes to innovating, shouldn’t more of us be taking cues from the kooks?

I’m not saying that you should literally go out and hire a spoon-bender (though it would be cool if you did).  But I do think that a high-functioning creative culture is populated by a subset of individuals who can’t help but be who they are, and what they are is someone put on Earth to do remarkable things.  These are your kooks.  Their unrelenting confidence in their own unique mode of creative expression—even if it be the transmogrification of metallic feeding tools—helps everyone else have the courage to go after things in a big way, too.  If you don’t have them, you won’t have any good examples of what extreme passion of expression looks like.

Have a few kooks in your organization, shine a light on their creative behaviors, and watch the positive effects ripple through your culture.

Jeff Zwart at Stanford Revs

Jeff Zwart Open Garage Talk Revs Program Stanford metacool Diego Rodriguez

I’m extremely thrilled/proud/stoked to be hosting renowned film director, racer, and photographer Jeff Zwart on November 7 for an Open Garage Talk at Stanford.  The event is sponsored by the Revs Program at Stanford and the Center for Automotive Research at Stanford.  Jeff will be giving a talk titled “Telling Stories with Cars”.

Jeff is so good at telling stories that any additional conversation with me may be superfluous, but I promise to work with him to use all the road and keep it (very) sideways, so let’s see where we go.  If you’ve ever perused my other blog Unabashed Gearhead Gnarlyness, you know how much I enjoy his work behind the lens and behind the wheel of a car, examples of which are both posted below.  I have nine hundred and eleven questions I want to ask him about his creative process and how he makes all these amazing things happen—and I’m sure you have a bunch, too.  It will be an awesome evening.

Hope to see you there!  Registration is required, so sign up now!