Episode #263 Preview: Interview with Andy Armanino

Andy Armanino started his career with Arthur Young as an auditor and joined Armanino LLP in 1989 where he built a full-service audit offering before becoming, at 29, the youngest partner in the firm’s history. In 2005, he was elected to Managing Partner where he served until his retirement from Armanino in 2018. Andy’s leadership helped propel the firm to be one of the fastest growing and best managed firms in the US, earning awards and accolades from the profession for its entrepreneurial spirit and innovation. Under Andy’s leadership the firm developed new services, expanded technology offerings, grew a full-service consulting department and strategic acquisitions extended capabilities and geographic locations. His most gratifying accomplishment was launching the Armanino Foundation in 2016. Join Ed and Ron for what’s sure to be a dynamic interview.

Named to INSIDE Public Accounting’s 2014 list of “Most Admired Peers” and Accounting Today’s “2013 MP Elite” list for staying entrepreneurial, Andy Armanino is a former Managing Partner of Armanino LLP, one of the largest CPA & consulting firm in the nation. The firm has been named one of the nation’s top 25 “Best of the Best” numerous times. Andy’s past honors also include “Top 100 Most Influential People in Accounting,” “Most Admired CEOs” and “Most Admired Managing Partners” in the nation. Andy was Managing Partner at Armanino from 2005 to 2018 where he focused much of his time on firm strategy, growth and culture. Included in his accomplishments are twice doubling the firm's size, an aggressive growth model of new services, expanded technology offerings and acquisition. Andy will become Chairman of Moore Global on January 1, 2020.

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Episode #262: Survivor’s Obligation — Interview with Chris Stricklin

What an emotional show!!!

Chris Stricklin _ Survivor's Obligation Book.jpg

Ed and Ron were HONORED to have Chris “Elroy” Stricklin back on the show for the third time. Here is a link to his book as well as a link to his video presentation. The full transcript from our interview with him is below. Enjoy!

Show Transcript

Here is the full transcript from the show. Enjoy!

Like a chrysalis, were emerging from the economy of the Industrial Revolution and economy confined to and limited by the Earth's physical resources into the economy in mind, in which there are no bounds on human imagination. And the freedom to create is the most precious, natural resource.

Ron Baker 0:33
Welcome to the soul of enterprise business and the knowledge economy sponsored by Sage energizing Business Builders around the world to the imagination of our people in the power of technology. I'm Ron Baker, along with my good friend and various agents to colleague, Ed Kless. On today's show, folks, we're going to be talking to retired US Air Force Colonel Chris Stricklin about his new brand new book survivor's obligation How's it going?

Ed Kless 1:01
It's going great. Ron, looking forward to talking to Chris again.

Ron Baker 1:04
Yeah. As you know, I'm probably more excited than anybody about this because I'm a big Thunder boy fan, but Thunderbird fan. But, Chris, welcome back. This is just an honor to have you on for the third time.

Chris Stricklin 1:18
Yeah, you know, I always love to spend time with you and your listeners here. And it's always one of those great conversations. You never know where it's going to go. But you know, we're going to have a good time.

Ron Baker 1:28
Well, I'm going to dispense reading your bio, Chris will post it. But people can just also go back to our prior two interviews where we kind of focused on the lessons learned and the debriefing. But this book survivor's obligation, which you were gracious enough to share with Ed night, prior to its publication, I have to tell you, Chris, I was in a seminar that I was speaking at, and I was in the back of the room. I was reading your book, and I couldn't put it down. I didn't even want to get up and do my talk. Because I was just so engrossed in the book. It It's profound. It's in places it makes you weep. And in places it just, you know, you brought us into the cockpit of your rejection and and I thought to myself, wow, for you to even write that must have been just cathartic, painful, just a bundle of emotions. Just Why did you write this book?

Chris Stricklin 2:24
So first of all, I want to say that what you just said means a lot to me because I respect both of you a great deal and, and this book to write for me and my co author. For me, it was more painful than the ejection it honestly what? And for my wife as well, which we'll talk about here in a minute, but why did I write it for 13 years after my objection, what was deemed an unbelievable objection. It's one of those things where everybody just spends their time going, you shouldn't be here. Why are you here? And that's what I asked myself. It was a lot of weight on me and I was still in the Air Force. You know, I only retired two years ago. So I spent all those years trying to put it behind me and not talk about it. So for me to now write a book about it, and ask people to look at the video and talk about the lessons. It was therapeutic for me, in some ways that made me and my wife talk about it. Because we never mentioned this to each other. We never discussed the actions. in her mind. She was told by the Air Force, I didn't survive over the telephone. Obviously, we both have specific aspects of trauma from this. And it was therapeutic. It is therapeutic, because every time I can talk about my story for me, it gets a little easier to talk about, and I can talk about a little bit more. So thank you for your feedback.

Ron Baker 3:42
Chris, is it easier for you to talk about it now Now that you have?

Chris Stricklin 3:49
That's a tough question. I will tell you, the night before the book released, I had one of those moments I went to my wife and said I think I made a mistake. I wish I had written this book. Because I was terrified to let people in, you know, there's a persona of being a fighter pilot for both me and Joel, my co author, where we want to stand up and say everything's perfect. Here's how good everything we do is. And we don't want to admit we have trouble. We have struggles we have weaknesses, and that things affect us emotionally. I mean, who wants to people to know that fighter pilots have dealings? And and now, like you said, when you read the book, hopefully you felt what I felt you felt what Terry felt what Marcia felt, because this was traumatic on both of our families for our different stories.

Ron Baker 4:37
Do you wish you would have talked with your wife about it sooner? Looking back I

Chris Stricklin 4:42
I do. That's that's my biggest regret is that we didn't talk about it. And it was one of those things that the Air Force could put it aside and let me go on with my career again, so good way and it was just easier than dealing with it is to go I won't talk about that till I retired. And that's ultimately what drove me Open it up as a buddy of mine called it on it and call me on it and said, hey, you're retiring you, you guaranteed you would talk about this and I went, I'm not ready. And and he put me on contract to give a keynote to his organization. And together, we agreed to put my wife in the contract as well, because I knew if we weren't legally obligated to do this and do it with both of us in the same room, that that we would back out. And we needed that that impetus to push us forward and force us to tell our story because I think there's so much that can be learned. For everybody out there. This story has nothing to do with the objection of an aircraft or stage four cancer. Those are two things that spark your interest and may get you to open the cover. But when you finish it, hopefully you will fail that this is about surviving and how we get better to live intentionally tomorrow with the sunrise we get that so many others habits that weren't afforded. And that is what the book is about.

Ron Baker 5:57
Right now. I love how you say that this book is not about Why I crashes about why I survived and how it has impacted my life I guess just incredibly powerful. Chris, I have to ask you, you had a you wrote that you had a sinking feeling on September. What was it September

Chris Stricklin 6:15
2003.

Ron Baker 6:17
50th anniversary of the Thunderbirds, and you had a sinking feeling that day. Can you kind of explain that you didn't even want to do the maneuver?

Chris Stricklin 6:28
That's true. It was. It was one of those days where everything going wrong. It was one of those events where everything is going wrong. We had we had flown too much we were on our third show site third location on one trip. We didn't have enough fuel coming into our practice for neighbors our points move the satellite imagery was wrong. I can go on and on. It's everything that indicated this wasn't a good show. And and for some reason, on that morning, I had a normal routine I did and I completely broke my routine. I usually got up and went for a run and I didn't that day whenever I woke up. I had a sink in feeling that something was wrong? So first of all, I call home and talk to my wife and go Is everything okay? Because Because I think that's what it is. And she's like, everything's fine. What are you talking about? You know? And, and so I go through my routine of what I'm doing and I go, it's not right. So I went into the safety observer and said, something don't feel right today, too many things have gone wrong. I do not want to fly my tech off from there. What I want to do is, is transition to my backup the neighbor which I'll tell you that most most audiences wouldn't even notice we have a backup the neighbor we fly, but my takeoff maneuver was one of two of the most dangerous maneuvers that Thunderbirds color. And I said, don't feel good today. I don't want to fly it and he goes, you're trained to do this. This is what you do. You're skilled aviator, go fly your maneuver. And I went flew my minute.

Ron Baker 7:48
Did he feel any remorse or apologize to you afterwards about that decision?

Chris Stricklin 7:54
Well, there's there's always there's always a lot more to the story and Yeah, I'll just leave it at that. Okay.

Ron Baker 8:01

Okay. I mean you like you said you did that maneuver 258 times. And you even had a bad feeling about your rejection. See, you said your crews Ben and all night are fixing it because something was troubling you on flights.

Chris Stricklin 8:16

Yeah, in the end, the month prior to the ejection, we were at the practice range in Las Vegas. And me and the other solo when we take off we go upside down and do about a negative 3g push to check the aircraft out. And when I would push upside down and negative G, the seat would move like a quarter inch, a half inch but just enough to let you fill the seat move. And so the first time it happened, I I stopped the maneuvers I brought the jet back and I wrote it up and I went checked it out and couldn't find anything. So I flew it the next day and it did it again. Well, it turns out, there's only two people that fly the F 16 like that. And both of us are Thunderbirds. So the company goes in to check the specs and see what they are and they go well really there are no specifications when you're upside down it over a negative three G's, you know, because it's not a normal thing. So we think it'll be good. And my crew chiefs, my team, the Thunderbirds, they said if it takes your attention away from what you're doing even for a split second when you're upside down at those altitudes, that's not good for us. And they pulled an all nighter, they replaced my ejection seat replaced every part of it, because it made me uncomfortable. And who knows how what was wrong with the other seat or what would have been different. But I will tell you that the ejection when it happened was on the new seat. And it was an out of the envelope projection, one that they say was unsolvable. And the seat was so far out of parameters, there is no way it could safely get me out of the aircraft. And I attribute that to my team, who put in the extra effort and cared enough to go if it's not right for you. It's not right for us, and we're going to go change it out. Wow, wow.

Ron Baker 9:54

That and also I have to ask you this because you wrote as you were describing That flight in those pages of the book, you said, I made my final decision not to reject. The captain stays with his ship, a pilot stays with his aircraft. Is that the ethic of a fighter pilot? Chris I thought the ethic of a fighter pilot was to reject not go down with the ship like a captain in the Navy.

Chris Stricklin 10:21

So did I. That's what we're trying to do. We're trying to eject but when it came down to that moment, and and my training, I did not make it through this maneuver. My training made it through this maneuver. That's the power of what the Air Force does for how well we train, train our aviators. And as you go through because everything was automatic people go how upset were you? how nervous were you going through the maneuver? And I say I was the most calm I've ever been in my entire life. Because I had trained my entire life for that moment. And as it came down to it, when it was time to pull the handle, I made the conscious decision not to I said I'm not going to object and I knew I was going to crash I call it my fighter pilot hand is the one flying my right hand and my fighter pilot hand said, Nope, you're going with it. Either you bring it back or you're not going back and right or wrong. That was my mentality. And that's what went through my mind. And at that same moment, I watched the canopy come off the aircraft, I watched a smoke engulf me, I watched it ribbit by rivet, go through the sequence. And I thought, What's going on? Why is my canopy coming off? And as I look down, my left hand, had pulled the ejection handle. My left hand was the one that said you have to try.

Ron Baker 11:35

Right? Your training, your training just kicked in.

Chris Stricklin 11:39

The training just kicked in. So people ask me, other fighter pilot to want to know what happens when you make that decision. What it's like to make the ultimate decision to pull the objection handle and my answer is, I don't know I decided not to reject. But my training took over and said you have to try to live

Ron Baker 11:57

and that injections 40 Jesus It

Chris Stricklin 12:01

is about 40 G's and and i will tell you as I'm standing here talking to you today, I'm two and a half inches shorter, two and a half inches shorter than I was that morning. And and people assume it's from the ejection going up the rails, whether it's 30 G's, 40 G's, who knows. But the more important thing is, whenever I landed, the one thing that I did not do, according to my training was my parachute landing crawl. We're trained to dissipate the energy when we hit the ground across our body so we don't break anything. And I had so much adrenaline going on that day that I stuck the land and I landed on my feet, and I stayed on my face and stayed there. And it compressed my my body two and a half inches. The doctor said there's not two and a half inches of cartilage in your body and once you push through the cartilage, you hit bone on bone and it shatters every bone in your body. And my answer to them was, I stand before you two and a half inches shorter and I didn't break a bone

Ron Baker 12:59

and you You discovered you are two and a half inches shorter because of the greatest hug ever known to mankind with your wife.

Chris Stricklin 13:08

I love that you pulled that quote out of there. So for those that don't know I'm married my high school sweetheart. We've been together 31 years we've been married for 25 and she flew up there to see me I left. I left the scene on the backboard in a helicopter strapped to that for quite some time. And so he was in the days that followed, she ran up to hug me like you can picture any husband and wife do and and as she embraced me, I step back and I put my arms out and I looked at her and I literally think she thought I was crazy. She was What are you doing? And ago you need to take him to the hospital. And you know this the first thing I said to her and she goes Why? I said because you've gotten taller. It turns out when you've been with somebody that long one of those things you don't notice is you know where your faces touch when you hug and she was over two inches taller and I it took me aghast I step back and go oh my gosh, she didn't get taller I'm shorter and the fact that I entered the hospital on a blackboard means I never measured my height. So I went in, and I obviously the hospital knew me at this point we've met. Can I walk in and go, I want you to measure my height. And in true military fashion, their first question is, well, how tall are you? I know I want you to measure my height and they put me up there and they said, you're five eight, right at my record and open up my record because I've been 510 and a half for my entire life.

Ron Baker 14:29

Wow, Chris, I wish we didn't have to break unfortunately, we're right up against it. But this is just unbelievable story. Folks. I'd like to remind you if you want to get ahold of Ed or myself, send us an email to ask tsp at Vera sage. com. We will post full show notes and where you can access Chris's website his new book, survivors obligation which is just absolutely a fantastic spelled minding read at the soul of enterprise. com and now we want to hear from our sponsors include Sorry, I ran a little long on that, that no,

Ed Kless 15:03

not a problem, not a problem. And I'm just spellbound as well. Good. Just

Chris Stricklin 15:09

you You want me to shorten up my answers? Oh,

Chris Stricklin 15:10

no, no, no, no, I,

Ron Baker 15:13

I hope you don't mind reliving this. But it's just so compelling.

Chris Stricklin 15:21

I'm going to tell you, there's only one part of it I have trouble talking about. And you just nailed it when you asked me about making the decision not to a jet. So we've made it through that. Anything else that fair, JJ.

Ron Baker 15:33

Sorry, I just had to ask you about the ethic of the fighter pilot. I always thought it was to reject.

Chris Stricklin 15:41

Yo, did I were trained to do that. And no kidding until you're in that moment. It's like I say, with military people, until the first bullet flies. You don't know how you're going to react. Are you going to lean in and run toward it? Or you can duck away? You just don't know.

Ed Kless 15:54

Right? what's the what's the mic the mic? Everybody's got a plan to get punched in the face. You get punched in the face.

Ron Baker 16:04

Chris, are you the only Thunderbird in their history too hippy rejected at a live air show.

Chris Stricklin 16:11

I don't know that I think I am but I can't. I can't give you that back because it's not when I've looked up. I will know that after we get off this phone call.

Chris Stricklin 16:20

Okay. Wow.

Chris Stricklin 16:27

Absolutely compelling.

Chris Stricklin 16:29

And and

Ron Baker 16:30

yeah, I don't know if we're going to get to Joel's side but if you want to talk 10 seconds guys side, we can do that.

Chris Stricklin 16:38

I would like that if you just go Okay. How did you partner with Joe? I got it. Okay.

Announcer 16:47

You are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show. It is on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSOE Now back to the soul of enterprise.

Ed Kless 17:06

The book is survivor's obligation and we are here talking to one of the co authors Chris Elroy, Strickland. And Chris, I wanted to ask you about a word choice, a very specific word choice that you had in the book on on page 14, actually. And because it's something that I've done a lot of thinking about myself and I want to perhaps do some therapy with you. My therapy, not yours. And this and this, this is the quote, a calmness I had never experienced before settled throughout my entire body. Now, earlier with Ron, you were talking about how pumped up you were on adrenaline which, you know, makes a ton of sense yet at the same time, there was this calmness that you had never experienced before. Settle through your entire body. I know. We We talked on this show, it's the soul of enterprise. We talked a little bit about spirituality, not necessarily religion, but is this is this the peace, which passes all understanding? Chris?

Chris Stricklin 18:11

It does. And, and it is one of those moments that literally when you quoted that out of the book, I got chills all the way across my body because I can remember it right now, like I was in that moment. And there came the moment where for every ounce of my body, I knew that I was going to crash. There was not a doubt it was not I might it was, I'm going to crash. And at that moment, you know, your reaction defines who you are. And at that moment, instead of panicking, my body went completely calm. And it said, you had trained for this, you had been through this 1000 times in your mind, pilots care, fly. We literally sit in a chair in our office, close our eyes. And we think through everything that can happen, both good and bad, both right and wrong, and how we will react if that happens. And that was the moment Where my body told me you've trained for this now it's time to see if you can do it

Ed Kless 19:07

and did you spend time that because then after that obviously this this incident occurs you have all of the the medical procedures that happened on you find out your two and a half inches shorter the not talking about it with your wife for for so long have Have you ever reconcile the fact that at the same moment when you had this absolute calmness was also the moment that everything flew? all of the pieces literally flew flew apart at the same time.

Chris Stricklin 19:35

So if I could for everybody listening the entire flight from lyst off to explosion, which 25 or 25 seconds long. Think about what you're doing 25 seconds. And for me if I sat here and told you everything I thought about everything I went through, I saw plenty of psychiatry psychologist investigators after the fact. It was three hours long in my mind. The temple was In the temporal distortion slowed time down till it almost stopped. I literally round where I was compared it against the times I had blown it before it was like, it was like Monday talking about a football game. I was watching replays of other times I had blown it to try to figure out what was wrong with this one so that I can correct what was wrong so that I couldn't make it out. It was unless you've been through something like that I can't even explain how fast the human brain can actually work when it needs to. So from that point to the rest of it, that was the calmness that allowed me to make sound decisions, all how go into the aircraft and flashing back to my family thinking about what is going on. You know, they always say, Oh, they didn't see it coming or, and I hate to say this because that makes some people feel okay. But I saw everything. I was oversensitive to everything going on hypersensitive to everything going on, and always thinking about everything in my life and nothing in my life and only the aircraft at hand. At that very moment, it's it's almost incredible to try to explain to you

Ed Kless 21:05

know, it is and I'm going to keep pushing on this because as I said, this is this is something that I personally struggle with because and i think it's it's a moment for us to learn from from a leadership standpoint as well. You know, we talked about, you know, things happening in business and things going going around us. And I came across this quote earlier this week, which is completely different source, but I want to share it with you and test something on you that the quote was this we can't change the past. We don't know the future. And we rarely are ever fully present

Chris Stricklin 21:39

in our in the actual presence. Do you think this sense that you had this again, this that the temporal temporal distortion that happened that made 25 seconds seemed like three hours was just an extreme case of you really being fully present in that moment, as as a as a spiritual being I do. I do think it's for President. And one of the things I'll tell you if I could flash forward a little bit to a different area. And let's talk about at the moment I came out of the aircraft and I will tell you, I never lost constant consciousness. From the moment I came out of the aircraft till I was standing on the ground, but my body, the body is an amazing thing. My body yet 16 years later, has not let me remember what the objection from leaving the aircraft until standing on the ground. So your memory in my opinion is not videos. If you think about it, it's still images of things that happen in the emotions around them. So picture me I know I'm going off the rails on the objection sequence next frame, I'm standing on the ground. And in that moment, I felt everything good in my life. Everything my life did not flashed before my eyes, but in one instance, I felt every positive every good thing, every ounce of love in my world. world. And it's something I can't explain to you. And it was only there for a second because right after I started feeling it I looked up at this guy is a beautiful day. And I was taking it all in and then I got snapped back to reality and went, wait a minute, I was just a mystic thing. Why am I standing on the ground? And so again, my training snapped me back to the ground to get back into the sequence. But, but when you're talking about those types of spirituality, that was the biggest moment I've ever had in my life because the feelings that came into my body, there's no way I can explain them to you.

Ed Kless 23:31

You know, and I know if you're aware of this and just because like I said, this is something that I picked up on in the book and obviously I'm obsessed with it. So if you'll pardon me, but you you right after that passage about what you say I saw no parachute. This again, quoting from the book, with the same calmness I'd experienced a few seconds before in the aircraft I began to look around as a spiritual person. I believe light would lead me to the other side after death, but nothing. My point being is that that That that whole thing that you, quote, can't remember, was completely and totally surrounded by this parenthetically, I guess by this calmness. And I just find that it's beautiful, that there's no other way to describe it, but beautiful.

Chris Stricklin 24:19

I appreciate that. And I love the fact that, that you pulled that out of the book because for me, that was the biggest moment. It was one of those spiritual moments and talking about presence. When I go out and talk about the book. It's not about talking about the objection. What it is, is talking about intentionality. Because I'm telling you that presence I had in that moment, the way I felt in that moment, the fact that I got it tomorrow that other people didn't make me so intentional in every move I make in every interaction, every hug with my kids, every time I say goodbye to my wife to walk out the door and go to work. It makes me always think that's going to be my last second and one of the things I ask people to do is After you read the book and see how it resonates with you, and what aspects of it resonate with you, I want you to lay down at night. And when you close your eyes, ask yourself one thing. If this was my last day on this earth, would I have done the same thing? If I knew? Would I have treated people the same way? Would I have devoted my time to the same things? And if the answer's no, live intentionally tomorrow to change those things? Because if you ask yourself every night, if this was my last day on earth, would I be happy with it? Unfortunately, one day, you're going to be right.

Ed Kless 25:36

Yeah. And I grew up Catholic. So I'm always fascinated by some of the stories of the saints and one of my my favorites is along this lines, I believe it was St. St. Anthony of Padua, who was a priest in the Order of St. Francis. They asked him he was he was out tending the garden one day and one of the one of his George's, one of the postulates came over to him and asked Anthony if if if you were told that the Messiah was returning right now what would you do? And he said I would tend the garden

Chris Stricklin 26:15

That's how you know you're doing the right things in life. Because if I could pull on one other side of the spirituality like you said, the book is not about why it crashes but why survive? When people go through trauma and and i will tell you, the way I define trauma is not ejected from an aircraft or stage four cancer. It's everything that goes through our life, whether it's a divorce, a marriage, a child, whether changing jobs, losing jobs, getting those are all traumatic aspects of our life. And you have to think of those things because if you win the lottery today, you don't go Why me? You go out and cash a check for most people. But if something negative happens, you go Why did this happen? Why did this happen? Now? Why did it happen to me and that's where you can get lost in the negative side of trauma. But for me, that's not what concerns me. concern me is, why did I survive? What am I still here on this earth to do? But more importantly, did I do it? Or did I miss it? And it forced me to live every day like today was the day I was left here for and make sure that was ready for those opportunities. But if you think of it that way, because we're all here for a reason, and like you said, spirituality is not necessarily religion. They're two totally different things to me. And they're also two totally intertwined things. But we have to think about what we're doing every day.

Ed Kless 27:33

Well, amen. And this is one of the few shows where I'm sort of resentful of our breaks but we have to take one and want to remind you that you can get a hold of Ron or me by sending an email to ask tsp at various age calm Of course, as you know, the show and website is the soul of enterprise where you will see show notes as well as previews to upcoming shows as well as the link to Chris's book. But right now, a word from our sponsor.

Chris Stricklin 28:01

Alright, you're clear. What do you think?

Ed Kless 28:09

Oh, man,

Ron Baker 28:10

this is great. Wow, that was powerful.

Ed Kless 28:14

I'm trying to withhold from weeping on the air. So yes,

Ron Baker 28:20

that Wow. That read that that first quote you said that about the past and the future was that

Ed Kless 28:30

we can't change the past. We don't know the future, yet we are rarely ever fully present. Okay.

Chris Stricklin 28:41

Okay, where we finish up today if you guys give me one, give me one second to say is there anything else that you'd like to add? I'm going to top that quote, If I don't

Ed Kless 28:54

stop it. Yes. All right. I'll buy you a drink. Anyway.

Ron Baker 29:00

Wow.

Ed Kless 29:01

Alright, so and Brian, if you want to pick up on Chris, I'll I'll can do the fourth segment and talk about Thor story. So if you Okay, okay.

Ron Baker 29:10

Yep. And you can mention that the book goes to charity and all that.

Ed Kless 29:16

Yeah. Because believe it or Believe it or not, Chris, you're your co author uses the word calm one time, and I want to make a connection. So that'll be

Chris Stricklin 29:27

we're very different. And I will tell you one other thing. Yeah, we're a year we couldn't write a book because we went our stories are two different and I don't remember if it makes version but literally, literally, go ahead.

Announcer 29:44

You are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask t so we know that to the soul of enterprise.

Ron Baker 30:01

Welcome back, everybody. We're here with Chris Strickland, co author of survivors obligation. And while Chris listening to you and Ed talk about that, how you were full of adrenaline, and yet so calm, and it also just reminded me that you were present enough to realize that there were thousands of people in the crowd that you had to move away from before you did anything. And yet all these other things were going on in your head as well. Your wife your family, your training was kicking in it that's not spiritual. I don't know what is.

Chris Stricklin 30:37

It is there was one of the most spiritual moments I've ever had in my life. And, and it's just like I said, writing the book was traumatic for me, because I had to put words to what I had felt all those years back and hadn't dealt with.

Ron Baker 30:53

Yeah, and you even had the presence of mind when you were in the ambulance to ask first today. Anyone get hurt? He responded, well, sir, just you?

Chris Stricklin 31:06

Yeah, that's, that's one of those moments in the books you can laugh about. But needless to say, when I was in the ambulance there, there put me in the back board and have this airman working on me, but there's a military ambulance. And and I asked him that question. It goes, I got a couple of questions for you. Did anybody get hurt? And and if you could have seen this surprise on his face, because he he kind of looked at me to see if I was serious. And he went, No, sir. Just you and he kind of looked at me on the blackboard in an ambulance. And he goes, he didn't say it, but his face said, You do know you're in an email. Right? Right.

Ron Baker 31:39

And your second question even shows the presence of mind because you asked if you could have completed the maneuver without hitting the ground.

Chris Stricklin 31:47

Because that's what's in your mind. Did I make the right decision? It I heard anybody and did I make the right decision? And the answer I needed an outside perspective on it. And in that moment, He instinctively reacted and said, There is no way you were completing that maneuver. And that's what I needed to go. Okay. I did the best I could. I mean, that's really what we're saying. But that that was what was on my mind. And as you know, most fighter pilots just speak what's on their mind.

Ron Baker 32:17

Chris, can you contrast survivor's guilt with survivors obligation for us? And I think people have an idea of what survivor's guilt is, but I'm not. I'm not sure that

Chris Stricklin 32:29

I can. And so survivor's guilt is something that's experienced, very commonly whenever a unit deploys to combat and 99 of us go home but one of us doesn't. there's times where you look around and go, why did I make it home and he or she did, what they may have been standing right beside you when it happened. And the same thing happens with our first responders. When someone has an incident happening, they don't get to go home to their loved one done. And like me focusing on the sunrise when I when I talked to be In person, there's one picture I show. And it's a sunrise picture. And most people think it's a sunset because they look very similar. And it's a sunrise on the day after my objection over my objection side, and I said, because I hadn't dealt with it, I knew I felt deep down. I wasn't going to deal with it for a while. But I had the presence of mind to stumble out of my room because I really couldn't stand up straight, and take that picture and put it away. And I didn't look at that picture for 13 years. I literally did not open the file. But now it's my favorite picture because it's the tomorrow I almost didn't get it tomorrow. I almost lost with my family with my friends, everything. And that's what's powerful about this is they could be your last any of us, any of us anything we do. It's not just high danger jobs, you got to make the most of it.

Ron Baker 33:47

Now, when you wrote about that single picture of the impact site, I thought, that must be some such a meaningful possession

Chris Stricklin 33:57

as it is I can't even it's another one of those. I can't tell you what I feel when I see that picture.

Ron Baker 34:07

Any reason why you didn't put it in the book?

Chris Stricklin 34:11

Because at the time I wrote the book, first of all, I told you up front that writing the book was therapeutic for me and my co author, and, and literally my wife and I had one of those moments last week where we went, Oh my gosh, I can't believe we did this. And it's still overwhelming for us because people like to ask me, how did you deal with that past hands? Well, people who have been through trauma, don't deal with it past tense. They are dealing with it present tense and the two of us, Marcia and Joel are dealing with his we still talk about that last weekend, we talked about how hard this book was on our wives. Because we are now talking about our trauma all the time, to different people like yourselves, and there are times that we all just break down in tears. I mean, literally, I'm literally break down in tears. That happens to us. routinely now, but now I see it as a healing process, not when I'm embarrassed up. Well, my wife was joking with somebody last night, something came up about some volunteer work we're doing. And she goes, she was talking to my kids. And she goes, your dad can't do that. And they're like, Why? Why can't dad do it? And she goes, he has become too emotional over the last few years, and there's no way he can go, his emotions can't handle that aspect of what we were going to volunteer anybody with a hospital. And she goes, he can't do it. He's too emotional. He's the emotional fighter pilot now.

Ron Baker 35:34

You know, after I finished your book, and I wrote you that note about just how impactful it was, and my dad read your book, as well. And we talked about it a couple days ago, and I said to my dad, I said, I almost feel like I'm invading Chris's privacy by asking some of these questions that I'm dying to ask them. But you write in the book that people rarely asked why good things happen. When painful events happen, acceptance is an important step.

Chris Stricklin 36:06

It is it is. And, you know, for me, you guys have been with me for quite a few years now in different avenues in person on the radio. I think we've all gotten to know each other. And I think, correct me if I'm wrong, but the side of me that you saw through this book, and our recent interactions are completely different than the persona you had before the book published, is that correct?

Ron Baker 36:29

That is absolutely correct.

Chris Stricklin 36:32

And when you say you're invading my privacy by asking the questions, I would say don't worry about it. You've already invited my privacy by reading the book, because that was an all access pass into my house. And I don't mean that in a negative way. I gave you permission for that. But, but that's what I feel like the book is for me and Joel both is showing the backside of how this affected us how it affected our families, how it affected our children, how it affects our future, and our today

Ron Baker 37:01

Do you think being putting yourself out like you did with the book and being vulnerable? How has that affected people's perceptions of you? I mean, like you said, You're a fighter pilot, everything's perfect. I mean, you guys are flawless. You do things, you know, a couple inches apart. And here, there was this traumatic event. Do you think showing that vulnerability is changed people's perceptions?

Chris Stricklin 37:30

It is, and you brought a smile to my face with that. I will tell you I was terrified to show vulnerability, because in my mind, I thought it was showing weakness. I truly did. And but I felt the calling to do it right. We have these callings in our lives and Joel and I felt the calling to share because we thought we could take our worst day and help other people through theirs help help make good out of the bat. And I'll summarize it like you said, You sent me a note those moments. I'll summarize it this way yesterday, I had a speaking engagement And I talked about the book. And they and we went down a path. I can talk about it so deep, but there's still things I can't. And I almost went over that line and almost got emotional during the presentation, which, as a professional speaker is not something we like to do. And, and there's that moment of how did they react to it. And I will tell you, when I walked off the stage, they didn't only clap, they got up and hug my neck. Literally, this was a professional organization and they walked up and one by one, put their arms around me and hugged me.

Chris Stricklin 38:30

I can't tell you what that means.

Ron Baker 38:33

It means you're human. We're just humans.

Chris Stricklin 38:36

We are all just humans.

Chris Stricklin 38:40

But book let us be humans together. Instead of hiding it or putting in the closet. I always say that I locked everything in a closet. I knew it was there. But fighter pilots are trained to compartmentalize their emotions so that we can contain not just fighter pilots, but military and first responders in general, because our emotions can't get in the way of doing our job. The problem is we Leave it in the closet for too long. And like you read in the book, at one point, something opened my closet a little bit and those emotions started blowing out. And when they did, I couldn't stop. I couldn't they were coming out whether I wanted to or not. And the fact that it took me 15 years for that to happen, My only regret is I didn't open up with my wife or others to help them learn from it. Right.

Ron Baker 39:25

You know, Chris, another thought that came to me when I was reading your book is spend a lot of time talking about living intentionally. And you know how this this dramatic impact affected that. The only other person that I've read that had a similar story to yours not exactly but but parent very parallel was Ronald Reagan. He when he was assassinated, the attempted assassination I was like he said, The Lord kept me here for a reason.

Chris Stricklin 39:56

And I better be ready for it. Right?

Ron Baker 39:58

Yep. And No, go ahead. No, don't go ahead, please.

Chris Stricklin 40:04

So So I got sidetracked on the survivor's remorse. So we started talking about that when you come home, a lot of people feel remorse from that. And as Joel and I started talking about it, we really looked at each other and said, we can't do that because and I don't mean to sound cold, but I'm not remorseful that I've survived. What I feel is an obligation to make it mean something to like, you've heard me say to be ready for whatever it was, I was kept here for and that is for survivors obligation was born that is post traumatic growth. Not ETFs D like we've painted it to be.

Ron Baker 40:38

Right. I just love that title. I love that title when you told us about it. I just knew it was going to be a great book when I think it was the second time you were on the show. And you gave us the title. I thought wow, that's a powerful title. is such a contrast to survivors, you know, guilt

Chris Stricklin 40:58

right? how we live our life we choose to live our life. Right? We choose how we react. We choose how we spend our time. Don't don't live in remorse.

Ron Baker 41:12

Right? And even before you told your wife, you wrote in the book that you had a conversation with a couple friends from San Antonio, if I remember right. In you kind of went through the story with them that must have been traumatic or cathartic.

Chris Stricklin 41:29

So that was unintentional and accidental. So that was the friend I told you about that wanted to put me on contract to talk to the organization and I flew down there to talk to him and his wife. I went to both of both of them, went to college with me at the Air Force Academy. He was in my wedding. So he knew me and Terry very well. And we were sitting at Chris Madrid's in San Antonio, incredible hamburger restaurant, we just went out to eat to talk about it. And while we were sitting there, that was right at the time, I was starting to deal with it back at home with my doctor and with all of the everything going on. And all of a sudden, I go, you guys, you want to hear my version of the story. And it was just meant to be a, you know, a way top version of it. And all of a sudden I dove in at a level I never dove in. And I'm looking at them. We all have tears in our eyes. And I went, Oh, my gosh, how did we end up here in a public place? We're in a restaurant. And that's where I realized the true amount that I had been hiding and putting the feelings aside.

Ron Baker 42:27

Wow. Well, again, Chris, I do resent these breaks. But unfortunately, we're up against another one. But I can't thank you enough ads going to take you home. But thank you so much for coming back on the show, and sharing some of your insights from this wonderful book. I really appreciate it. And folks, we'd like to remind you if you want to contact that or myself, send us an email to ask tsp at Vera Sage calm. And now we want to hear from our sponsor sage.

Chris Stricklin 42:59

All right, you're Clear. Cool.

Chris Stricklin 43:03

Thanks, Chris. Great stuff.

Chris Stricklin 43:06

I appreciate you guys doing this. I'm gonna tell you like I told my wife when I got home last night. Hopefully it's a great show for you guys and your listeners. I'm a professional speaker. You don't know how much it takes out of me to do what we're doing right now.

Ron Baker 43:19

I can imagine. Yeah, I can I get again part of me feels like we're being invasive. I have I have guilt.

Chris Stricklin 43:33

But the book give you permission to do that. People are always afraid to ask me questions. Now. It's like, you know, what's off limits? There's nothing off limits. Just go. Let's go. Let's see, we know

Ed Kless 43:44

for sure. Chris. I can remember the first time we interviewed you and I think Ron and I had a AR before action review. And I think we talked to

Ron Baker 43:54

ask him about the crash.

Chris Stricklin 44:00

And at the time you guys sent me home, you would not have gotten an answer. I don't know how it would have been answered. You know,

Ron Baker 44:07

a little bit about it. But

Ed Kless 44:09

we may you may I think we made the joke because what you had told me that you were shorter. And I think that I think we we kind of like, had a laugh about it to a certain extent.

Chris Stricklin 44:18

We didn't talk about it. We talked around it.

Ed Kless 44:20

Right. Exactly. Yeah, right. Right.

Chris Stricklin 44:23

Right. That's my way of dealing with it for all those Yeah. Yeah.

Ron Baker 44:27

Well, like you said, acceptance is a big challenge in this right. Here. Yes.

Announcer 44:43

You are tuned into the soul of enterprise with Ron Baker and Ed Kless. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask gsae. Now back to the soul of enterprise

Ed Kless 45:01

And I have never been so grateful for the fact that Ron and I trade segments off before on the show so that I can well and I guess he can recover after talking to Chris about his this this story that he's so wonderfully shared with with us. Chris, I know that there's something that you wanted to make an announcement about was regarding the book. So let's, let's quick talk about that.

Chris Stricklin 45:23

Yeah, so Joel, and I, my co author, and I have always said, This book is not about us. Our stories only get you to pick it up. But it's really about the lessons we learned and, and we have always said we didn't want to be professional authors or sell books. We just wanted to create a community of survivors. All this morning, I talked to Joel and we've decided the best way to take us out of the equation is to donate all profits from the books to charities, so that everybody knows that genuinely, he and I want to share our stories and hear other people's stories. This is not about selling books or making a profit and so now We won't make a penny off the book, everything goes straight to charity, different charities because we're on different sides of the story here we have the areas we want to focus on. But thanks for letting me share that. He just announced that on social media while we were on this call.

Ed Kless 46:12

Oh, outstanding, outstanding. We're glad to be part of breaking that. And I think that's, that's terrific. So let's talk a little bit about Joel as we've alluded to it but to come straight out. It's really the two stories, your story and Joel's story. And Joseph is quite quite different, isn't it?

Chris Stricklin 46:30

It is quite different. So we share a background he's an epic thing, fighter pilot just like myself. And fighter pilots don't like to go to the doctor because we're afraid we might not get fly again. And one day he went to the doctor, he had a plane he goes, Hey, Doc, I got this going on. Just check it out and give me back to fly. And and it turns out, he didn't have just a pain. He had stage four cancer, a rare con that gave him a 15% chance of living five years. Think about that. He was on top of the world. He was on top of his episode eight Got a 15% chance of living five years. Just after that happened. His two year old, had a tumor on his lung. So while his wife is running between rooms in a hospital, she has both her husband and the son in the hospital. Now, mind you, that was nine years ago, nine years ago. So when I retired from the Air Force, I was working with Joelle and some consulting work. And we started talking about our trauma. And that is where the idea was born for the book. And for a year, we say our stories are two different there's no way we can relate them. And then one day, we said our differences are our similarities. The fact that we went through different kinds of trauma, but we ended up with the same post traumatic growth is what the book is about.

Ed Kless 47:46

But there's also some great contrasts to in that yours is 25.5 seconds. Everything happens to in your incident, of course, his story with him being diagnosed with cancer and then if I if I have The this right? He, he was uh, he was aware of that, but then goes to the appointment with his son hadn't yet told his wife, right? Because, again, the one time that he uses the word calm is in that section when he's making that transition, he said, I tried to keep calm in front of Marcia, right. And it was like the this this duel thing. His was it seems like it was 25 days or whatever that was. So there's this absolute elongated sense of his incident as opposed to yours, which is really this this tightness. But what is so cool about it, as you said is, is is in the end? You can't you had you came to the same place.

Chris Stricklin 48:41

That's right, we came to the same place. And you know what, it helped me because since his trauma was so stretched out between diagnosis and all the treatment to get him past it. He had dealt with things much differently than I had. So I will tell you, there were times we met every Sunday afternoon, talk about the book wherever we were in the world and There were times we were we were hugging each other virtually there were times we were yelling at each other, because we were going through different levels of our trauma. While we were writing the book, it took two and a half years for that reason. And I intentionally we wrote a short book because we want it to be a quick read so that nobody can say I don't read books that's too long. Because we think there's so many lessons you can get out of there. And that is his cancer, his long drawn out cancer, my very quick trauma between those two, hopefully everybody can relate to some aspect of it in their lives. Like one of my cats Raiders said it best before we published, he came in and said, there's a moment where you interior in the kitchen, you're talking about the conversation you haven't had. And he goes, that wasn't you and Terry, it was me and my wife. And I was asking myself, how many things are we not talking about that we should?

Ed Kless 49:52

Yeah, no, it's terrific, terrific. Insight there and regarding that, I wanted to to To ask you, you know about your career wise, it's then they both come off as clear heroes in this this story as well. There's a lot of marriages that that don't make it through this right that don't make it through the these types of stressful incidents.

Chris Stricklin 50:17

Yeah, they and I appreciate you bringing it up and they don't come off as heroes. They are the true heroes. They are because they're the ones that held it all together. Right? When I'm in the hospital, and Joel's in the hospital, just like all military spouses everywhere, when I disappear for a year to deploy that gana, Stan, I've got four kids at home and a wife who has to act like a single mom. That is every military person around the world not just looking at trauma. And when you go through trauma, you can choose to either let it bring you closer together or force you apart. That that is a deliberate choice you and your spouse have to make and whether you're talking about it or not. We knew we had been through it together and it brought us closer together.

Ed Kless 51:01

Yeah. At the same time, one of the things I just wanted to point out is that there there are plenty of people who who have experienced trauma and and don't make it. And they have and I'm going to say I am one of them went through a traumatic divorce situation a long, long time ago. It we have a survivor's obligation once you get on the other side of those incidents as well.

Chris Stricklin 51:27

That's right. You look at every aspect of your life and you can apply these principles to almost every move you make. You can imply that intentionality with everything you do.

Ed Kless 51:38

Yeah, so true. Well, anything else you want to mention here, Chris, before we wrap up?

Chris Stricklin 51:45

You know, if anybody takes anything away from the book, here's what I would ask you to take away today. Today, your presentation is the culmination of yesterday's actions, reactions and in Your decisions and in decisions, your peak and your valleys that chart the journey that is your life to today. Think about that. Don't be a passenger. Write your book and live intentionally to become the person you want to be tomorrow. Not the person you have allowed your experiences to make you today.

Ed Kless 52:23

Yes think TS Eliot said it in a minute. There is time for 1000 decisions and revisions that a minute will reverse.

Chris Stricklin 52:32

Powerful

Ed Kless 52:34

Yeah. And you're in your case 25.25 seconds. So just just just just amazing, amazing stuff. what what what's what's next for you? Obviously a speaking turck as a speaking tour for this book, but what what what else are you doing?

Chris Stricklin 52:52

You know, I'll tell you that Joel and I both have professional careers outside of the Air Force. Now that we're out of the Air Force, and we have no engine Tension have given up. We love what we do. We truly do the people we do it with. And it's a reason in the beginning we said we were writing this book to help others and to create a community. But neither of us are leaving our primary jobs to go out on a speaking tour. We're working it in where we can, but I will tell you as a professional speaker, it's amazing how many engagements I've taken in the past month because of the organization's I was partnering with not because of the paycheck that's coming in. It's the freedom of giving back the power of giving back. And I challenge all of you to find the area where you can devote time and resources because it's fulfilling it's more fulfilling than a paycheck ever will be.

Ed Kless 53:43

Yep, so very true. Well, I want to run had a chance to thank you I want I want to thank you for being on the show again. And we just love having you on as a guest whether it's talking about after action reviews and before action reviews and making decisions or This extraordinary personal story that you have chosen to share with us that we, we are all blessed to have, have you share with us and be in our lives. So so thank you for that.

Chris Stricklin 54:12

Thank you, gentlemen. And it was a pleasure as always, and every interaction always walk away better than I was before, if nothing else, because we're spending the time talking about improving some aspect of our life.

Ron Baker 54:26

Thank you so much, Chris. Ryan, what do we got coming up next week, next week. And we have Andy Armand Nino, who retired as of January 1, the former CEO of the firm I worked for so I'm really looking forward to that.

Ed Kless 54:43

Outstanding Well, I'll see you in hundred and 67 hours then.

Ron Baker 54:57

This has been the soul of enterprise business and the knowledge Economy sponsored by Sage energizing Business Builders around the world for the imagination of our people and the power of technology. Join us next week folks and Friday at 1pm Pacific we will have and Dr menino on. In the meantime, visit us at the soul of enterprise. com will post show notes and links to where you can learn more about Chris and the amazing book survivors obligation and his story and even watch a video he's got up there so you can also contact better myself at ask tsp advanced age calm. Thanks for listening, folks. Have a great weekend.

Chris Stricklin 55:36

Bye, guys.

Ed Kless 55:38

Alright, thanks.

Ron Baker 55:39

Thanks, john.

Chris Stricklin 55:40

Appreciate it. As always.

Episode #261: The Lost Chapter from Implementing Value Pricing

Here it is, folks! At long last we have Chapter 32 — otherwise known as the “Lost Chapter” — from Ron’s book, Implementing Value Pricing: A Radical Business Model for Professional Firms. The short version is available below and details on all 26+ pages for Patreon members are available at the bottom of this post. Enjoy!


­­Chapter 32: Attracting, Developing, and Inspiring Knowledge Workers

The management of knowledge workers should be based on the assumption that the corporation needs them more than they need the corporation.  They know they can leave.  They have both mobility and self-confidence.  This means they have to be treated and managed as volunteers, in the same way as volunteers who work for not-for-profit organizations.
— Peter Drucker, A Functioning Society: Selections from Sixty-Five Years of Writing on Community, Society, and Polity, 2003

Today’s knowledge workers, unlike the factory workers of the Industrial Revolution, own the company’s means of production. This is what Daniel Pink, author of Free Agent Nation, calls “Karl Marx’s revenge.” People are not assets––and will not be replaced by computers no matter how far advanced artificial intelligence becomes––or inventory, or resources; they are individuals entitled to sense of mission and purpose in their lives, who congregate in firms to make a difference in the lives of others. The universal need of every worker is to perform meaningful work, in a community with others of like mind, to make a difference in the world. The real aspiration of an organization is to make people better, not just make them better off.

People Have Value, Not Jobs

Peruse a corporate annual report or website, and inevitably you will read that “people are our greatest asset” (or “resource”). Stalin use to say it as well. Thinking of workers as resources––from the Latin resurgere, “to rise again”––is equally demeaning, implying people are no different from, say timber, to be harvested when you run out. Even Michael Eisner, former chairman and CEO of Disney, has been recorded as saying, “Our inventory goes home at night.” There’s a new twist––people are now inventory to be turned over. Perhaps one of the reasons for the use of these demeaning words is managers do not understand the worth of their people because they cannot be measured as exactly as accountants record assets, inventory, and other tangible resources. Humans deserve more respect than a phone system or computer. Assets are passive, bought and sold in the marketplace at the whimsy of their owners; conversely, knowledge workers have ultimate control over their careers. Why do we insist on perpetuating this belief that people are resources to be mined rather than human capital to be developed?

Becoming a Lightning Rod for Talent

Southwest Airlines does not hire for skills—it will teach people what they need to know—but for attitude, which is very difficult to teach, or change. It hires attitude, and teaches functionality.

Attracting good people and hiring are two of the most important jobs to which everyone in the organization can contribute input and ideas. Executives spend more of their time—or at least they should—making people decisions than any other. No other decisions have as many repercussions throughout the firm, or have lasting significant effects than hiring choices. Typically, the average firm is batting 0.333 on its hiring decisions; that is, one-third turn out to be good decisions, one-third are minimally effective, and one-third are abject failures. It is rare in any other area that executives would accept this level of performance.

The Importance of Continuing Education

Knowledge organizations must have a healthy respect for these three categories, so as not to make their team members feel as if they are not spending enough time in the production of earnings when they are investing in their human capital. In spite of this, is there any doubt that most firms underinvest in Becker’s second category in ruthless pursuit of his third category?

I have the good fortune to speak to thousands of owners of professional knowledge firms who confirm they don’t spend more than the minimum on their people’s continuing professional education. For certified public accountants (CPAs), this equates to 80 hours every two years.  According to the American Institute of Certified Public Accountants, the average CPA firm spends just .8 percent of its revenue on continuing education, approximately equal to what is spent for broadband internet service. However, companies like Accenture, the Big Four accounting firms, and consulting houses such as McKinsey, Bain & Co. spend approximately 6 percent of their gross revenue on education. How else do firms expect to increase the human capital and effectiveness of their knowledge workers if they don’t invest in continuous learning? Sure, they can invest in technology or a better widget machine, but those are merely tools. They are the equivalent of having restrooms in your building, not competitive advantages that enable you to do better than your competitors. What counts is what knowledge workers know this year that they didn’t know last year that is more valuable to the company or its customers.

Lean and Six-Sigma Initiatives

I have gotten into vociferous debates with advocates of Lean and Six-Sigma for professional firms. Since the VeraSage Web site has a full record of these debates, and I spell out the arguments for effectiveness over efficiency throughout this book, I will not repeat those writings here. Suffice to say, I do not believe that Lean and Six-Sigma are necessary in professional knowledge firms. They are far too inward looking, tending to focus more on efficiency than effectiveness. Consider Toyota, a Lean company that is having serious quality problems as I write these words. No doubt, these automobiles were produced efficiently, but obviously not effectively. Nor do these programs provide any guidance on how to solve this thorny customer issue.

Want proof? Check to see if any of the firms that have undertaken these initiatives have trashed their timesheets. If Lean and Six-Sigma truly were customer-focused strategies, they would have realized long ago that customers do not enjoy being billed by the hour. They also would have figured out that timesheets are a lagging indicator whose measures are meaningless to the customer, as the focus is on inputs, efforts, and costs, rather that output, results, and value. The VeraSage Institute’s Web site is full of Trailblazer firms that have eliminated these strategies, and not one has undertaken Lean or Six-Sigma programs.

Generational Astrology

An enormous amount of ink has been spilled on this topic, usually along with the different characteristics of the Baby Boomers and Generation X, Y, Z. One reason for this increased attention is there are simply more generations interacting in the workforce today than in the past. One reason is life expectancy. The average knowledge worker today will outlive their employer, with an average active work life of approximately fifty years compared to the average organizational life of thirty. This translates into the average worker today having many more jobs—and even careers—than those of their ancestors a century ago.

It may be an interesting academic and historical exercise to create lists of the differences between the Baby Boomers and Generation X, Y, and Z, but knowing the personality traits between the generations does not necessarily assist a company in attracting or inspiring its knowledge workers. All of this “generational astrology” has all the explanatory power of asking people their signs—it is an incredibly weak theory.

A more robust explanation for today’s workers—no matter when they were born—is the fact that they are knowledge workers, who are far wealthier than their parents—they grew up in what economist Brink Lindsey calls “The Age of Abundance.” Wealth provides more options, from extending education, traveling the world, living with parents longer, or simply delaying gainful employment.

Personality Testing and Performance Appraisals

The most widely used is the Myers-Briggs Type Indicator (MBTI), created by Pennsylvania housewife Isabel Myers. This particular test is utilized by 89% of the Fortune 100, given to 2.5 million people each year to identify strengths and enhance teamwork. She thought the test could bring about world peace.

These tests are also popular among consultants, who are paid good money to administer them in a convivial atmosphere. But the fallacy is the tests measure what we are like and who we are, not what we know, believe, or what we can do. They confuse labeling personality with understanding it. These tests are reassuring confirmations of what people already know about themselves, what psychologists call the permanency tendency. They also tend to validate the positive characteristics we all believe we possess, the so-called Pollyanna principle. Companies might as well bring their people together to play with Ouija boards, which are equally entertaining while having roughly the same empirical validity. As they say, if you really want to learn what someone is like, marry them or work for them.

Compensating Knowledge Workers

Any organization of humans—be it a school, a nonprofit agency, a governmental unit, or a business—is going to have a bell curve of high, average, and below-average performers. One study found wide differences in performance for complex jobs (e.g., attorneys, physicians, and cartographers), where the top one percent of producers generated 2.27 times the output of average producers (Davenport 1999: 66). It is estimated the best computer programmers are at least twelve times as productive as the average. Alan Eustace, a vice-president at Google says “one top-notch engineer is worth 300 times or more than the average” (The Economist, October 7, 2006: 22).

Given human nature, not much can be done about this distribution, but what we can do is not exacerbate the problem of below-average workers by designing systems around their weaknesses at the expense of placing a ceiling over the heads of the superior performers. Public schools do this all the time. They “dumb down” the standards for the slowest learners, while letting those with above-average abilities stagnate and get bored. A business organization should not do this to spare the feelings of the less effective team members; rather, it should design processes and compensation systems that take into account different levels of performance.

Are Professionals Really Knowledge Workers?

My colleagues and I at VeraSage Institute spend the majority of our time working with, by any common definition, knowledge workers, at accounting, law, and technology firms; advertising agencies; consultancies; engineering; actuaries; architecture; and software programming firms; and so forth. We educate them on the difference between manual (and service) workers, and knowledge workers.

But I can always count on at least one of my colleagues to cause some cognitive dissonance, and Dan Morris has not let me down. He thinks I am wrong about most professional firms being filled with knowledge workers; he believes the majority of them are more akin to factory workers in the days of Frederick Taylor and Henry Ford. Now I know this is a heretical view, but Dan has assembled a very powerful argument to support his assertion. He does not deny professionals have the potential to be knowledge workers. His argument is they are not largely because of the incentives and structures of the firms in which they operate, which function more like sweatshops of yore. 

Summary and Conclusions

We have covered a lot of ground in this chapter, and rightfully so, since human capital is the most important component of the firm of the future’s intellectual capital. It is time for leaders to stop viewing employees as simply problems, procedures, and costs. People are not assets, inventory, or resources; they are individuals entitled to a sense of purpose in their lives, who congregate in organizations to make a difference in the lives of others. The universal need of every worker is to perform meaningful work, in a community with others of like mind to make a difference in the world.


Want more? The full “lost chapter” is over 26 pages and practically a book by itself! Our Patreon members have access to the full lost chapter along with bonus episodes and bonus content every week.

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Episode #260: Free-rider Friday - September 2019 - Pacioli, Uber, and 42

Come Free Ride With Us For The Month of September!

Here are Ron’s Topics:

Here are Ed’s Topics

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Here are some links from our bonus show this week. The show, all bonus links, and additional bonus material are available to our Patreon subscribers. Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #259: Lawyering Up — Value Pricing Down Under

Ed and Ron are honored to have our three VeraSage colleagues, and Australian lawyers, on the show for the second time: John Chisholm, Matthew Burgess, and David Wells. We discuss what's happening with Value Pricing in Australia, and peel back the curtain on this November's VeraSage DownUnder Symposium.

A 3rd generation recovering lawyer, for well over a decade now John has been urging lawyers to not only stop billing their services by time but also to burn their timesheets. He works with lawyers & other professionals assisting them with both a mindset change, and the practical implementation of moving towards value based pricing principles to become Firms of the Future instead of firms of the past. John is a Senior Fellow of the VeraSage Institute, Adjunct Professor of Law at La Trobe Law School Fellow of the College of Legal Practice Management and Distinguished Fellow Centre For Legal Innovation. He has written numerous articles, papers and blogs on value based pricing and has presented and spoken to thousands of professionals on the topic in Australasia, USA,UK and Latin America. In 2017 John co founded The Innovim Group with fellow lawyers Liz Harris and David Wells to run Aligned Pricing Programs and assist professionals with their practice and
pricing transformation.

Matthew Burgess founded specialist timeless Australian law firm View in 2014 (see www.viewlegal.com.au). For the previous 17 years, he was a lawyer and partner of one of Australia’s leading independent law firms and in 2002 was one of the firm’s youngest ever partner appointments. In part leveraging off the skills gained from advising a range of successful businesses, Matthew Burgess has been the catalyst in developing a number of innovative legal solutions; including establishing what is widely regarded as Australia’s first virtual law firm. Matthew last filled in a timesheet in 2013, and has been a passionate and vocal advocate for professional service firms to abandon the heritage inputs based time billing business model. In 2017, Matthew’s vision of an integrated fintech and legal solution based on membership pricing (ie subscription) was realised with the joint venture between NowInfinity (see: www.nowinfinity.com.au) and View Legal.

As Managing Partner of Moores Legal, David led the firm's transformation to a value pricing practice, implementing Moores Agreed Pricing (MAP) - negotiating an up front price with clients. MAP is not simply a new pricing model. It represents a whole new business model. This transformation involved renewing or replacing several key systems including Knowledge Management, Performance Management, Project Management and Business Development as well as budgets and reports. Beware! Ditching hourly rates and time recording will necessitate that. There is always risk associated with significant change. Sometimes there are risks that you can't afford not to take. For the outstanding team at Moores with a vision for the goal of long term relationships with clients who are the right fit, this was one such risk.


A Transcript of the Show Follows

Ed Kless
We are very pleased to have three of our wonderful various age colleagues with us. We're going to be discussing value pricing down under as well as the upcoming various age symposium that we've been talking about on the show. And I'm going to introduce these three gentlemen in turn. First, we have john Chisholm is a third generation recovering lawyer. I love that I'm going to ask you a little bit about that john. And he works with lawyers and other professionals and assisting them to change their mind, right and shift away from billing time into value based principles to become a firm of the future. We have Matthew Burgess, who founded a timeless firm in Australia called view legal and he's been doing that for quite some time. I'm going to ask we'll ask him about to tell a story of that and you think they they, they ditch the time sheets in 2013. So it's been five, six foot for the years. And then lastly, but not least Lee we have managing partner of Morris legal David wells who joining us as well. And we are just thrilled to have you guys on the soul of enterprise. So welcome all of you to the soul of enterprise. Again, thank you

Yes, we are going to dispense with our normally when Ron and I have guests on we kind of alternate back and forth. I'll take the first 15 minutes and Ronald take the next 15 minutes but we decided that that's just not going to work with this group because the conversation needs to be a little bit more flowing. So I'm thrilled to have you guys on john as the senior partner of senior partners here I'm going to turn to you first

And and ask so first of all, how's house? How are things down under today?

Unknown Speaker

Well, saying it's 6am or just after 6am. You will be pleased to know though that the world made it to Saturday, the 21st of September.

Unknown Speaker

Things are things uh well down under, I assume when the sun breaks eventually it'll be even nicer. Where Matthew is. I'm in, in in Melbourne in the south of Australia. Matthew is in Queensland. So I assume the sun's already well and truly up in Queensland, Matthew,

Unknown Speaker

absolutely, Mr. Chisholm.

Ed Kless

But that john, just it just talking a little bit about this. So your third generation recovering lawyer, does that mean the to vit to previous generations are also recovering lawyers or are you the only recovering lawyer of the three?

Unknown Speaker

Well, my grandfather I don't think he can say is recovering because he passed away many years ago. My father is definitely not recovering. He's He's in his 90s. I'll have to tell him I told everyone how old he is. And he's still a got a practicing certificate and practicing lawyer. He's still going to the office. Now he doesn't he's, he's he's, he's he's dining room. He does have a works. It works works at home. But you'd be pleased to know he's never ever filled out a timesheet in his life in Rome. No,

Ron Baker

he did it by weight. Right? Only the story way the file after they were done? Well,

Unknown Speaker

he didn't used to. And now I know this sounds really Myron par kettle so but he still does it. He never ever set out a bill with that ringing client first.

Ron Baker

That's brilliant. Actually,

Unknown Speaker

gee, wouldn't that be revolutionary? And he would discuss the matter and discuss the bill and the client was happy. Send it the bill and Clive wasn't maybe

Unknown Speaker

make it bit bit less, but he would never ever send out a bill. So there was no surprises for his class.

Ed Kless

Outstanding. And Matthew, turning to you now just been without timesheets for six years. Is that right?

Unknown Speaker

Yeah, absolutely. That even that a little bit misleading. Because even before that we were absolutely on the fixed pricing and value pricing trial. But doing it inside a very traditional sort of inverted commas to steal I think one of John's words, big law firms which which product itself on charging keeps it ours all the time. So little bit of a mismatch there for a few years, but but then eventually off in about 2013 never looked back. should add we we gave everyone the choice to continue filling in timesheets, if that's so desired.

Ed Kless

Can you were there any takers for that? Or they

Unknown Speaker

takers? Finally, single person took up that offer? extraordinary.

Ed Kless

Crazy. That's it? I didn't think it must be must be. Yeah, no, they love the time. She's other places. And David is the newest to this crazy model. We want to want to welcome on board here. But how how long have you guys been without timesheets?

Unknown Speaker

So I hadn't realized that our timeline was almost the same as Matthews, we started pricing for value in 2011. But I did allow people to continue filling out the time sheet for a couple of years, we actually turned off the time sheets from practice management system 2013. So that's about the same as Matthews experience. Ironically, a couple of words in our practice the elect to continue filling out time sheets, it made them feel secure. And I could look back at the end of the day, and they could probably try and console themselves that they have actually done something. I'm not sure why they didn't know that they've been doing anything with our time. But that's the way it was. But yeah, we ditched the time sheets in 2013.

Ed Kless

And I just don't want when I last one yesterday, I'm gonna let you take over here. But and I'm going to ask all three of you this, I'm going to do it in reverse order that I did this. Because this is a thing that's really been been percolating here in the US. And that is this a sort of semi resurgence of this notion of well, you can go to value pricing, but we'll let you keep the time she cuz it's really it's it's okay. What what are your thoughts on that? And let's we'll, we'll start with, with David, what do you what do you think about that?

Unknown Speaker

It's a nonsense, it's not okay, you cannot get really good at pricing the venue where you're filling out the timesheet. And so I mentioned this period of two years, during which we allowed people to fill out timesheets after we started pricing, the value, our momentum, in terms of our journey with learning how to do value pricing, well, would have been a lot better if we'd turn off the time sheets. Immediately, I reckon we probably lost about 12 months because of my failure to get wise in relation to that issue right up front.

Ed Kless

Okay, great. Thanks, Matthew, what about your thoughts on that?

Unknown Speaker

What he said, I mean, we all experience and having lived in God breathed it. I mean, I can only assume that people driving that it has a vested interest because they're trying to flog some sort of technology that helps you to track everyone's time. Well, secondly, they never actually done it. Because while it might sound fine in theory and practice, but it's absolutely not the case. So now, I mean, out, we often go back to what we know, when we used to recruit people, and it's a little bit of a one liner. But But unfortunately, it's a bit true, you know, what's the difference between a good lawyer and a bad lawyer. And the reality is that, you know, the bad lawyers make those things last a very long time when they're on time sheets, the good lawyers, even longer. And you say that is that that's the mantra and and the minute you focused on inputs is the minute you can never ever, ever get to a position where you're actually pricing for value and pricing in a way that the customer is at the centerpiece of the holiday Asian

Unknown Speaker

tour. And, john, anything to add to that, I absolutely agree with with David and Matthew, you just can't be half pregnant. It's It's so you keep the time sheets best will in the world. People default to time I see it all the all the time excuse upon with with firms that Yep, one section of their, their firm, they may be genuinely trying to go to at least fixed fees, maybe value pricing, often because perhaps a client's insisted or something like that. But you know, when you still have the the rare model or the compensation model, and the measurements and rewards around time, you're just going to keep continue to get time and get it in spades. And, yeah, it's just so high. And that's it makes it hard for particularly the bigger firms to, to really do that paradigm shift and change is run. Baker has always said and you've said it. It's not a building model change. It's a business model change. And that's what makes it so hard for many firms to

Unknown Speaker

adopted.

Unknown Speaker

Take it wrong.

Ron Baker

Why do you guys think because you're part of innovation in consulting and you help firms move to this model? Why do you think so many consultants are out there, paying lip service to value pricing, but saying at the same time, but you can keep your time sheets that issues a distraction? I don't want to bring that up, because it just fosters a lot of dissent and all of that, and why is that we all know pricing consultants, to the professions that have that line. And I just find that so frustrating. I do believe they're part of the problem. But But why do you think that is?

Unknown Speaker

any of it? David, do you want to go first, before I say anything defamatory?

Unknown Speaker

We were just going to try and define no one. But I do think that they're trying to have their cake and eat it too. I think they're trying to play both sides of the street. And I just think that it's dishonorable in a way. I think that if we profess expertise, we should actually be trying to give our clients guidance about the best way to do stuff. And I think it's it's a false premise that you can practice constructively with clients and build relationships while you filling out the timesheet. And I wish that clients would pay no attention to consultants who actually preach that you can play operate on both sides of the street, it just doesn't work.

Unknown Speaker

Matthew,

Unknown Speaker

john guy, then maybe we he'll be beaten by the break and find anyone.

Unknown Speaker

Whether we get to this time, and I think this has been a big topic on this program that if you start looking at that you're crossing 2.0. So in other words, subscription. I mean, it's just completely untenable that anyone would even remotely think that term sheets are useful in that environment. So I'll stand by my only comment. I think the people providing this either had a vested interest, or have never actually actually been involved in a profitable firm.

Unknown Speaker

That value pricing process.

Unknown Speaker

Can I just say one thing, and I went to find anyone. But yeah, I think it speaks for itself that most of those, if not all of those pricing consultants who preached keep the timesheets actually don't keep timesheets themselves. Exactly.

Ron Baker

Yeah. That's exactly right. Well, we may, we may take that we may discuss that even further, because I just I find the topic absolutely fascinating. Because any firm that has made the transition is Matthew and David, just to test it to, they all say unanimously, that they they should have gotten rid of the time sheet sooner. So I think the empirical evidence is out there. And to say it otherwise is a form of malpractice. But unfortunately, guys, we're up against our break. And we'd like to remind you folks, check out the soul of enterprise. com will probably post the full transcript of our show today with our three Australian lawyers, and also if you'd like to contact Ed or myself, you can do so at asked to so he at Paris h com. Now we want to hear from our sponsors.

Unknown Speaker

All right, you're clear.

Unknown Speaker

You guys should just say anybody that's good.

Unknown Speaker

Like gentlemen, we do a little quick little maintenance. All the guests, if you can make sure your zoom is brought up on your screen and go to the bottom left, you're going to see a little microphone there. Next to the microphone is an arrow. If you click on that arrow, it brings up a small menu, the bottom of that menu, you're going to see audio settings, if you click on that, it's going to open up an actual menu and you will see your speaker settings and your microphone settings. in there, there's going to be a little box that's possibly checked that says automatically adjust volume. Make sure that is not checked. You want that that turned off.

Unknown Speaker

Okay.

Unknown Speaker

He was having trouble just let me know.

Unknown Speaker

Yeah, I'm not getting that little box on the bottom left hand screen. Okay, we

Unknown Speaker

do not have a microphone check. plugged in. It might not might not pop up for you. So if you're not getting it at all,

Unknown Speaker

I've got it up yet. It doesn't say I haven't clicked the box that says automatically join audio. Okay.

Unknown Speaker

Yeah, just make sure that automatically just is not checked. That's

Unknown Speaker

what we're just just making sure.

Unknown Speaker

Yep. Okay.

Ed Kless

And, and while we're during these breaks will be coming back. But just you know that we do reduce release the entirety of the show as part of the Patreon episode, which includes the stuff from in breaks, so don't say anything.

Ron Baker

You don't want public

Ed Kless

description. It's a closed it's a closed group. But

Ron Baker

yeah, now of course we'd be well defended Ed.

Ed Kless

Yes. Please take us back. Ron. Take us back. Okay. Okay.

Ron Baker

I'm gonna jump to you, David,

Announcer

with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask gsae. Now back to the soul of enterprise.

Ron Baker

Welcome back, everybody. We are lawyer it up and an outrageously hourly rate here. So glad it's only lasting an hour. But David, you made a comment about the the effect of no time sheets on team members. And Matthew talked about this to giving people the choice to keep their time sheet and nobody did. But I remember David, we spent a day at your firm, me and john and we got to talk to the team about how they work different as a result of not having the sword of Damocles, you know, the time sheet hanging over their head. And I think it's one of the hardest things to articulate to firms. And I'm just wondering if you can attempt it. Because what I got from that day was just a ton of it's changed our focus from inputs to value. And it allows me to do things that maybe we wouldn't have done in the past for the client more hand holding more Council, whatever it might be, but talk about some of those non quantifiable effects of not having a timesheet culture.

Unknown Speaker

You mentioned the focus on outputs rather than inputs. And that's probably the primary effect. That just was revolutionary for our lawyers that they realized that what was important was,

Unknown Speaker

and that they were going to develop with their client about

Unknown Speaker

fleshing out the clients objectives for the project, how we get to be managed, our people would spend time actually having little celebrations about getting the agreement with the client that our practice was retained to go ahead and deliver the project. And then we get on and actually start delivering after the price agreement was signed, the self esteem of the lawyers in our practice, just rows that it was almost pill. Right. I just can't tell you the difference that it has made to morale in our practice, I didn't realize that that was going to be a byproduct of it wasn't a primary driver for us in, in going down this path of practicing for value. But what a sensational byproduct it's been.

Ron Baker

Yeah, especially since you know, Australia seems to write a lot about the link between being on the hamster wheel of the billable hour and mental illnesses, whether it's depression, alcoholism, suicide. And I just think that that is such a big shift. And it's so hard to quantify. But it's even so hard to sit there and explain even the narrative form until people live through it. Matthew, how would you How would you say it's affected your team? change their focus or the culture?

Unknown Speaker

Yeah, I mean, I catch driveway us internally, and it's absolutely the case, Sean is that it's taken away this incessant and overriding focus on what's chargeable and flipped our model to what's valuable. And that probably sounds a little bit glib, but in particular, when you then overlay, as you've just touched on mental illness aspect, I mean, that we don't like talking about that too much. Because, you know, there's a lot of science to suggest, the more you talk about it, that the bigger issue becomes the people that are in that space, but the the stats are actually quite horrifying run and the fresh, professional service firms as a whole have mental illness, you know, significantly higher than the general population, lawyers even worse again, and, you know, it's a huge issue and for the industry as a whole to be almost dismissive of that I we found, frankly, by the end of our journey on being time, billers, it was it was morally wrong, from our perspective. And as I said, I don't want to get too high on that. But the reality is, the stats Don't lie. And there you go back to Martin Seligman has been industry a link between an input focused journey and mental health. Oh,

Ron Baker

yeah. And certainly I don't think any of us are arguing the time sheets are the only issue, but it's certainly a large factor. Everything I've read from down there, says that that everybody complains about that hamster wheel. It's just amazing. Yeah,

Unknown Speaker

it is an insider. Of course, it's not the only issue. And it's a very sensitive issue. But the reality is that we we are an obligation to our people, we failed to break that cycle back that had.

Ron Baker

JOHN, I know you consult with a lot of firms and spend a lot of time in front of young lawyers. How do you try and articulate this issue?

Unknown Speaker

Yeah, look, I think

Unknown Speaker

Simon's what David and Messier, have spoken about, it's, the well being is certainly it's stressful enough in any other profession. So the legal professions, adding to that, you know, I've just got to be seen here, I've got to be doing, I've got to fill out my time sheets, the way, you know, the traditional firm, or the old law, I got the old law, leveraging people by time by hourly rate is, the more money they make is, the more they are on the hamster wheel. And, you know, with young lawyers, and we all know, we know many lawyers who have left the profession for principally now the reason that they just don't don't want to feel that time sheets, they just don't want to be there for the sake of it is is Matthew said they can find, you know, being a value to an organization, even thank goodness, there's opportunities in in law firms like Matthews and David's and others out there. But until recent times, they wasn't for many of those lawyers that were feeling just just trapped by the business model. And they have to either leave the profession, perhaps going house, now, thank goodness, there's more opportunities where they can, you know, be really creative, really look at the outputs and results and adding value to, you know, to their clients, to their customers, without just looking at having just put all the time at the office, which is still unfortunately, run, as I spoke about earlier on, you know, most of the firms just can't change that measurement or and reward system that they have in place. And it's it's really hard. And until that changes, it is a chicken and egg situation, it's going to be really hard for them to not just truly value price, but to do all those things that that Matthew and David talk about.

Ed Kless

Yeah, yeah. Well, I'm going to add a lighten up a little bit. But my, my daughter was just in a in a production of the desert. He's frozen. And you know, as the song goes, we're gonna let it go. The past is in the past, right? So we're gonna we're gonna move, we're gonna let it go. And I will I would I like to turn our attention to is what Ron has dubbed value pricing two point O, which is this whole subscription model. And I understand from Ron Matthew, that this is something that you have started to dabble in a little bit, maybe David and john as well. I just I just know that he specifically talked about you. So what are your thoughts on this whole thing? You've heard Ron and I talk a lot about this subscription based model? What do you think it means for lawyers specifically, and we let's narrow the focus will but

Unknown Speaker

yeah, absolutely, Ed. And I think from our perspective,

Unknown Speaker

you know, value pricing, throw away out implementing value pricing, it's a useless publication.

Ed Kless

So yesterday,

Unknown Speaker

it's something controversial.

Unknown Speaker

We're trailblazers, Ed, and I

Unknown Speaker

know you all, you gotta grab it, he is gonna throw it out. Come on.

Unknown Speaker

It is totally I mean, value pricing, moving off time sheets, and value pricing just totally changed our business model. Absolutely. We feel that subscription is actually going to change our lives as well, it is unbelievable. We started with baby steps, we were really trying to provide a subscription model to access some of our intellectual property, whether it be books, or audio books, or podcasts, whatever it might be. We've now iterating the bad at really quite significant levels into actual legal solutions, particularly product or solutions. So you know, in the US, for example, a Legal Zoom style solution on a subscription model, or you can aid and, you know, you talk about that some of those other businesses are growing, it is exponential growth we're seeing that's why it's like it's unbelievable, the guys in that subscription model. And the beauty, as the two of us speak about it so regularly is that it is interesting, highly customer centric. If you're not delivering every single day, every single week. I mean, the subscription gets turned off. Like it's a pretty, pretty blunt piece of feedback that just go straight to the hottie business models. So we were in state this weekend, and we were only going to get data.

Ed Kless

Well, that's that's great. And what are there anything that you're seeing that that has surprised you initially out of the gate with it?

Unknown Speaker

There's been a few things. I think, from our perspective, the biggest surprise has been how easy it is to create subscription across a legal product. Because I think when we initially looked at it, we thought I know that you know, of course, if you're if you're selling software, of course software as a service as subscription yet no brainer, go for it. We could never do that in the law. Whereas once we've actually peeled away that initial resistance, we actually feel was as foolish as we feel today about time sheets, we we actually feel as foolish that is being back dismissive of subscription and in the legal space.

Ed Kless

And, David, what about you? Have you done a dabbling in subscription or thinking about it?

Unknown Speaker

We certainly have, we don't actually call it subscription. But I think that to the extent that professionals have retainers with their clients, it's a subscription model. And Matthew might be a little bit further down the track than we are at Moore's in relation to subscription. We're reasonably high touch practice, doing high value work for clients who, certainly in the private cloud area had always repeat clients, we hope that they will be as a result of good experience, but I think it does lend itself more to repeat clients. And we've had some outstanding results with some of our organizational clients that have become very loyal. And ironically, what we do with subscription model for the retainer is we value price that arrangement before the retainer, so we would give the client who wants to pay for a year's worth of legal services from our lawyers, three options about how they might like to structure that arrangement over the year.

Unknown Speaker

And

Unknown Speaker

it's it's a pretty heavy combination. Actually. We had one of our boys, Hugh Watson, whom you know it because he was at the conference in Texas two years ago. He went on holidays, couple of months ago, he was away for two weeks of the month. And I was astounded. He was still one of our top billing lawyers for even though he wasn't present. Now, I know he had his phone with me was doing a little bit of work while he was away, but he blitzed everybody else. And I won't tell you how much he believed in that. But it was very, very encouraging for him and for me,

Ed Kless

right the power the power of of making money as you sleep with the subscription model, but we are on vacation, and we're up against our next break want to remind you that in order to get ahold of Ron or me, you can send an email to ask TSOE at various age com, of course, the website is the soul of enterprise where you can get show notes as well as previous to upcoming shows. And we're going to talk about in an upcoming same segment about the various age down under conference, if you want more information about that go to either the soul of enterprise com slash VDU or their SH com slash VDU. And that will be what will take you to the site where there's all of the information and links to how to get registered for that conference. But right now, a word from our sponsor.

Unknown Speaker

All right, you're clear.

Ed Kless

And yeah, no really good. And what coming back for on this run, if I could I just want to asked john in his work with with the talking about subscription to other people, if he's seeing the same thing that we're seeing, which is, for some reason, subscription resonates a lot faster and quicker. Right then did value pricing. So I don't know if that's your but I don't answer now. Because save your hands.

Ron Baker

Right, right. JOHN, I do want to ask you to I because you might have sent it to me or maybe I sent it to you. I forget there's so much stuff going back and forth between us all but there was a great ABA article, profiling all these lawyers. Now most of them were sole proprietors that were using some form of subscription. I believe they were all USA base. I don't remember if there were any Ozzy's in there, but wanted to see, you know, if you're seeing any movement in that area amongst Australian lawyers, especially on the small end,

Unknown Speaker

yep. And it when you say people get it quicker, is that they? Are they then taking action to implement or it's more that they just say more open to have a discussion?

Ed Kless

Oh, no, they're not actually. They can just

Ron Baker

get their mind around it easier. More.

Unknown Speaker

It's probably what it's probably worth also drilling down a bit. Is there a difference between coming back?

Ed Kless

Okay. Yep, bring it back.

Announcer

You are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSO, we know that to the soul of enterprise,

Ed Kless

and back on the soul of enterprise and run, and I often joke that this is the, quote, fastest hour of our week. But I gotta tell you, this is flying by even more quickly. And now I understand why at various age events, we, you know, end up at four o'clock in the morning and thinking, Oh, is it bedtime? I don't like that way. And now I'm beginning to understand what's going on there. JOHN, I want to turn to you and just pick up on the theme that we left in the last segment. And that is this notion of subscription based pricing and in your work with talking to firms and speaking to them. One of the things that Ron and I are finding it with subscription is that the concept resonates a lot more quickly than did value pricing when we first started talking about it. I don't know why this is maybe it's because people subscribe to other stuff in their lives. And that that's the the framework that they have. But are you finding that as well that people wrap their mind around it a little bit quicker?

Unknown Speaker

it? I'd love to say yes. But I think they do understand, they do understand the concept. They actually actually get you can relate to subscription models everywhere in our business and personal lives and what have you. And I think for law firms, it's still if they're doing anything major, in that case of the platform, netease firms and a couple of others, it's still down the retainer model. They do understand that and all the benefits that that that that come with that. But, you know, actually doing it, you know, getting to what we would call value pricing. 2.0 is still really hard. I haven't seen some of the accounting firms. Some of the bookkeepers and all that tend to be doing it more, I have to say, in my experience, at least here in Australia, I think it will,

Unknown Speaker

you know, will take off

Unknown Speaker

quicker because you know, value pricing still has that I don't know what it is, it's just seems threatening or whatever too many firms yet talking about retainers and subscription. They do understand, but I still think there's a huge gap. I don't know whether David or Matthew would agree with this between actually understanding it and then being able to implement it within their current business model within their current measurement and reward structures is still a challenge for for many firms. Some of them have got separate areas, or they've purchased here, at least here in Australia, they've purchased some some business, which may be more in the technology space. Certainly, Matthew, the accounting firms have done it here. And they're going heading down the subscription model quicker in in, in that part of their practice.

Unknown Speaker

Oh, okay. Thanks, Ed.

Ron Baker

You guys, you know, it's obvious to me, it's been obvious to me since I made my first trip to Australia in 2000, that Australia punches far above its weight in terms of innovation. And you the last time you guys were on collectively was back in February 2016. And we were talking about the implications of Daniel Susskind book, the future of the professions Daniel and Richard test. And he's got a new book coming out, by the way called the end of work. And I just wanted to ask the three of you. And David, I'll start with you. What other types of innovations Do you see in law firms in Australia that are going on besides value pricing to or even value pricing? One? Oh, do you see a lot of artificial intelligence or machine learning or other types of innovation, that you've been intrigued by or impressed by?

Unknown Speaker

Certainly a wave of innovation with technology. Probably a bit of a skeptic that the technical obstacle innovation is actually go to deliver sustainable benefits, because everybody catches up. Forcing was in innovation. And of course, when everybody started out, so it wasn't really something that was delivering any sustainable advantage to affirm. I think that one of the real ways that practices can innovate effectively is in relation to their business model. And if they actually start narrowing their focus and building a depth of expert expertise the way that Tim at.

Ron Baker

David, you're cutting out there. Why don't you

Unknown Speaker

actually end

Ron Baker

up your cut now, David? Yeah, Matthew, go ahead. Thanks, you

Unknown Speaker

should actually call, I don't know if that comes up on the screen. For those watching at home, I should call it out on how quickly this goes. I'm actually struggling big time today. And because I only have to listen to you guys on double time.

Ron Baker

That's funny, Texas, you know, so it's always New York actually talks really fast.

Unknown Speaker

I'm going to do an gratuitous plug for various sites down under, I don't know if this is the right time. And

Unknown Speaker

I disagree a little bit with David, in terms of how much the subscription model and how much innovation could be coming through. And maybe it's it's just saying the same thing that a different perspective, from LL and I think the interpreter, the digital disruption into play in the legal space, I don't think anyone in the room currently can can really see where that's going, we've had a bit of an insight on this. In terms of the joint venture with done with a FinTech company here in AWS, you know, it's the old is at the time quite a lot. You don't need to be worried about the second best swordsman in the forest, you need to be worried about the some of the comes in from the side and just does not play by the rules at all. So Ron, to actually answer your question, I think the number of solo printers just seems to be overwhelming at the moment, the ability to just walk out of big law and set up a really profitable, interesting value pricing practice, within a week, has become all encompassing, was saying like just hugely talented people coming out of the machine and doing their own thing. And when you have hugely talented people doing that, the innovation becomes over, you know, just becomes unbelievably compelling. So from our perspective, I think, while they did disruption does have the potential to democratize us all. If you're like apple, and that's certainly the model we're trying to build. And you can build an ecosystem that it becomes almost impossible for people to change ships on, I think what's actually happening potentially, is that there's businesses being built that people turn around in I don't know how long, maybe three, maybe five years member? RR that's what you were doing. All right. And, and yet, we can't join that game, because we didn't get on the ship at the right time. So we might be wrong, that, that maybe that's part of the discussion that will be having it there, essentially and under.

Unknown Speaker

That's awesome. JOHN, how about you?

Unknown Speaker

Yeah, look, I I agree with that, I think one of the even the move to value pricing move to the sort of models that that Matthews talked about, it's being bottom up driven, have to say it, at least in terms of sighs and numbers. And, you know, the work that we're doing through the Innovation Group is mainly with, you know, solo practitioners, entrepreneurs, smaller firms that just felt trapped refugees from old Laurel or big law, but they can they can utilize technology to get to, you know, where they want to go, it's not the driver, but they utilizing that, but that just allows them to do so much, much more quickly than what you could in my day, or, or, you know, even five years ago, and I think I think that will only exponentially increase. I think it's exciting from you know, from from that point of view. And runners, you've always said that those that have the most to lose will be the last change. And I think, you know, big law old law, you will be the last to change. And look, let's be frank about it for many still, particularly at the beginning to tan. They, you know, doing quite well financially, at least some of those people in those firms are doing quite well financially and they're not about to change the business model anytime soon.

Unknown Speaker

So I really do think it's bottom up.

Unknown Speaker

driven and, you know, we should be it's just a plug for Australia, but quite proud of some of the technological advances we're we're making here, and some of it, it's been exported to your country and others around the world. But at the end of the day, it's it's, it's it's the mindset, it's the that's what's really driving that. And that you can't, you know, you can't release the entrepreneurship in those sort of people if they're part of the big old little structure, I don't think anyway.

Ron Baker

Right, right. It's another Yep, sorry. No, no, I was just going to say that it's too bad because these big firms they have the resources and if they ever did step up and attempt to do this value pricing one or two Oh, they would they would be great at it.

Unknown Speaker

I look, I don't know whether I'm gonna be around to see it. But one day one of those firms will do it whether the penny drops or it's you know, they get to the tipping point and we our profession, I have to say in the main of sort of lemmings and you you watch when one of the big firms do it may not be a law firm just just watch the others follow we see it in so many other areas of what what they do but until then, I think you know, firms like David Matthews and other firms that you know we know and work with certainly here in Australia they're they're raping the rewards not just the financial rewards but the you know, the self satisfaction the self esteem rewards, you know, that first mover advantage and justifiably they should they've been courageous, they've they've, they've taken you know, a leap of faith to some degree you know, and made the paradigm shift and well, long may that continue

Unknown Speaker

running might be blind arrogance, it's Matthew jumping in again, but I and we spent a lot of time consulting in inverted commas or chatting to some of these bigger firms to try to help them because we we believe that it's actually that's for everyone that has just had if we can all rise at its best for everyone. It's pretty easy litmus test though. Because if you casually dropping okay and how do you track what you're doing? And without missing a beat like oh, yeah, well, we all still fill in time shades so pretty short discussion? Yeah. Not real concerned about what you guys are going to be doing anytime soon.

Ron Baker

Yeah, well, Matthew I think the first time we met in person bin you were in one of those big firms correct you probably thought I was crazy

Unknown Speaker

it changed my life Ron you've heard me share that story i mean i i actually I my life to you and your vision because of you I did I could not get it I'd read for the future I and I could not join the dots on that sitting with you that day was enough it was the last piece in the puzzle for me to to actually get with the program

Ron Baker

well and on that because I

Ed Kless

was gonna say it's good enough with the get get a room guys get it

Unknown Speaker

wasn't obvious it was writing off the script was

Ed Kless

all good. It's all good. But we're gonna we're gonna take a take our break. Now I want to remind you, you can get ahold of Ron or me the email addresses asks he so he at various age calm, of course, we are out on Twitter. So hashtag, ask ESOP as well as the handle at to you. So if you want to contact us, last thing I would ask that you do is to put your rate your podcast equipment on pause right now, and run out and rate the show. And if you really want to ingratiate yourself toward us write a review and we will be happy to read that on the air. But right now a word from our sponsor and my employer, sage.

Unknown Speaker

and clear.

Ron Baker

Thanks, Matthew, you said that just about the way I wrote it for you.

Unknown Speaker

Easy to see when it's

Ed Kless

David can vividly remember David, I don't know if you see but there's a if you can get to the chat window I sent sent you a link that if you can probably click on that link and find an Australian number and call in on the phone because your connection is very shaky. So which is why we had to cut you out the last time. So

Ron Baker

yeah, I'm thinking that dish we dropped the video. I don't know.

Ed Kless

It's not our video. It's his connections connection.

Ron Baker

Yeah, yeah. Yeah. Okay. Yep.

Unknown Speaker

Good. CNVN. JOHN.

Unknown Speaker

Thank you. Thank you.

Unknown Speaker

Thank you. I see. We don't have it.

Unknown Speaker

We're in the middle of Brisbane and we don't have it.

Ed Kless

And Josh, Josh, I'm not didn't see any countdown for me last time was that

Unknown Speaker

by design. I was trying to see if I could figure out his thing. And you had already started going to break by the time I realized we're supposed to go

Ron Baker

Okay. Okay. Um, I was looking forward to I was like, wait a minute.

Ed Kless

Yeah. Professional.

Ron Baker

BDU. All all this segment? I think we should. Yes,

Ed Kless

yes. Absolutely. Okay, so break, bring us back and take us there.

Unknown Speaker

Okay. If you're ever looking for new topics, and I reckon palantir your bookshelf would be you can fill out a few shows. Just doing that. That is an awesome show.

Ed Kless

So I would I aspire I aspire to john setup, which is with the wind behind this. I've already decided that in retirement, the bookshelf will be replaced by the john Chisholm. Wine Rack.

Announcer

You are tuned into the soul of enterprise with Ron Baker and Ed Kless. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSOE. Now back to the soul of enterprise.

Ron Baker

Welcome back, everybody. We are lawyer it up today on the soul of enterprise. And in the last segment, gentlemen, let's talk about the barest age down under symposium. symposium as a very specific word I'll let I'll let Ed describe that but but john, what what are the plans? pull back the curtain for us?

Unknown Speaker

Yeah, well, we got two great days. We're in fact, there's two events. There's the symposium which is being held in July, which is about hundred 80 kilometers from Melbourne. So two wonderful days you'll be surprised and know they'll also be some wine consumed at some stage Australian Australian wine. But now with with got your we're going to be talking about positioning and Ron and Ed, we all know you can't separate pricing from you know, positioning your practice, we're certainly going to be spending, you know, a fair bit of time talking about the subscription, business model. And behavioral economics and heuristics. Certainly in the no no fun group. David, listen, I doing a lot of work around that area and just have, you know, we all know, humans do not usually make rational decisions. So what's the impact of that on, you know, firms marketing firms pricing and the value they can deliver to their customers. IIN technology, after action reviews just had that is really transforming firms, and some talking about strategic TG cos transformation. So yeah, it's going to be an you know, those that have been to the symposium, the various age symposiums before, know that just things take off a little bit, a lot of other stuff that will be talked about, I'm really looking forward to it. We've got really good numbers, we could still use a few more that come this, there's still some seats available. And but prior to that, so that's on the 14th and 15th of November. Prior to that there's a one day workshop called transforming your firm, which is Liz Harris, David wells, and myself and Kirk Bowman from out of value. So we're running a full day workshop in Melbourne on the 12th of November. So it's going to be a big, big week. But a great way, Matthew and his team is Danny. And so looking forward to it. And I certainly am. And I am and I appreciate the support from the various age founders and follows fellows. So yeah, I don't know, David, messy your insights into it, if I left anything out?

Unknown Speaker

Well, I hope you can still hear me, gentlemen.

Unknown Speaker

Yes, you can.

Unknown Speaker

It's going to be a wonderful, wonderful gathering. I'm looking forward to meeting lots of new friends who are coming from far and wide, as well as old friends from North America and the UK. And the the Australasian contingent, is extremely excited about it. I've got probably a dozen people from the most practice who are coming. And there are people from other value pricing practices, such as hive legal and the people who have been in the innovation, align pricing program yourself excited about coming along as well and meeting luminaries

Unknown Speaker

like summary john and and David as well. I think the only two things are there. It's unbelievable what can happen when you get super smart people and I'm excluding myself from that but super smart people in a very Monday night. People talk about that there is a headache and it starts from normally within about 20 minutes in and does not stop for the 40 days It is unbelievable you every time I've got more value out of this conference symposium then then anything I go to in the in the entirety of the previous years. So I cannot understate how important it is to our business. It may feel a little bit cultish. But it's a good kind of cold. And it's the kind of cold you want to be part of. And the reason for that, I think ultimately is to person people are just unbelievably generous. Like it's just as I said, I don't know what why news you guys serve up. But there's just something in that. And that means it's everyone's there to say everyone lift it up and the generosity is everybody happy. So I'm counting down the sleeps.

Ron Baker

Awesome. And tell the truth what symposium me what do we really do at this thing.

Ed Kless

It's funny that you mentioned that run the word symposium is Greek for to drink together. In ancient Greece for them, and they had these gatherings of all of the intellectuals, the they would you know, be serving some wine. And my favorite part of this story is that there's a head of the the symposium who's known as the symposium mark. That's right was head of so symposia. So I think john, your appointed the symposium and the symposium because job was not only to keep things on time and keep things moving, right, but also keep the level of alcohol right at the right level to maintain the flow. Right. So that and and then you know, what they would do is they would at the time, mix water and wine together. So that's, you know, that was that's the deal.

Unknown Speaker

It Thank you. I,

Unknown Speaker

you know, it's my birthday this week, at last I found my calling.

Ed Kless

Yeah, you can know, add some Posey arc symposium to your

Unknown Speaker

Good, good.

Ron Baker

It's just trying to deplete all that wind behind you, john.

Unknown Speaker

Trying to cut into that, well, though, there will be plenty of that. But his message says I show you the various he said I will not be solely attributed to Australian wine, it may help bet it is because of the stimulating discussion. And I can only, you know, up into four, five or six of these now and just learn so much. And that is Matthew said the generosity that should you know, by the likes of you and others. And you know, we we all learned so much. And those that even come for the first time and think that, you know they're going to be you know, all we've all seen how they've added value to symposiums in the in the in the past. And yeah, I think it's wonderful. And, you know, the return the people that are coming that have been been before but David and messy said just it's very exciting. And there are a lot of, you know, a lot of professionals, not just lawyers, I have to say that coming and not just from Australia, but we've got the US we got the UK. We've got the Middle East. We've got Russia, we've got from Amsterdam. Yes. It's, it's terrific.

Ed Kless

So let me amazing time. Yeah. And one of the things that I just love about it, like you said, john is is the organic nature of it. And every time there's going to be somebody who we haven't met before, give this knock your socks off presentation. That might not be the best presentation from a presentation standpoint, but has such rich content that you're just blown away. So anyway, well, our hour is already up. So I'm glad with the time we get stop your watches, gentlemen, you can stop to fill out your time sheet one hour, but want to invite you guys to stay on if you can for we're going to record a little bit of a bonus episode. But we have to wrap things up here on voice America. So Ron, what do we got coming up next week?

Ron Baker

Next weekend. We got free writer Friday for the month of September.

Ed Kless

All right, awesome. I'll see you in 167 hours.

This has been the soul of enterprise business in the knowledge economy. Sponsored by Sage energizing Business Builders around the world to the imagination of our people and the power of technology. Join us next week on Friday at 4pm. Eastern that's 1pm am Pacific and who knows what time in Australia. In the meantime, please feel free to visit us at www.thesoulofenterprise.com

Episode #258: Interview with Accounting Thought Leader Joe Woodard

We are thrilled to have have Joe Woodard back on the show!

joe woodard.png

As an author, consultant, business coach, and national speaker, Joe has trained over 100,000 accounting and business professionals in areas of practice development, changing technology trends, strategic consulting, and how to maximize the use of accounting software in their practices.

We are providing the FULL TRANSCRIPT of the interview for everyone to enjoy.

Ron Baker
We're doing our second interview with accounting thought leader Joe Woodard. Hey Ed, how's it going?

Ed Kless
It's tough. It's a tiring week, Ron that a tiring week had a little travel. I've done like three webinars and recorded like eight podcasts, including for earlier today. So I'm like talked down. So I'm gonna let you just run with this.

Ron Baker
What Why did you put a bunch of sage podcasts in the can?

Ed Kless
I did. Yeah, yeah.

Ron Baker
Yeah, even though they're short. That's, that's a lot of work.

Ed Kless
Yeah, no, it's talking to a lot of people, though. And one was an extended version that we're doing so that’s cool.

Ron Baker
Okay. All right. Well, let me introduce Joe Woodard here before I bring him in. And because he's got an incredible bio as an author, consultant, business coach and national speaker. Joe is trained over 100,000 accounting and business professionals in areas of practice development, changing technology trends, strategic consulting, and how to maximize the use of account software in their practices, has been named on accounting today's top 100 most influential people at least six times. And in 2008, he was recognized by CPA practice advisor is one of the top 40 up and coming thought leaders under the age of 40, which drives me crazy. Joe is the CEO of what are the events LLC, which includes education, coaching resources, and a community for small business advisors and small business owners within the accounting industry. Welcome, Joe.

Joe Woodard
It's good to be here. Good to be here.

Ron Baker
Welcome back. I should say I only say thought leaders under the age of 40 drives me crazy, because you know, once you once you're over the age of 40, your innovation curve is dead. You do know that? Right? Yeah.

Joe Woodard
Well, if you're doing the math, I got that award about 12 years ago. So that kind of

Ron Baker
okay.

So bad, but barely. Okay, so that's your equivalent of the high school photo on the website. Okay. Yeah, there you go. Gotcha. Well, listen, I, you have a great vision on your website. And I know that you worked on this at a place that we both had the honor of attending. And I'll let you tell that story. But I just want to read your vision, because I do think it's powerful. It's to transform small business, through small business advisors. And I just love that, how'd you come up with that?

Joe Woodard

Well, I came up with that through a journey through the Disney Institute. And the Disney Institute said that your vision, not your vision statement, your vision is the intersection of three things who you are, the higher principle you follow, and the change that you want to see in the world. So then they sent us through this exploration of those three things, and we would come back with something and it would be weak, and it would be thin, or it would be too wordy, and then they would send us back in. Until finally, what emerged was not what you just read, what emerged was about a 15 word version of that, that I slowly down over the course of the a couple of years to as essential elements. And it always strikes me when I hear it read back to me how simple it sounds to transform small business or small business advisor sound like something I should have been able to write in the back of a taxi cab between appointments in New York City. But in truth, it was forged out of a multi year process that is the fusion of my personal and business ambition.

Ron Baker

Right? Yeah, it's interesting, isn't it, how our whys or our purpose, whatever you want to call it taps into that part of our brain that can't process language. So coming up with this is really difficult.

Joe Woodard

It is it is especially if you're going to treat it as a compass point, C, and that was one of the guidelines that would come back. And they would say if you're going to dedicate your entire life to this, never arriving at it, but always marching toward this direction. Are you going to be fulfilled? Are you going to have purpose? And then Oh, no. So let's go back. And let's start writing again. And I think that's the most important thing, the biggest misunderstanding with vision is people think you can accomplish one, or that you're supposed to accomplish one. Now, some visions have actually been accomplished, and in which case, those are herculean moments in human history, but more times than not, or even you could say by its very design, a vision statement is supposed to be a magnetic north. And not when I'm teaching this always say, you know, have you ever traveled to magnetic north? Is it? Is it a destination, a place where you want to go hang out with your family on a summer vacation? No. But until the age of GPS, it was the most important single place on the planet. Because it was it was that point by which everybody steered their journey. So I always test. Say, for example, we're an event company, we do a lot of training. If General Motors were to come to me tomorrow and say, we're doing a big gala for the brand new Corvette. And here's the $300,000 throw the gala for us, you know how to throw a party? I would have to say no, because it has nothing to do with transforming small business through small business advisors. Now, if it's a middle aged small business advisor, male in mid age crisis, maybe it can transform them, but that's about the closest you're going to get to my vision Not gonna happen. Or maybe Batman, it could transform Batman, but

Ron Baker

I love it. It's aspirational. Yeah. Something

Joe Woodard

or it's not. And one of my favorite teacher says that opportunity does not equal obligation. And the only way to discern between opportunity and obligation is the vision.

Ron Baker

What Disney Institute course Did you take Do you remember,

Joe Woodard

I took the one on branding. And at first I felt like it was a bait and switch because I thought they were going to help me create a logo. Tell me tell me what branding actually is. and branding is a story. A story with integrity. That is born out of the intersection of the higher principle you follow the change you want to see in the world, and who you are. And so that so when it's when it's none of those things, when it's not a story, when it's not a pervasive story, when it's not a story that is true to who you are as a person that begins to show people can actually spot it on the surface of that they don't know why it lacks integrity or depth. But they instantly see that and it doesn't resonate.

Ron Baker

Sure, sure. Did when you attended Disney Institute. Was that was that down in Florida? Yeah, I went down to Florida. Yeah, me too. I attended their customer loyalty program that Disney way back in 97. And I tell people, and I think it's really true. It's it's some of the best education I've ever had literally. Yeah. Yeah, it is really good stuff. So I wanted to ask you just some macro issues about the profession. But this all so ties into what you've been talking about a lot. Your theme about you talk about the Rise of the Machines. And we've we've had you on, we talked about the future of the professions book by Daniel and Richard Susskind, and AI, deep learning bots, all of that the automation of the profession. But you talk about the answer to the Rise of the Machines is the rise of the advisor.

Joe Woodard

That's correct, or the rise of the human. Right, right, exactly either way. What I tend to take a very positive outlook on the Rise of the Machines, I don't tie in to the more Terminator kind of approach. Or even in the alien series, you know, where, where the human being becomes denigrated to somehow the service of the machine. Of course, there are bazillion Star Trek episodes about this, this whole idea of have we diminished, we diminish when the robots begin to overtake us it intelligence or capabilities. And the Star Trek saga, the the next generation did a great job. juxtaposing data with the humans that with which, with whom data interacted he was smarter than they all are stronger than they all were, he eventually even began to understand the emotions that they all felt then feel the emotions that they all felt. But somehow he never did achieve certain things that his crew mates had, and I thought was masterfully told. But it's also a parable for us that the machines are there to enhance us. Okay, and the what is the US that is enhanced look like? I think it's a more liberated us, I think it's an us that can focus more on the the, rather than the survival elements of economy, we can focus on the creative elements of the economy, more than on the the grunt work of client relationships, we can focus on the growth areas and the consultation of areas of client relationships. So if the machines can take care of the things that are lower in value, it liberates us. So I tend to think in the in the optimistic view, that the Rise of the Machines is going to usher in an age of creativity, extreme economic rival, and if that's such a word, Jason bloomer would say it is, and, and a renaissance of art and creativity.

Ron Baker

Yeah, yeah, we like to call that magic work rather than logic work. Yes. And and that's great. And you also talk a lot about relationship workers as part of the transformative advisor, the human advisor, this idea of, you know, we're relationship workers. And to get really specific, how do you measure the efficacy of a relationship worker?

Joe Woodard

Yeah, so relationships are measured in mutual benefit. And, you know, we greater somehow than the sum of our parts, right, or two friends stronger than if they were by themselves, or they two interdependent people as covey would say, that are interacting in some way that is a win win, always win, and accomplishing something they couldn't do by themselves. Relationships suffer, we're going to get to the business application of this in a minute when it's to what it's not two independent people who are interacting with each other. So you have a codependent relationship, or you have someone who is always predominantly doing the giving, the other person is predominantly doing the taking, that creates an enablement that allows them to live through life. And I would just refer everybody to the the Seven Habits of Highly Effective People for for the study of that. But in a business relationship, it comes down to the increase in wealth. If, if I am a religious successful relationship worker, I leave my client or I wouldn't say leave, because I may be coming alongside for the whole of a journey, right. But by interacting with my client, my client is wealthier than if I did not interact with them. But catch or caveat, that wealth may or may not be financial, right? It could be infrastructural, it could be cultural, it could be a social, it, it could be in terms of their ability to scale, it could be in the valuation of the company, rather than the cash position of the company. It could be a long term trajectory toward wealth, rather than an immediate return of wealth. However, its measured as long as the client perceives it, then the client will pay for it. But not there wasn't when they're not when they're paying for is ultimately not an outcome, but they're paying for is ultimately the relationship.

Ron Baker

Right. I love that. Because, you know, we talked last week when we had George Gilder on about the idea of the customer doesn't care how much time we spend on something, what really matters. And we should make the customer do a timesheet, because what one of the things we can do to enhance our wealth is increase the time may have to pursue what they want to do when they want to do it. And that's a form of wealth. It's not necessarily quantifiable, but its massive.

Joe Woodard

Can I tell a duck story?

Ron Baker

Right, so we got one minute, but go ahead. This

Joe Woodard

is a one minute duck story. All right. Oh, I went to the county fair. And there was this guy. These make these wonderful, beautiful little handmade, handmade ducks. And he put him down in this little battle water. And they dumped in the bob Didn't they did all you know, it's just the cutest little thing, wind him up, let him go. I'd never seen a little duck like that. Because he invented it was his design. It was differentiated. I also had an immediate need, we were going to a birthday party. For a small child, they needed the duck couldn't find anything like this anywhere in the world. I asked how much he said $20 I pulled out $40 said give me two ducks. While the money's in my hand, he starts going through why the ducks are worth $20. And everything he describes is how much time it takes how long the varnish has to set, how long he has to you dry the wood? How long? And I mean, he's already made the sale. And he's trying to resell me based on the effort that I could not care less if it took him five seconds to make the duck. I just wanted the duck.

Ron Baker

Right, right. What was great, great illustration of the labor theory of value and why it's wrong. Exactly why we focus on the wrong things. Well, Joe, this is great. I know Ed wants to pick up and ask you a bunch of questions with folks. In the meantime, I'd like to remind you if you want to contact that or myself, send us an email to ask tsp at various age calm, go out to iTunes and give us a rating that helps the currency of the show and helps us get guests like Joe. And now we want to hear from our sponsors.

Josh

All right, good.

Ed Kless

Night. Cool.

Ron Baker

Good stuff, Joe. I don't think I ever asked you which Disney course you took. I didn't realize they had one on branding.

Joe Woodard

I think they're all kind of the same course underneath.

Ron Baker

Could be

Joe Woodard

different rapper.

Ed Kless

Somewhat someone say that, that, that Ron, and my material has really the same course under, you know, that they're there perhaps was a day when that was the case. But um, alright, cool. So I'll I'll uh, I'll pick up on this, Joe. And I mean, you've got me intrigued, of course, I want to find out what you've changed your mind on. So I'm just going to go there first to sort of to get that get that done. It did. I don't know front. But we do have Daniel Susskind coming back on. And he's got another book coming out. So we're pretty excited about that.

Joe Woodard

Oh, fantastic.

Ron Baker

Yeah, it's called the end of work. And he's very pessimistic. He's not he doesn't. Yeah, does not share our attitude that AI is compliment. He thinks they're substitutes to humans. Right. I have a big problem with but Oh, wow.

Ed Kless

Oh, and just a quick reminder that our bonus episodes that we put on our Patreon site, Joe are part part of it is this conversation. So thank you. So just Just so you know, there's a limited number of people who will hear it, but other people will hear this conversation. So I would first like

Ron Baker

to remind anybody, you know, don't say anything that you wouldn't want public.

Ed Kless

As my as my rule with it all the time. Yeah.

That's right, it's a good way to assume that your email will be sent to everyone at Everyone calm.

Josh

We're coming back.

Announcer

You are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSOE. Now back to the soul of enterprise.

Ed Kless

Our guest today on the soul of enterprise is Joe, wouldn't he Joe is lead I like to call a recidivist guest, your recidivist, Joe, this is your second offender. And, and what and what I wanted to talk to you about you've got me intrigued because before before we started recording the show, Ron said, you know Joe has changed his mind on a couple of things since he's been on our show last, and I went back in the last year on the show in December of 2016. So it's little less than three years. And Ron and I subsequently have done a show on changing our mind. And one of the things that we we talked about in that show is that changing one's mind does not does not happen overnight, right that if your mind is changed by me talking to you for five minutes, your mind isn't very strong in the first place. Right? You're very easily fallen under the influence of somebody. But I think enough time has elapsed that you have changed your mind on a couple things. So I want to know what what is it that you've changed your mind on?

Joe Woodard

Well, they're really two sides of the same coin. But when I was I was back on it in 2016. I said you should not bill for time, but you should track time because time is a good internal measurement of productivity of whether or not you're on track on budget with, with your work with the job and so forth. And I remember you were so kind you said, Well, we will agree to disagree. And, and you you actually didn't say anything beyond that you can fight the elder or anything like that just move along. And then um, but what's changed is I've ceased to see that as net value. Now I'm not going to say that in certain reports, it might not be fun. Okay, it might not be an interesting little graph to place up how much time it took versus how much money but but here's the problem. At first, there's limited value and any graph that you would place up that way. But what you lose was the focus on what really measuring what really matters. So as I was tracking time, in order to determine how much time it took for somebody to generate X amount of revenue or X amount of outcome, everything became time obsessed. So did I remember to start or stop the time clock? Did I start or stop it when I went to the bathroom? Do I burden it with time that is out of the office if the person is sick, and it takes a longer time in terms of duration on a project? How do we track that against the amount of actual time they worked the project. And and first time the variables were many seconds, they were often irrelevant to the outcome. And third, it took way too much time to track them, which means they were a massive distraction. And so I simply stopped doing that all together and told my team, get the job done, get a jump to get it done well, and we're going to measure the quality of the outcome of what you've done. And then, you know, was that the deliverable to the client? Do we over deliver under deliver? Or do we deliver right on track? And often that can be determined by if they buck you on the price that you quoted to them or not. And then whenever I started teaching this to accountants, the most common The most common objection I would get is, if I don't track time, how do I know which clients are are the troublesome clients? How do I know which clients I need to let go so that I can make greater profits and i and i can service more clients better. And I told them, and I can't remember if it was one of the two of you that said this or if it was somebody else I was listening to once but I said let them fire two clients per year. And they will tell you which clients they will fire the two clients that they know are the biggest problems. You don't even have to measure that. They live on the ground they see it.

So there you go. That's changed my mind number one.

Ed Kless

Okay, well, let's let's just explore that for another little bit. Maybe we can even push you further down the down the road on this. But But yes, you're you you've you've come into alignment with a lot of the thinking that that Ron and I have done over the years on this. And you're exactly right. We one of the exercises that we have have had people do in our classes is go through the the this what is the cost of tracking time? What is the cost of the time and billing system of pushing these transactions through your system? And in every place? We've done it What does it run somewhere between five and 10%? is where this comes out with. So we're like, oh, you want to increase profit by 5%. Get rid of your time sheets are pretty simple. Right? That would just we'll just remove that right away. But the probably the even more important thing that you've discovered, and this is where we get into, you know, Peter Drucker logic, you know, Peter Drucker, he would, and Ron and I are fine if you want to track your own individual time, because it's a value to you to decide whether you're spending much time with your kids or whatever you're doing, by all means, right? If you want to do that, but it does it matters not a lick to anybody else. But you.

Joe Woodard

Yeah. And I would say even for me, I would much rather measure still the outcomes, does my daughter feel loved? Does my wife feel loved. And I'm not going to go back to my wife whenever she says, I really just don't feel loved and pull out of time sheet. And not quite first is not going to help seconds probably gonna hurt. And so I you know, so it comes down to, I've been putting a lot of emphasis lately on the value of attention. And then I've looked at what people have been saying, when they say time, and realizing they really mean attention. You know, I want more of your time as a spouse. Okay, I've been sitting on the couch right next to you for the last four hours reading a book, you've had me here, you've had my time know, what I want is your attention. Okay? And what the client wants is our attention. And sometimes attention can be as simple as I'm in their Slack channel or a number of Microsoft Teams. Or I could just shoot them an email or something and say, okay, we talked about these four things last week, how are they going, that that takes 1015 seconds to do we get they have my attention. And while remaining real and while remaining personal. You can even program some of those things. The solutions like HubSpot are key or whatever, as long as it doesn't become mechanical, right? To follow up with them. And let them know that you're getting your they're getting some of your attention, as long as it's highly personalized. So you know, you guys say if somebody says thank you for your time, you guys were taught back, no thing. No, say thank you for your knowledge. Um, I have a similar one. If somebody says thank you for your time, I'll say no, no, thank me for my attention. Because maybe at that moment, I didn't disseminate any knowledge. Maybe I was the receptor of their knowledge. But I gave them my attention. And I've got a funny little anecdote for this too. I was I was presenting on this in New York City. And and anything could happen in New York City. I love teaching in New York. And so I said, your time doesn't matter. And I just, I dropped that out in Ohio. Drop that out in Silicon Valley and Silicon Valley, if anybody does that get offended. They're guilty, because they shouldn't get offended. And then, you know, and then over here in Georgia, they're just like, you know, whatever. This lady in New York, was ready to come out of her chair, when I could see that she was ready to come out of her chair, kind of like how dare you thing you know, I'm not valuable. And and so when she started, she raised her hand, she was actually halfway she had, she had one, but she added the cheer. And I said, I said, I said, Ma'am, I understand that you're having a strong reaction to this, let me tell you what I'm not saying. I am not saying you are not valuable. You are valuable. I'm saying that the phrase your time is valuable, is an inane phrase, it's like saying your square cube is really round, it makes no sense. Because you can't have time. You time is a force of nature. It's like saying, I'm going to go to the gym, I'm going to control my gravity, I'm going to, I'm going to manipulate my gravity, okay? So never your gravity, it's a force of nature that you happen to be leveraging in order to make your muscles get bigger. But Einstein even said that time and space are the same thing. So now you want to say that I'm going to manage time means I'm going to manage all of time and space so that I can own all of time and space. So when we get to the right question, only then can we get to the right answer? And what is extremely valuable, is your attention.

Ed Kless

Yeah, it's funny, I think I, I either did a blog post or I envisioned myself doing a blog post a number of years ago, on on on this, the notion of all of the different metaphors that we use with time, save time, make time, right, invest time, and they're all really crazy, then when you actually try to try to parse them out, because my, the phrase that I use that you said eloquently, as well as time is straight. It's not a resource, right? Because it's it just is it's a it's an Gilder put it, it's a measuring stick, and the measuring stick doesn't change, the foot doesn't change the yard doesn't change, it's it's the measuring stick. And it's the constraint under which we all live, right? So it's not anything that can be created. We can't create time we can't make time right up and and you're right i like that i like that notion of of attention as well. That's it, that's a that's a really good way to phrase it. So I'm gonna, I'm gonna steal that and incorporate that in into my

Joe Woodard

Pat and I would add to it that we can't manage time either. So so that begs the question, what can we manage, we can only manage a task. And in the management of tasks, the first line of business is prioritization. And as a consultant we prioritize those things that will increase our clients wealth.

Ed Kless

Yep, yep, manage the work not the people as the the folks from row says, but we're up against our next break. Want to remind you that you can contact Ron or me by sending an email to ask TSOE at various ages calm. The website is of course, the soul of enterprise where you can go out and get show notes as well as previous to upcoming shows. Our archive page, which is where you can find all previous 250 some odd shows including Episode 119, which is our first interview with accounting thought leader Joe Woodard, but right now a word from our sponsors.

Josh

All right, you're clear.

Ed Kless

So I sue. I could do I had the next segment to ask what the second thing was? Yes, sure.

Joe Woodard

I guess that's a foreign question. So I'll

Ron Baker

let Ed do it. I'll let

Ed Kless

this be Mrs. turning into a very easy interview

Joe Woodard

sides of the same coin. It really is. Is it important? Is it important, the other side

Ron Baker

not really go down a different road and so you can you can bring it back to the second thing. Okay, good. I'll mention it. I'll mention it.

Ed Kless

Okay. And then Joe, you got to read just just finished the case against reality. Oh, by Donald Hoffman. Did you read my review? Ron?

Ron Baker

Yes. It gave me a headache. So I don't know.

Ed Kless

Space Time is Doom Joe space time is is Does It Really?

Joe Woodard

Yeah. Okay.

It's good to know.

So where we can exist?

Ed Kless

consciousness?

Joe Woodard

Interesting.

Ed Kless

It's absolutely fascinating. This guy the

Joe Woodard

quantum realm is it isn't general. No. No

Ed Kless

DEP. Donald Hofmann the first time. Yeah. case against reality. Basically, the short short answer is he uses he uses the theory of evolution. To to prove that there is no, there is no space.

Josh

Come back. Yes.

Announcer

You are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSOE. Now back to the soul of enterprise.

Ron Baker

Well, Welcome back, everybody. We're here with accounting thought leader Joe Woodard. And I really enjoyed that discussion, Joe with Ed about the measurement aspect and the whole time is money. viewpoint. You know, Oscar Wilde famously said time isn't money, time is a waste of money. But always, always like that line. But on the measurements sticking with that. I heard you on a recent podcast and you were discussing Apple as an example. And specifically the Apple iPhone, you said take a look at what Apple measures with respect to the iPhone. It's certainly not how long it takes them to produce said. It's other things and what explain that. And then what lessons what lessons for accounting firms, bookkeeping firms that holds?

Joe Woodard

Yeah, well, so so when Apple is measuring the iPhone, they're measuring the quality of the product as it is perceived by the consumer. And not as not as it is perceived by the apple engineers. But as it is perceived by the consumer. The consumers thought one of the old Apple Macintosh is look like Betty Jetsons microwave oven. Right that so that was the perception, I think we all know which one we're talking about. And so that perception meant that it had a very short life. So when you're when you're measuring what matters, you're measuring a product. If you're under the delusion, that time is your product, then that is what you will hyper measure. So one of the one of the interview with accounting today, I pointed to one of the staples of all professional service measurements and metrics, it's billable versus non billable time. And from that you get a realization rate. Okay, well, that's, that's irrelevant. That's an irrelevant measurement when it comes to quality, because you're not even measuring the product. And then that starts to kind of like I talked about the first thing that you started to hyper dissect that, well, how can we get your ratio of billable non billable time? How can we get that better? Well, then are you know, then we start asking the really inane questions. Are you turning off the time when you go to the bathroom? Should you turn off the time when you go to the bathroom? What's the ethical implications of that? If it doesn't cross the five minute mark? If you do go the bathroom too much? Because maybe you ate too much Mexican for lunch? Did you work 15 more minutes during the day, in order to count the count for all the bathroom breaks in order to get the realize bill rate up? How do you factor in PTO? How do you factor in vacation? What do you do whenever there's a write down is that a realization of billable versus non billable, and the whole thing will make your head explode or make you throw up or maybe same time. While the client is out there think about now what we're really trying to do. And this gets us back to the transformative advisor. Joe's lawn mower shop is out there trying their best to make lawn mowers and survive. They've got some sort of a, sorry, they've got some sort of a problem that they're trying to solve. They're trying to get the lending that they need. They're trying to get the they're trying to get the supply chain for their parts worked out. They've got real problems that they needed an advisor to work with them on. And we've got our heads down, focusing on how much time last month we spent preparing that person's financial statements. Wouldn't the time be better spent measuring the financial statements, or maybe maybe making a cash flow prediction because if we could have done that, they wouldn't be in a cash crisis right now trying to scramble with the bank in order to make the next payroll. So if we can turn lift our heads up, get our heads out of the time sheets and focus on the client pain solve the client pain, price it right. And I know that the pricing right this key, then we're all taken care of in the equation.

Ron Baker

Yeah, I love that. I love that analogy. It's it's really spot on. It really makes people think about what the customer the customer is ignored with hourly billing and the timesheet measurement. And on that I mean, I know you've been at scaling new heights, your your company, your flagship conference every year. You've had me and you've had Kirk Bowman and you've had Mark workers come in, there's been a lot of emphasis on value pricing. Where do you see that movement? Is it diffusing?

Joe Woodard

I think the value pricing is become tired as a content concept only because it's been taught so much. But it's it's tired while being grossly under adopted. And that's a tragedy if it is under adopted because people don't know how to sell so the books I'm reading right now are books on how to sell books on how to negotiate. I'm reading a book called Getting to Yes, reading a book called never split the difference. I'm going back and visiting a lot of the covey principles where he where we heard when when so many times it becomes trite. But covey actually breaks it down and dissect what a win win looks like. And then one of the other books that I'm reading by Patrick Lyndsey on ER, I've read and I'm rereading is a the the book called getting naked, because in that book, that book should really be called the relationship worker. First, it's easier to Google without getting in trouble. And second, it'd be more appropriately titled, because in that book, he in a narrative way as Patrick Flynn cod's want to do, he talks he described out in a storyline what a relationship worker really looks like. And what amazes me every time is how little time he actually spends with the client. He'll but he's physically present. He'll walk in, he'll look at something like a piece of artwork or a marketing messaging, or he'll look at something that's happening in a business plan, he will call it the problem. He'll say, you've got to change this, he won't even wait for much of a response. And then a walk out the door, almost like a fractional CEO would do. This is not a matter of a question, this is a matter of a dictate change this or it's going to go bad and out the door. He goes. And he's built such trust, that they will listen to what he has to say they'll do it and 99 times out of 100, it's going to generate more wealth for them. But he's doing all of that in a relationship, not driven by how much time is there? Right, in the fear of what they're going to think and all of the other psychologies that come into play, and definitely with his head up.

Ron Baker

That book never split. The difference is that the former FBI negotiator

Joe Woodard

it works because sometimes when you're trying to value price, you feel like that,

Ron Baker

isn't that that's a great book, because there's so much counterintuitive advice in that book. And I just, I just love it. And I love some of the stories to the hostage situations. But on that, okay, so value pricing is, you know, tired, but under under adopted, as you say, what about time sheets? What about are people still clinging to their time, she's like a security blanket.

Joe Woodard

I unfortunately, I think the rank and file are now some of the folks that come to scaling new heights of the gun to back off of those. But what I'm finding is that they do hold on to them, they hold on to them for this set, like these five kinds of engagements, we're going to track time bill by the time these over here, we're not some of the ones I'm hearing that they focus on tax returns note, not so much bookkeeping, no, not so much. But if they get a brand new client, and they're trying to do client file cleanup, then that's Pandora's box. And anytime they feel like they're opening up Pandora's box, they run to the safety of a time sheet to protect themselves. And, you know, I can't blame them there, they need some form of protection. We don't know what's in Pandora's box, right. And it's it's impossible to spec that are very difficult to spec that. But that is actually my response, create a flat fee specifications, engagement, open the box, don't change anything, don't fix anything, just write down what's in the box and what it's going to take to fix it. Now you've got a project, now you can plan against it. Now you can price it,

Ron Baker

right, you can put it into as I've, I've really gotten more bold on this. But you know, we talk a lot about risk and profits come from risk, that's their only origin. So when I see an engagement that's got risk or uncertainty in it, I want to run towards it, because that's where you can make real profit, we can't make profit by reverting back to the hour, leave a nice, safe hourly rate. When there's uncertainty and risk, we have to run towards the risk.

Joe Woodard

Man, I know that's really the clients gonna run out of money or run out of value perception, they're going to try to shut it down, or they're going to try to talk you down. And so the whole thing ends up having the same little trap. It's just, you know, what point do you fall through the whole, I couldn't agree with you more, you know, embrace the danger, run into the risk. And with that can come tremendous reward. Maybe sometimes you'll spend a little more time than you planned. But But you know, what does that really mean? it and you'll learn a lot in the process you you've earned the trust of the client in the process. And then the only other thing I would say is when you can form a specification, be extremely specific about the specification, and the the slightest deviation, pull out a change order. Because Because it's not about how much time and this is where time can become another form of a trap, it's only going to take me about 10 minutes to do this different thing that they're asking for. Folks, I'm just going to throw it in. All right, that's the other side of the time trap little time, therefore irrelevant, no big relevant, hugely relevant psychologically, as well as sometimes in terms of value. So I, you know, pop the change order out is going to be $50 going to be $100, it's gonna be $300, whatever the value of that thing they're wanting you to do for the 10 minutes may be and then it will also set the guidelines for the relationship that you go off spec, you pay more money.

Ron Baker

Right. And with all whether you phase it or do that tight scoping and use change requests diligently, you're managing the client expectations, you're doing that constant communication. And that's what what's important, no matter what, because we fall into all sorts of traps through just lousy communications with with the customer.

Joe Woodard

I get I get asked all the time, how do I get started, and I've got an example of this is very fresh, I've got a client, their software developer, I'm doing some consulting with them on a product launch. And neither of us really knows what the relationships going to be like, they just know they need some guidance, and they want me to be there. They want me to be in the room part of the team. So on the call without any kind of specifications work that was to to a theory for that I said 1500 dollars a month. And then they said, Okay, great. What does that get me us? It gets you me. But meet your slack. You know, throw me on send an invite, I'll jump into some comment. I'll jump into a meeting, how many meetings see they're trying to they're trying to know, five meetings, 10 meetings, 15 meetings, whenever you need me to be in a meeting, throw me into a meeting? Shoot me something in a slack? I'll I'll answer it Yeah, asked me to take a look at something, I'll review it. But this is the key. But at some point in the future, you're going to feel like you're getting too much of me for 1500 dollars a month. And when that time comes? Why don't you change the price?

Unknown Speaker

Right? Our discretion

Joe Woodard

at their discretion. Now if they wait too long, I might hint, right. But that's the nature of a relationship relationship is to interdependent people with their own sets of very well established boundaries, defining the nature and the terms of the relationship. If I ever feel like they're either by distraction, or by intention, taking advantage of me, I'm going to come back and say, Yeah, well, I think we're at 3000 a month now 4000 months now, whatever it is, but at that point, I have a chance to look back at some of the successes, you know, as you can see, I accomplished this with you or headed off the past that you, you know, save saves you a big run into a brick wall over here. And justify the increase in price.

Ron Baker

Right, you're back to the quality of the outcome for

Joe Woodard

rather than, yeah, I can actually win some win some outcomes and and and establish my value so that we can then price something we get out of that chicken and egg problem.

Ron Baker

Right? I love Ed calls that selling your brain. And that's what you're doing there. You're not selling a pair of hands or a series of tasks or scope of work, you're selling access to your brain, whatever they need. And that scares the heck scares the heck out of a lot of professionals because they think it's so open ended because they're stuck in that time mentality. But it's just amazing how much value you can add in a short period of time sometimes?

Joe Woodard

Well, and I'll tell you one thing to that makes it and this is why it should be appropriately called relationship work. I actually like hanging around with these people. So you know, when they call I don't went I don't think oh my gosh, I got I've got to deal with them. I'm delighted. I can't wait to get into a meeting. They have an amazing culture. And so I'm having fun. They're paying for me to have fun. I don't see a downside.

Ron Baker

Yeah, that's that that those are the best relationships because nobody's a supplicant. There, you're you're both equals your colleagues at that point. I heard you once a job that you recommend your you see the day where we could get to where the compliance work is just done as part of the advisory services being, you know, engaged.

Joe Woodard

I mean, automated.

Ron Baker

Yeah, yeah, I realized that relies on automation. But do you kind of hold that view that the compliance work should just be kind of thrown in? As long as they're in the advisory work?

Joe Woodard

Yes. As matter of fact, I was asked on the podcast once if I could give any advice, any single piece of advice to the entire accounting industry, this was a global podcast, what would it be? And I said, stop selling accounting services. And boy did I get reamed on social about that. But because I did not say though, stop doing accounting services. But I said it stop selling it. Because to sell it means that you immediately attach yourself to a price anchor of price anchor that is constantly getting lower and lower and lower. As more and more of the scale bookkeeping models and monetize bookkeeping models pile on. So instead, what I say is sell results. So outcome salary, increases in wealth, all that stuff we call advisory work, but advisories another word that's gotten really, really tired, right. So that's why I call it transformative advisory, instead of trusted advisor, trusted, trusted can be passive, we all trust our CPA, we trust, they're not going to go you know, put ours our tax returns out on Twitter, or that's a passive trust. An active trust means that if you give me advice, I'm going to change something in my life is as a result of what you have said, that's active trust. And an active trusted advisor. If they're providing good advice, transforms, you transforms your business. And then we have to define what transformation is, I am a better human being is a stronger business. And then you can start drilling down and all the aspects of that. So if we're, if we're focused on all of that, if I say my job here is to make your business stronger, better, more profitable, more scalable, more valuable and ready for succession, which everybody should start thinking about from day one. And to come alongside you for the whole of the journey, a phrase I use a lot, which is summarized in the Greek word parrot cleat. That's my job, then everything else becomes a means to that greater end, having accurate, timely financial information. That's a means not an answer.

Ron Baker

Yeah, excellent.

Joe Woodard

Yeah. So whenever they say, Well, I can go over here and I can get it for X Prize. So you're not going to be my price. My price is free. I don't charge for bookkeeping, as long as you are my advisory client. But for advisory, we start at $4,000 a month.

Ron Baker

I love it. I'm sure Ed's going to ask you about that Greek word that you threw out. He's also going to ask you about the second thing you changed your mind on but unfortunately, we're actually overtime for our break. And folks like to remind you, if you want to contact Ed or myself, you can send us an email to ask DSOE at bare sage.com check out the Patreon site at patreon slash TSOE. And now we want to hear from our sponsor sage.

Ed Kless

All right, you're clear.

Ron Baker

ran over on that, Ed? Sorry.

Ed Kless

No, no worries.

Ron Baker

can be a short segment. Joe? Six minutes or so? Yeah.

Ed Kless

Yeah. Because we have to be out by 57. So if your timing on this, just

Ron Baker

just so you know.

Ed Kless

And so yeah. And next week, run we're learning up. We're gonna be talking about all things very Sage down under that.

Ron Baker

Okay. All things legal. And

Ed Kless

then, what, 57 we'll wrap it up. And that's from Ron and I will just do a little banter to wrap through. So gotcha.

Unknown Speaker

All good, though.

Ron Baker

Yeah, he dropped that Greek work on me this Greek word on me this morning. So maybe maybe as you can get the Latin word for it? Well, no, it's all about the Yiddish word.

Ed Kless

Yeah. Apparently is is one of the names for the Holy Spirit to

Joe Woodard

yes, you do know that? Yes, I was actually appropriated by the Christians and, and, but it predated them. It actually goes back to Stephanie's. But it just means one who comes alongside of for the whole of a journey, which is applicable to the Holy Spirit? Yes, I can see.

Ed Kless

The Christians are really good at appropriating lots of things. That's what we got Christmas and Easter and Easter eggs. And we like that. What was it? Well, you know, when you think about it, you know, especially when they were talking to people who were doing human sacrifice, and you're like, No, you don't have to do that anymore. Oh, all right. Back,

Announcer

you are tuned into the soul of enterprise with Ron Baker and Ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask TSOE. Now back to the soul of enterprise.

Ed Kless

His vision is to transform small businesses through small business advisors. And we have with us on our last segment of the show today, Joe Woodard and Joe, I had the opportunity to ask you about the first thing that you changed your mind on and then we went a little bit long on that. So what's the second thing that you've changed your mind on

Joe Woodard

was the other side of the same coin, I was living in hypocrisy, I was saying that you know what, but it doesn't matter. I don't sell hours to my client, I sell results to sell outcomes. But then I was paying my employees by the hour. And I thought that I had myself inoculated from that because everybody was salaried. I had no hourly employees. So I was telling myself, Well, I'm not really paying by the hour, I'm salary salary to everybody, until I got the 500th said, Okay, if I leave an hour early today, I'm going to go to the shopping center cannot take a long lunch. And I realized that the mindset of my employees is that they're trading hours for dollars. I took that entire mindset away by saying, I don't care. If you want to go on a 10 hour shopping spree five days a week, I don't care. All right, what I care about are two things, get the job done, and be here for your teammates. As long as you guys have that worked out, you can bring to me any issues and escalate them to me as necessary. I'm good to go. And part of that, of course, is at least somebody has to be here to pick up the phone or respond to the chat bot. But cover the company, make sure the customers are happy. And then do whatever you want to with your time. Because time is not relevant to the outcome. It is simply the air we breathe.

Ed Kless

Yeah, another another thing that's way underrepresented in the in the world today. And that is the real movement, the results only work environment. I mentioned that earlier, Jody Thompson has been on the show and her great phrase, manage the work, not the people what's got to get done, the work has got to get done. That's what's got to get done. So we manage the work. And I don't care if you follow what's left of the Grateful Dead around as long as the work gets done. We're good with it.

Joe Woodard

But you know, I've seen some thumbs up some incredible things happen and that we just put this in about a month and a half ago. And already I'm seeing that a mom in our company was at her kids school play at three o'clock in the afternoon is that elementary play thing. And then I saw that her kid was in our conference room, just doing his homework, which I thought was kind of cold to some point, she went and picked him up. She didn't have she didn't have to ask me, can I go pick him up, she knew the conference room was available, she stuck her kid in there. It wasn't available space, she didn't have to ask me. But I saw that same mom on Saturday, working to make sure that all of her tasks got done. So as long as you trust your people to get the tasks done, and as long as you measure the outcomes, so I've started sounding like a broken record, if people come to me anymore, and they say, can I have so and so off? I don't know where you had on your tasks. And sometimes they'll cut a heads down and they'll realize that they can't give themselves that day off. Or the best their choice. But I never say yes. I never say no, I always return that with a question. Are you on track with your tasks? Are you going to hit your deadlines? Where yet for this milestone? Are you going to slow your team members down? Do we have somebody answering the phones? Is somebody managing the cases? How backlogged is our caseload? If depending on the answers to that, and I don't even want you to give me those answers, I want you to go look, and I want you to make a grown up decision as to whether or not you can take it to our lunch go. Yep,

Ed Kless

yep. Great stuff. So Joe, rotten Brown was asking about value pricing. And we've only got about 90 seconds left. But I wanted to get your thoughts on, how do you see what we're calling value pricing two point O, that and that is, of course, subscription based pricing. And the mantra that we've been offering for this is, instead of what we talked about for years, which was price, the customer not the work, we're saying price, the portfolio, not even the customer.

Joe Woodard

Yeah, when that's kind of what I did with this client for us is 1500 dollars a month, right. And so so before I had even really absorbed this whole idea, subscription based pricing, I just instinctively knew I had a strong relationship with the client, they trusted me, they just wanted me on the team, we set a price per month, there we go. I did the same thing with another client up to $3,000 a month because the value prop was more established coming in the front door. Right? So these things may go up, they may go down. But I think it's I think it is the future of value pricing. Because of the fact that we can get started, we can set a term, let's reevaluate in four months. All right, anybody can do anything for four months. And then when we reevaluate, we have a track record. How much value do we generate? What is the trajectory for future value we're going to add? Where do we want to set the price for the next term? It's a great, that's a great way to do it.

Ed Kless

Yeah, no, it really, really is. And we've, we've spent a lot of time there spent that metaphor again, spent a lot of time

Ron Baker

wasted a lot

Ed Kless

of attention. We've given a lot of attention. Thank you to this notion. And yeah, we're on the same page here with regard to this. The future of this is more subscription across the board. All right, Ron. Well, Joe, want to thank you for being a great guest again, and we'll love to have you back. And you know, maybe we'll put a cadence of three years it'd be a cyclical thing or like a physical count inventory or something. I don't know. Well, let me make that all work. Ron, what do we got coming up next week?

Ron Baker

Well, next weekend, we're going to lawyer up with three Australian lawyers, john Chisholm, Matthew Burgess, and David wells all happened to be various age fellows, by the way, and we're going to be discussing what's going on in the legal marketplace down under, and also our Paris age down under symposium. We'll talk a little bit about that, and what what events are planned and the agenda. So I'm really looking forward to

Ed Kless

Wow, I can't wait. That's going to be a great conversation. I'll see you in 167 hours.

Episode #257: Third Interview with George Gilder

What a show! George Gilder continues to be a great thinker and we were honored to have him on our show for the third time.

Given George is such a phenomenal guest, we wanted to be sure you had the full transcript as opposed to the cliff notes. This conversation covers concepts the George shared in his books The Israel Test and Life After Google and his AIER article, The Huawei Test.


Ronald Reagan  0:06 

Like a chrysalis were emerging from the economy of the Industrial Revolution and economy confined to unlimited by the Earth's physical resources into the economy in mind, in which there are no bounds from human imagination. And the freedom to create is the most precious, natural resource.

Ed Kless  0:38 

Welcome to The Soul of Enterprise: Business in the knowledge economy, sponsored by Sage, energizing business builders around the world to the imagination of our people and the power of technology. I'm Ed Kless, with my friend and co-host, Ron Baker, and on today's show, we are honored to have our third interview with George Gilder.

George Gilder is one of the leading economic and technological thinkers for the past 40 years and he is the author of 19 books including: The Israel Test and Life after Google, which was the subject of our interview with him last time in August of 2018. George is a senior resident fellow at the American Institute for Economic Research where his recent post which was entitled The Huawei test broke the internet at the beginning of June. He is a founding fellow of the Discovery Institute where he began his study of information theory. George, welcome back to The Soul of Enterprise.

George Gilder  1:33 

The organization is AIER not AEI, it is near me in the Berkshires, but my real affiliation is the Discovery Institute. I'm a co-founder and...

Ed Kless  2:00 

Sure, sorry, right.

George Gilder  2:04 

AIER is affiliation I have in the Berkshires, but it's not my chief role.

Ed Kless  2:13 

Okay, fair enough. George, thanks.

When we had you on as I said about a year ago and we were talking about Life after Google. And I wanted to ask you about life after Life after Google. How do you think the book and its ideas have been received?

George Gilder  2:31 

Well, phenomenally in China. For a while is was the #2 book in China and it was voted the most the best social science book by a group in China, so it, it really was a hit over there. It was the number 1 crypto book on Amazon for about a year. Most of the time, almost all the time. So really a success around the world. There's a version in Japan and in China I did 40 appearances and nine days. I've visited all the major universities in China. This is a global phenomenon, this book.

Ed Kless  3:40 

Yes, it truly is. And we're thrilled to have read it and talked about it with you last year. But in the years since it's been published, do you think that this the signs are still moving in the direction that you've predicted? I whenever I see a story that’s related, I think Well, I think there's another chink in the Google chain? Did you still see those signs happening?

George Gilder  4:04 

Well, I do, I think however, I do not support this full court press attack on our technology economy by the government. I think this is really just suicidal for us. I mean, these companies are not monopolies, they face devastating competition from Chinese companies, many of which are better business models than our companies do. And the impact of the government intervention has been devastating. Facebook is becoming a manipulative maze that you can hardly enter anymore. It's really in the process of being destroyed by government regulation. They can't be a merge of fake news and hate speech. And 2 billion customers. I mean, it's just if the internet and face this kind of regulation, when it started, it never would have happened. If the phone network never good face this kind of scrutiny, we'd still be using Pony Express. [Unclear.] And Google isn't even allowed to hire computer scientists anymore. Google is being sued for sex discrimination of all weird charges. You know, they're full of women all over the place but somehow the quotas don't match up with some models of the Equal Employment Opportunity Commission. So, Google's being sued for sex discrimination. I mean, we really are in some kind of bizarre, self-destructive mode with regard to our technology and with regard to our economic leadership.

Ed Kless  6:21 

Yeah, I have a friend, a college friend who made let's call it oodles of money in Silicon Valley. And in a recent conversation with him, he said, "They seem to be Silicon Valley as long on capital, but short on execution." Do you agree with his assessment?

George Gilder  6:36 

I am afraid you broke up during that question?

Ed Kless  6:45 

Okay. So, my friend says that Silicon Valley is long on capital, but short on execution. Do you think that that's true?

George Gilder  6:57 

Well, I really think that what's happened is that the government, the US government, is mounted an attack on our technology companies on the assumption that how they're manipulating the news or accommodating Russians or making too much money or something and the combination of these measures has been to gravely impede their interest. They have, I admit that their execution has been at fault. But it's really hard to deal with a full court press from the government making bizarre charges, that you're somehow manipulating your services all the time to favor ideological causes. And it is agreed that the mainstream media, the United States is dominantly leftist then Google as a search service based on the most the PageRanks model the most vote sources get the highest rating, then, of course, Google search is going to reflect bias the media. That's not Google's fault. That's, that's the mainstream media and, and the mainstream academy and, and I just, I just think that we're in a amazing irresponsible phase, today with regard to our technology companies. We're proud of them, but at the same time, we’re paranoid of them. And, and at the same time, we're paranoid about China. And the combination of all these fears, the nervousness that runs from Silicon Valley through the Federal Trade Commission, which falsely believes these companies are monopolies, the European Union that's paranoid about privacy and all these charges and visions I think are inconsistent with national interest and the future of our economy.

Ed Kless  9:56 

Yeah, it's been an interesting ride that led the last couple years...

George Gilder  10:02 

You know, what's going on here. I think we should do this. You know, this is not a good enough connection to handle zoom. I've got to go somewhere where I can get a better connection this this is not working. Well. I mean, I know you your jerky and I can't really hear you in this. Can you hear me? Fine? Fine.

Ed Kless  10:28 

It's sort of tough George. I think what we'll do is let's take our break now. And what we'll do is we'll get you on a phone line and we'll take it from there. I think that's probably the best choice so now a word from our sponsors.

Announcer  13:05 

You are tuned into The Soul of Enterprise with Ron Baker and Ed Kless. To find out more about our show, visit us on the web at TheSoulOfEnterprise.com. You can also chat with us on Twitter using #ASKTSOE. Now back to The Soul of Enterprise.

Ron Baker  13:23 

Well, Welcome back, everybody. We're back with my 38-year, mentor George Gilder. It's such an honor to have you back on George. And I wanted to ask you about an article that you wrote, because Ed and I posted this on our social media and boy, did it generate a lot of controversy and comments, but it was your article, the Huawei test. I guess it was first published in the American Institute for Economic Research back in June on June 3. And you start the article by quoting Peter Drucker's famous line, we say this all the time, "Don't solve problems pursue opportunities," because problems are about the past opportunities and entrepreneurship about the future. George, what is the Huawei test?

George Gilder  14:08 

Well, Huawei was what great capitalist ventures in China was started by Ren Zhengfei, who was the son of a capitalist Schroeder, and he briefly served as an engineer in the Chinese army. But the idea that he's was permanently rendered a communist apparatchik by that experience, as the US government seems to believe, is simply preposterous. If you know the guy, if you know his history is amazing success and creating a telephone equipment company that is in 170 different countries and has now leads the world in technology for 5g, the next generation of wireless technology. You just can't do this as some kind of instrument of the Communist Party. I know that's just an absurdity. Huawei a great capitalist company. And they've been more effective and marketing their technology and in developing new technology over the last five years than their American competitors. And they should, their presence in the American market would be positive and accelerate our movement to 5g. And I just think this is a protectionist move. It's simply a protectionist move. The claims of a national security threat is just implausible. We had a billion internet hacks last year of all telecom equipment. If Huawei's routers and switches are open to communist hacking, so we're all other routers and switches all through the US telecom system. And I believe we need a new architecture for the internet.

And I think the blockchain supplies such an architecture. And Huawei actually very interested in researching solutions that actually do restore some degree of security to networks around the globe. And to kick him out of the United States, because I'm just really technically preposterous grounds is it just a great mistake. And it's protectionism. That's what it is, and we should stop it.

Ron Baker  17:34 

Is there any... you point out in the article that the, you know, the litigation over the so-called theft of intellectual property has been settled? Is there any evidence for them stealing intellectual property?

George Gilder  17:51 

Yeah. You know, all, all companies are charged, frequently intellectual property. Particularly, ascendant companies that challenge an incumbent establishment, when that when the United States was emerging as the world's leading industrial power, all of Europe, you know, in England, and, you know, to auto in Germany claim that we were that Carnegie was stealing their steel fabrication gear that Edison was stealing electrical capabilities, that Ford was stealing the internal combustion engine invented in Germany. We have our constant charges back and forth among American companies that they're stealing from each other. And the Chinese play a relatively small role in these litigations in the United States, 6% of all the charges involved China. I just, and now China's in the lead. So, all these claims are just irrelevant.

Their past, they're gone. Entrepreneurship is about the future. And the future depends upon being the smartest marketing in the world, the most vibrant capitalist market at the moment. It won't be in the future, maybe Xi Jinping is going to impose a communist totalitarian Regiment in China, but he hasn't done it yet. And they have three times more IPOs than we do. They got twice as many business startups, they've got millions more engineers, they can build cities faster than we can fill in potholes and the United States.

It is just silly for us to sit over here grousing that they've stolen from us when they've been manufactured... we wanted them to manufacture all our stuff. We joined a climate change cult that wanted to suppress manufacturing anywhere it could find it. We joined a litigation cult that bankrupted 36 of our major chemical companies with spurious asbestos claims, it where we just didn't want to have manufacturing. And so, the Chinese did it for us. And in the process, they got a lot of our technology. Is that a big surprise? We are not being serious about China.

Ron Baker  21:21 

You know, John Tandy wrote an article and he and he quotes you about your trips to China and how you'd never really met a communist. And he points out that Huawei has 80,000 employees in R&D and they spent $15 billion dollars in 2018. He says, anybody who believes that innovation is done through corporate espionage doesn't understand business, because most ideas fail. So I think your point is very well taken about that, that they're an upstart, that this seems... well not an upstart, but they're threatening the status quo.

George Gilder  21:57 

Now, well, they, they've done it... and... and we have... China has flaws. However, they have, by whatever means, pretty much created an economy that's 24 times bigger than it was when Nixon and Kissinger were opening up to China. And, and they now are essentially equal us, their technology in many cases is superior, they got a smaller government as a share of GDP because of the amazing growth of their private sector. They are in a kind of reactionary period, now, through Xi. And it may be that, that their capitalist growth will be halted. But in the last year, they've opened a couple more stock markets, they've opened up their bond markets to foreign investors, they're, in general, seem to be still opening up to a great degree, even while Xi is cracking down on on any of the dissident speech or democracy movements and their economy remains capitalist.

Ron Baker  23:32 

Right. And I mean...

George Gilder  23:33 

More than more than ours, I would say.

Ron Baker  23:37 

Wow.

George Gilder  23:38 

But it's sad, but it's true. So, I mean, that's, that's just and, like, and Trump is trying to fight against it. But he's destroying the effect of his policies, by adopting socialism internationally, wants to socialize trade, and since much of the global economy grows through the expansion of trade. Mercantilism of America is a is a drastic mistake.

Ron Baker  24:22 

Yeah, it seems like he wants to take us back to the mercantilism that Adam Smith. So easily destroyed. George, how do you reconcile because I mean, nope, I know, you've been anti-communist your entire life. And I nobody has been more eloquent for the defense of capitalism and liberty and the moral case for the human flourishing, that's a result. When you look at China, and you see these incredible achievements, do you think it would be even better if they were to democratize and an open up more Liberty? Is does it illustrate the power of markets that it they've been able to accomplish what they have?

George Gilder  25:06 

It does, and it does illustrate the power of markets and, and if they really abandon their progress and opening up their economy, it could be a tragedy for the world system. And that's why I think that our current approach is so negative, I mean, we're causing a kind of divorce between these two great economies. And, and it's, it's, it's a historic mistake, that they... You know, after World War II, the British faced, what I believe is the similar [unclear] the British had to give up their empire, they had to recognize that the US was ascendant, and they sought a special relationship with the US. Now we find that China, which is four times bigger population than us, and is ascendant and they're they they're not politically correct, they defy all the [broken up] and, anti-industrial Ludditism the dominates our universities. Their... And as a result, they are now really dominant, at least in Asia. And for us to think that we can retain the same kind of position we had before when they 1/24 is powerful, as they always just quixotic it's not a realistic stance, and countries that go on to base their policies on fantasies and grievance or of historic privilege are likely to fail.

Ron Baker  27:27 

Right. Yeah, we have to take a break, George. But when you wrote in The Huawei Test article, you said, "I hate to say it, but without the help of Chinese capitalism are pretty much over as a global power, and economy." Wow those are strong words, and perhaps Ed will pick this up with you on the other side. But folks, we'd like to remind you, if you want to get a hold of Ed or myself, send us an email to asktsoe@VeraSage.com. And now we want to hear from our sponsors.

Josh  27:57 

Alright, you're clear. All right.

Ron Baker  27:59 

Great stuff. George. Love it. Love the article. It was really thought provoking.

Ed Kless  28:11 

George, I'm going to pick up a little bit on Huawei as well. And I did you see that there was a on August 30. That now Huawei released a press release that the US Department of Justice is now you know, causing Huawei harm?

George Gilder  28:33 

Yeah, I saw I saw the announcement.

Ed Kless  28:39 

So I'm just going to ask you to comment on that

Ron Baker  28:41 

And the FBI is menacing their employees?

George Gilder  28:44 

Or is it just more the same? I'm, I mean, we're really trying to banish this world leading company in telecom equipment and AI and increasingly in chip design, as well, from our economy, and their company that buys 11 billion bucks a year of US chips, mostly from Intel and Broadcom and Qualcomm and then pay a billion dollars to Qualcomm for intellectual property. And, and there have been banished and, and contracts that they've made with US companies back are being suspended by the government.

Ed Kless  29:39 

Okay.

George Gilder  29:39 

Imagine...

Ed Kless  29:41  

Coming back.

Announcer  29:42 

...Ron Baker and Ed Kless to find out more about our show, visit us on the web at thesoulofenterprise.com. You can also chat with us on Twitter using #ASKTSOE. Now back to The Soul of Enterprise.

Ed Kless  29:57 

And we are back on The Soul of Enterprise with the great George Gilder. George, I know that you saw this article, but and just not I guess we're beating a dead horse a little bit here. But I just wanted to get your commentary on this. But on August 31, The Wall Street Journal, or the Huawei issued a press release about that it is finding that that certain things are happening in the United States. And there's a big long litany of stuff, I'll read a couple of them, instructing law enforcement to threaten Huawei employees unlawfully searching and detaining what Well, well, while way employees sending FBI agents to their home, and this is what YY is now accusing the United States government of, you know, there's crazy claims that, you know, CIA says that that Huawei has been funded by military intelligence, what's going on here? Why is our government so obsessed with it? Is it is it just this jealousy that that that somebody is, is outperforming us?

George Gilder  30:54 

That's... I do believe that's the heart of it. Also, based on a real incomprehension of technology. They're... they really do believe that technology is something you can steal, and something that Huawei could become a global Colossus as a kind of socialist arm of the Chinese government, and that's just a delusional, and that's... and it's... and there may be, you know, it is that...

There is a lot of spying going on between both countries, and the Chinese have done a lot of hacking and American networks. And, and there's been a lot and the NSA is also famously aggressive in... in its cyber programs. It's... I believe that if we banish all companies, from countries that do cyber hacking, we can't have a world economy. I mean, the world economy is dependent on taking for granted that the defense and... and intelligence branches of governments are constantly maneuvering against one another and testing out various technologies and intrusive tools. And and I just... We're doing it. The Chinese may be doing it more for all I know, I were certainly, but but it's not the way to stop it... It isn't just to kick out Chinese companies from America that hurts us more than it hurts China. China actually is one of the few countries in world that's big enough to actually pursue autarky successfully, that is they can actually do without a lot of foreign trade if they have to.

Well, while, we can, and I were smaller. And we've deliberately chosen to devote our colleges to an environmental cult that is against manufacturing, against industry. It really against the future. We believe that that population growth is a burden on the planet. I mean, these beliefs have consequences. I think the most important breakthrough in economics, and the last decade is really a Martian Mars, Marian Tupy and Gale Pooley, who have... They're two economist: one from St. Andrews in Scotland and one from Brigham Young in Hawaii. And together they have taken what is in essence, my time theory of money, and shown that using time prices, the world economy is growing four times as fast as ordinary GDP measures calculate, and that and, and this changes the whole view.

I mean, if we believe that some our middle class has been victimized by, by China, however, since 1986, as Tupy and Pooley calculate the time price of a Thanksgiving dinner has dropped for an ordinary blue collar worker from 32 hours of work, I mean, 32 minutes of work, excuse me, 32 minutes in 1986 to earn money to buy a Thanksgiving dinner, elaborate Thanksgiving dinner is calculated by the Farm Bureau to 9.2 minutes in 2018 and other words, something like say a 60%, drop in the hours, which had to be expended to purchase a major compliment of foods and drink and all what you need to sustain life. And this is part of a study that covers hundreds of, of commodities.

So globalization has been wonderful for the American worker, and the American middle class. And I didn't know this myself. This is a real finding of economic science, a great breakthrough, which dismisses says all a CPI is confused. Consumer Price Index, GDP deflaters, purchasing power parity guess work all these estimates that some show that capitalism hasn't been working because of Chinese depredations. The fact is capitalism has been working better than ever. And the rise to venture technology has resulted in a global productivity boom in all capitalist countries.

Ed Kless  37:23 

Yes, I've seen that study as well. And I've actually heard Marion Tupy interviewed on a couple of podcasts that I listened to. And it's absolutely fascinating. And we'll put a link up to that in our show notes. George, I wanted to ask you a little bit about the situation in Hong Kong having just visited China and I don't think you went to Hong Kong but do you in last week, the main Mainland China seems to be backing off a little bit on first of all their demand for extradition, do you think that situation will work itself out?

George Gilder  37:55 

I hope so I spent a lot of time in China and Hong Kong and too bad if freedom was extinguished in Hong Kong. I just... We'll just see, I do believe that if you're in China, and you're part of China, the rule is you don't you don't criticize the government. That's it's not a good rule, but in exchange for it, they have a massively emancipated the Chinese economy. Now they're retrenching on their freedoms. And I think it's a mistake, but it's helped by the United States. I mean, the United States is punishing their capitalist companies. I mean, it's just an art and punishing our capitalist companies. It's, it's, it's really a tragedy in in progress. And I, I hope that the sanity is recovered.

You know, to get an idea of what's going on in China. I... I've visited Shenzhen, a lot, which is sort of the center of global industry today. Al of the phones... most of the smartphones are made there. Huawei is there, and the biggest company, the biggest tower in the middle of Shenzhen is An Ping which is an insurance company... a Chinese insurance company that has reduced the time to settle insurance claims after an automobile accident to 10 minutes. You get you get out of the car, presuming that you haven't been seriously hurt. And you take photographs on your smartphone of the damage. And they compare it against the data base of 25 million auto components, they have you described the accident to your cell phone. Their artificial intelligence tells them whether you're telling the truth or not. And in 10 minutes, you both have your money and your WeChat wallet, and you have appointment with local garage that is best to do this specific repair that's needed. And they're also doing this kind of thing in medical care. This is capitalist creativity, that is really moving beyond what our insurance companies can do. I mean, just massively beyond.

Ed Kless  41:28 

Yeah, incredible stuff. I agree, lots of terrific technologies that are coming up. And I remain hopeful that and faithful that capitalism is going to be is going to be able to outrun government intervention both here and in China. That's my belief. I've got a solid on the future. But anyway, we are we are up against our last break here, I want to remind you that you can get ahold of Ron or me by sending an email to ASKTSOE@VeraSage.com. The website is TheSoulOfEnterprise.com, where we will post show notes to this show with and our interviews with George Gilder in the past, you can listen to those as well on our archive page. But right now, a word from our sponsor and my employer, Sage.

Josh  42:08 

All right, you're clear.

Ed Kless  42:13 

Great, great stuff. Thanks, George. And on behalf of myself, because Ron is going to take you the rest of the way. Thank you, again for appearing. We so enjoy our conversations with you.

George Gilder  42:26 

Thank you so much.

Ron Baker  42:30 

George, in the last segment, and it will be our shortest one. I just want to talk to you about The Israel Test, because we didn't get a chance to talk to you on that book on the last couple shows. I just because I think it's a good interesting bridge to The Huawei Test. But it's The Israel Test was incredibly profound. So, I want to ask you some questions about that. And if we have time, I'll ask you what you think of Brexit. But what do you think Brexit? Were you? Were you for it?

George Gilder  43:06 

I kind of was, I got persuaded by Matt Ridley, who is a brilliant libertarian. And sigh and analysis of analyst of science says that the Euro bureaucrats just become more costly and intrusive than they were worth. And so, they got thrown out. And it will be up to the Brits to address the new opportunities that open up as a result, but it is part of a fragmentation of the global economy that's coming back really results.

Announcer  43:55 

... Ron Baker and Ed Kless. To find out more about our show, visit us on the web at TheSoulOfEnterprise.com. You can also chat with us on Twitter using #ASKTSOE. Now back to The Soul of Enterprise.

Ron Baker  44:10 

Welcome back, everybody. We're here with my mentor George Gilder, and George in 2009. You published a book called The Israel Test. And you wrote in there that the Israel test is a moral challenge. What is The Israel Test?

George Gilder  44:28 

How do you respond to people who excel above you in creativity, ingenuity, invention and wealth? Do you admire them? Do you emulate them? And try to exceed them? Or do you envy them and try to tear them down. And I call this The Israel Test. Israel has led the world in inventiveness and creativity and in wealth creation over the last decade or so. They become the startup nation. They've created an Iron Dome that is needed by many cities, and which has protected their people from attacks from all around the region.

And but many people hate Israel, and it's a new form of antisemitism, I think it comes from envy and resentment of people who outperform. It's a hostility to excellence is what it is because Israel by any ordinary standards is perhaps the world's most successful country for its size. And it's a world leader, and it's been attacked by enemies all around it and somehow leftists in the United States support Israel's enemies against Israel. And that strikes me as the Democratic Party pathetically failing. It's Israel Test.

Ron Baker  46:29 

But I love how you wrote that. I love how you said in that book that America's technology emblem should read, "Israel Inside" because like you said they do such a high rate of innovation per capita. And George, you also pointed out that in the 1990s and 2000s, Israel started to embrace supply side economics. And prior to that, they failed The Israel Test, didn't they?

George Gilder  46:57 

Yeah, it was terrible, they almost went bust and the 1980s they had 1000 they were on the track for 1,000% inflation. And they contrived a unity government, and eventually began emancipating their country from the socialist traditions that they inherited from the Ben-Gurion and local labor movement. And... and Netanyahu really is the principal figure and let and liberating Israel and he's a kind of Churchillian leader in Israel. And, and again, the hostility to excellence has made Netanyahu the object of incredible hostility on the left in the United States, but he is... I think he is the greatest leader of this era.

Ron Baker  48:10 

Wow. I love how you articulated the golden rule of capitalism that - The good fortune of others is also one's own. And I mean, if that's true, yeah, if that's true, and the Jewish population is something like three tenths of 1%. And yet you look at their disproportionate amount of accomplishments, whether it's innovation or Nobel Prize, or entrepreneurship, it's it really does make your argument I think that you you've always made, the inequality is actually the answer, not the problem.

George Gilder  48:47 

Yeah, That's right. Funny, however, I do believe that some of the inequality is the result of what I call hypertrophy of finance. That is $5.1 trillion of currency trading every day, every 24 hours, the world's leading industry is currency shuffling, and it doesn't even stay stable at 25 times all global GDP. And it doesn't even provide stable values that prevent monetary conflicts and trade wars and general suspicion about monetary policy and trade policy around the world.

And I believe that the cryptocosm, the rise of Bitcoin and Bitcoin’s derivatives, because Bitcoin itself is flawed. That the rise of these crypto currencies provides a remedy for this pathetic breakdown of the world economy that we're currently experiencing. And so I call it the cryptocosm, I think it will both provide a new architecture for the internet, a security architecture for the internet that stop some of this paranoid fear of foreign chips and our telecom systems and, and also provide the platform for a new global money that can repeat the success of the gold standard. And my hope for the future, I'm very optimistic because I see a whole new generation of technology emerging, I see a way to measure innovation through time prices. That is a major break, which allows us to answer some charges about the effects of inequality.

Ron Baker  51:12 

George, just I know you dealt with this in Life After Google and you just made the point. Why is Bitcoin flawed as a monetary standard?

George Gilder  51:24 

Because it's tapped. There’s only a total of 21 million ever to be minted. And this means that has the kind of deflationary bias, a monetary deflation, not the positive deflation that results from ever expanding productivity is measured in time prices, but a kind of monetary speculative factor that is destructive for Bitcoin as a replacement for gold. That's what Satoshi wanted to do. He was trying to create a replacement for gold. He imagined that gold was running out, he spent too much time in universities. And he thought gold was running out, but the fact is, we're now mining gold, the oceans from slag heaps and thinking of mining gold on the moon or from meteors, you know, gold, all the gold that's ever been mined, is still available. And, and it's not running out. And that's the reason what remains scarce when everything else becomes abundant is time and, and time as the basis of value. Money is really time I explain it in and in Life After Google and other books, and I'll be explaining it more in the future but and the time prices of Tupy and Pooley really vindicate this insight of mine that money is central as it translates the scarcity of time, which is the fundamental reality of our lives into economic activity.

Ron Baker  53:38 

Right, right. Well, you did a great job explaining the flaws in Bitcoin in in Life After Google. And folks, that's a highly recommended book. George, thank you so much for appearing on The Soul of Enterprise. Unfortunately, we fit the time wall ourselves. So, Ed what's on store for next week?

Ed Kless  53:55 

Next week, Ron we're going to have our second interview with Joe Woodard.

Ron Baker  53:58 

All right, I look forward to seeing you in 167 hours.

Ed Kless  54:13 

This has been The Soul of Enterprise, business in the knowledge economy, sponsored by Sage, energizing business builders around the world through the imagination of our people and the power of technology. Join us next week on Friday at 4pm Eastern, that's 1pm Pacific. In the meantime, please do visit us at www.TheSoulOfEnterprise.com

Josh  54:42 

All right, gentlemen, you're clear.

Ed Kless  54:44 

Alright, thanks so much. Thank you, George.

Ron Baker  54:48 

Oh, he dropped Okay. Thanks, Josh.

Episode #256: Free-Rider Friday, August 2019

This was another great Free-Rider Friday. From Porsche to quotes from Steve Jobs to the Monopoly Socialism game, have a listen!

Here are Ron’s topics

 Here are Ed’s topics

Bonus Episode Links

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Here are some links from our bonus show this week. The show, all bonus links, and additional bonus material are available to our Patreon subscribers. Click the “FANATIC” image to learn more about pricing and member benefits. 

Ron’s BONUS Topics

Ed’s BONUS Topics

 

Episode #255: The Soul of Silicon

In May 1997, George Gilder delivered "The Soul of Silicon" to the Vatican, at a conference arranged and coordinated by the Acton Institute.

Ron, who is a devotee of all of Gilder's writings, believes that this is one of the most profound pieces George has ever written. We discussed the entire speech during this episode.

  • You can access The Soul of Silicon speech here.

  • You can access the encyclical Rerum Novarum here.

  • You can access the encyclical Centesimus Annus here.

Strap in for this episode! As follow up, George Gilder’s book, Men and Marriage, expands on the idea that parenthood is the ultimate entrepreneurial act, including many other topics. For an alternative perspective, Ayn Rand’s last public speech, The Age of Mediocrity, is where she criticizes Gilder’s defense of capitalism.

Bonus Show Updates

Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.

Here are a few links from our bonus show this week. The show, all bonus links, and bonus material are available to our Patreon subscribers. Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #254: Imagine the Audience in Their Underwear…Not! Public Speaking Skills

Would you like to be a better public speaker?

American journalist Roscoe Drummond said: “The mind is wonderful thing. It starts working the minute you’re born and never stops until you get up to speak in public.” Is it really true that people fear public speaking more than they fear death?

Here are Ron’s Rules for Better Public Speaking

  1. Don’t pain the listener

  2. Never talk down to your audience. Risk talking over their heads! That’s what makes the great books great, why they are constantly re-read: they are over our heads.

  3. Intimately know your material

  4. Don’t be afraid of repetition — the audience can’t go back and listen again

  5. Q&A is your chance to learn — Otherwise you’ve learned nothing listening to yourself

  6. You’ll never be able to please everyone — don’t cast pearls to swine. My brother Ken used to say: “One-third of the audience thinks you look like their Ex and will be pre-disposed not to like you no matter what you say.”

  7. Don’t point at the audience

  8. If there’s a stage, use it! It magnifies your presence.

  9. It’s about them; not you — humility is your friend

 Ed’s Rules Are Equally As Important

  1.  The only way to get better at public speaking is to speak in public

  2. Connection before content

  3. Begin with a story or quote. Actually, just begin with anything other than your name.

  4. Be Bertolt Brecht

  5. If you can, get introduced by someone else

  6. Don't be afraid to take a chance

  7. Steal from the best, but develop your own style

  8. Use the stage, but don’t be afraid to get off at certain point

During this show, we discussed a few books that can help you as well. 

Simply Speaking [hardcover edition], Peggy Noonan, 1998, On Speaking Well [paperback edition]

From these books, there are three things to keep in mind about your speech:

  • It doesn’t need to last longer than 20 minutes — because Ronald Reagan said so. The Gettysburg address and Sermon on the Mount were 3 minutes. The more important the message, the less time required to say it. The language of love is simple because it is big: It’s a boy; it’s over; he’s dead. 

            “For a speech to be immortal it need not be interminable” 

  • Yes, you should write out the text

  • Humor is essential

Peggy says most important component is logic when you look at Ethos, Pathos, and Logos:

  • Ethos—a person’s character (honesty, goodwill, etc.)

  • Pathos—arousing the passions of listeners, emotions

  • Logos—marshaling of reason

Where there is no substance, style will perish; you can’t be eloquent about nothing. Coco Chanel used to say if a women walks into a room and people say “What a dress!” she failed. She wants folks to say, “Oh, you look fabulous.” That’s success. After your speech, you want people to say, “She’s very intelligent, and made some interesting points.” Not, “Oh, what an interesting speech.”


How to Speak, How to Listen, Mortimer J. Adler, 1983

In this book we learn that reading and writing can be solitary and are easier to teach than speaking and listening, which are social. Technically, you can’t give a “talk” but you can have one. You can only deliver a speech with an audience. Listening, like reading, is an activity of the mind, not the ear or eye. If the mind is not engaged, you are hearing, not listening.


Strictly Speaking, Reid Buckley, 1999

This author is William F. Buckley’s younger brother who passed away in 2014. He ran The Buckley School of Public Speaking in Camden, SC. The premise of the book is that, crudely stated, public speaking = persuasion = selling.

Episode #253: Rory-Rider Friday

Once again, unfortunately, Rory didn’t make it on the show this week, so Ed and Ron improvised with a “Rory-Rider Friday.” Rory did make it onto our bonus episode, so if you’re a Patreon subscriber to TSOE you’ll get over one hour of Rory discussing his new book, Alchemy, and much more.

Here are the topics we discussed on Rory-Rider Friday.

Ed’s Topics…

  • Ed’s been playing the board game, Power Grid, available at Amazon.

  • Frank Beard (Half Size Me Podcast) spent 30 days eating nothing but gas station food, lost weight, and ate healthy. Read about it here.

  • Jennifer Warawa announced this week she is leaving Sage.

  • Read The Wall Street Journal article on Father Robert Sirico from August 3, 2019. You can access through the WSJ (paywall). As an alternative to the WSJ paywall, you can you can read the article via the Acton Institute in exchange for an email address.

Ron’s Topics…

  • TSOE listener Geir from Norway sent us an annual subscription offering from Circle K for hot beverages, all you want, for NOK 299, cup included (USD $30). When will Starbucks offer something similar?

  • Elon Musk explains how Tesla’s competitors make many cars with “no soul.” Bob Lutz, former GM Vice Chairman, made the same case in his book, Car Guys vs. Bean Counters. Read Ron’s review of this book here.

  • Reflections of a business guru,” The Economist, July 27, 2019, Bartleby’s interview with Charles Handy discussing the curse of efficiency.

  • Happy 89th Birthday, Dr. Thomas Sowell, who appeared on Episode #25. Read Mark J. Perry’s tribute to Dr. Sowell along with some of his favorite quotes here.

Episode #252: On Rory Sutherland's Book - Alchemy

Unfortunately, Rory didn’t make it on the show this week, so Ed and Ron discussed his latest book: Alchemy. The discussion was centered around Rory’s (eleven) Rules of Alchemy.

Rory’s Rules of Alchemy

  1. The opposite of a good idea can also be a  good idea.

  2. Don’t design for average.

  3. It doesn’t pay to be logical if everyone else is being logical.

  4. The nature of our attention affects the nature of our experience.

  5. A flower is simply a weed with an advertising budget.

  6. The problem with logic is that it kills off magic.

  7. A good guess which stands up to observation is still science. So is a lucky accident.

  8. Test counterintuitive things only because no one else will.

  9. Solving problems using rationality is like playing golf with only one club.

  10. Dare to be trivial.

  11. If there were a logical answer, we would have found it.

We are working on rescheduling Rory—stay tuned!

Episode #251: Free-Rider Friday, July 2019

What a GREAT Free-Rider Friday! Ed and Ron cruised through the most interesting news and topics that caught their attention this past week.

Here are Ed’s Topics…

And Here are Ron’s Topics…

  • Uber is testing an all-in-one subscription for rides, food delivery, bikes, and scooters,” The Verge, July 23, 2019, by Andrew J. Hawkins.

  • Unintended, uh, whatever, man,” The Economist, July 13, 2019.

  • New ways of selling books clash with France’s old pricing rules,” The Economist, July 6, 2019.

  • Ball-game theory, The Economist, July 13, 2019.

  • The AICPA’s PCPS 2018 Survey of 1,910 CPA firms reports a declining use of hourly pricing and an “increasing use of value pricing and “value billing” [whatever that is?] and fixed pricing.” Depending on size, the percentage of firms report anywhere from 15-50% of revenue is now derived from value pricing or “value billing.” Hourly billing is between 59-80%, so we still have a long way to go. Fixed pricing is from 20-30%. Take these surveys with a grain of salt, since they are non-random and contain errors in reporting, interpretation of meaning, etc. But they do give us a vector of what is happening, and it is clear that hourly billing is waning.

Episode #250: INFLUXUS RECIPROCI FALSUM

INFLUXUS RECIPROCI FALSUM - “The Correlation False”

statistics maybe.png

The idea for this show started when we ran across the book Spurious Correlations by Tyler Vigen at the San Jose Tech Museum. Ed and Ron both picked it up and immediately loved it. And a show was born! So what’s up with the show title??? Literally translated, it means “the correlation false” and if you’ve been listening to the show for any period of time you probably picked up on the fact that Ed understands a thing or two about Latin.

Now that you’ve read this far, Episode 250 of The Soul of Enterprise was — predictably — about the confusion between correlation and causation. Folks - some of these examples are hilarious! 

Let’s get a few key things out of the way before diving into the examples.

  • Correlation: two things vary together. Ron likes the example that wet streets cause rain.

  • Graph Paper Diaries has an excellent description of correlation/causation confusion along with six examples:

    • Thing A caused Thing B (causality)

    • Thing B caused Thing A (reversed causality)

    • Thing A causes Thing B which then makes Thing A worse (bidirectional causality)

    • Thing A causes Thing X causes Thing Y which ends up causing Thing B (indirect causality)

    • Some other Thing C is causing both A and B (common cause)

    • It’s due to chance (spurious or coincidental)

  • Data dredging: Provided enough data, it is possible to find things that correlate even when they shouldn’t. The world of big data and big correlations. Statistical significance increases as sample size increases. Every one of the correlations in Tyler Vigen’s book was discovered by a computer. 

In terms of methodology, Vigen used Pearson’s correlation coefficient which is common for expressing linear relationships between variables. You can double-check any statistic in the book, and find many more charts: http://tylervigen.com/sources.

Spurious Correlations documents a statistically significant correlation between many humorous variables, including:

  • Earnings per share of Domino’s Pizza Group and Economic loss due to cybercrime (98%).

  • Undergraduate enrollment at U.S. universities and Injuries related to falling TVs (99.6%).

  • Customer satisfaction with Taco Bell and International oil production (79.9%).

  • Stay-at-home-dads and Walt Disney Company revenue (93.8%).

  • Beef consumption and deaths caused by lightning (87%).

Real stories of correlations ≠ causations

Mark Twain: “The difference between reality and fiction is that fiction has to make sense.”

  • The Economist had an article “Enough is never enough,” that discussed whether or not advertising is good or bad? A survey of 1 million Europeans who self-reported life satisfaction with variation in total advertising spending as a share of GDP and found a significant inverse relationship: a doubling of ad spending = 3% drop in life-satisfaction. So, North Korea should be most satisfied on the planet!??! 

  • Adding one more woman in senior management or to a company’s board, raises its return on assets by 8-13 basis points (hundreds of a percentage point), according to one study. An IMF study shows a higher share of women on bank boards is associated with greater financial resilience, and greater financial stability.

  • The correlation between unemployment and inflation was postulated in 1958 by William Phillips, a London School of Economics professor. Milton Friedman falsified this theory but it still rules at the Federal Reserve Bank.

  • Discussing brushfires in Australia, The Arsonist by Chloe Hooper reports [from a book review in The Economist, “Into the inferno,” June 15, 2019.

    • “People are more inclined to destruction in places where “high youth unemployment, child abuse and neglect, intergenerational welfare dependency and poor public transportation meet the margins of the bush.”

Based on this book, Risk Savvy: How to Make Good Decisions, (Gerd Gigerenzer, 2014), the author believes we live in a risk-illiterate society. There is some truth to that. When meteorologists report a 30% chance of rain tomorrow, what does that mean?

  • Some think, it will rain 30% of the time tomorrow

  • Others, it will rain in 30% of the region

  • Others still, three out of ten meteorologists think it will rain and 7 don’t.

What it actually means: That it will rain on 30 percent of the days for which this announcement is made.

Many of us smile at fortune-tellers, but when they’re armed with computer algorithms rather than tarot cards, we take their predictions seriously and pay for them. One amazing fact Gigerenzer points out in his book is the 5-year survival rates of prescreening for cancer. This is achieved by screening at an earlier age (age 60, say, rather than 67 due to symptoms). Say the patient dies at 70 no matter what. In the first case, the 5-year survival = 100%; in the second case it is 0%.

Statisticians call this the lead time bias. The high survival rates don’t tell us if lives are saved. PSA screening detects both progressive and non-progressive cancers. It can’t distinguish between them. More men die with prostate cancer than from it. As such, Gigerenzer concludes that prostate cancer screening has no proven mortality reduction, only proven harm. It’s the same with mammography.

Gigerenzer First Law: The more the media report on a health risk, the smaller the danger for you.

In the book, The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives (Stephen T. Ziliak and Deirdre N. McCloskey), Deirdre points out that statistical significance is not the same thing as a scientific finding. In fact, it can be misleading at best. Also,

“The mainstream in science, as any scientist will tell you, is often wrong. Otherwise, come to think of it, science would be complete.”

Science has stopped asking “How much is the effect? And What difference does the effect make? Fit isn’t the same as importance. W. Edwards Deming used to say: “Statistical significance provides no rational plan of action.”


The VeraSage Symposium

Use this link for more information: VeraSage DownUnder 2019

verasage symposium down under.png

As you may or may not know, VeraSage meets biennially for a VeraSage Symposium [“to drink together,” and for the first time ever the Symposium this year is being held in Australia in November.

In conjunction with Australian Senior Fellow John Chisholm we have put together what we think is a terrific program covering two events—a one day “Transforming Your Firm” workshop in Melbourne on Tuesday, November 12, followed by the two-day VeraSage Symposium commencing Wednesday evening November 13 and running to the 15th, being held in Geelong about 70 miles from Melbourne on the wonderful Bellarine Peninsula.

Ron has visited Melbourne, Geelong, and the Bellarine Peninsula several times now and trust me they are wonderful places to visit and experience some of the best of what Australia has to offer.

In addition to the formal programs the Aussie contingent have put together some wonderful social events, with a special emphasis to showcase the local food and (of course) the wine. If you are at all interested in attending, register online or contact John Chisholm at john@chisconsult.com for further information, or any travel recommendations—especially if this is your first time visiting Australia.

You will see from the website that early bird pricing is available until end of August and attendance will be strictly limited. We look forward to seeing you Downunder in November!

 

Even MORE Examples and Resources for Correlation and Causation

Episode #249: The Adaptive Capacity Model

Do You Know the Real Capacity of Your Firm? 

Ed and Ron went through the Adaptive Capacity model this past week on the radio show. The show notes are below. This was a complex topic covered over the course of an hour. It is definitely worth a listen or two!

Maximum vs. Optimal Capacity

All firms have a theoretical maximum capacity and a theoretical optimal capacity. From a strategy perspective, it is essential to see how that capacity is being allocated to each customer segment. Your maximum capacity is the total number of customers you firm can adequately service, while the optimal capacity is the point at which customers can be served adequately while maintaining your competitive advantage and pricing integrity.

Usually, for most professional firms, optimal capacity is between 60 and 80 percent of maximum capacity. 

Insuring a proper amount of capacity is allocated to various customer segments, while offering a differentiating value proposition within each segment, is an essential element of implementing value pricing strategies. It also prevents bad customers—those who are not willing to pay for the value you deliver—from crowding out good customers.

The Adaptive Capacity Model

Think of your firm as a Boeing 777 airplane, similar the one below.

Picture1.png

When United Airlines places a Boeing 777 in service, it adds a certain capacity to its fleet. However, it goes one step further, by dividing up that marginal capacity into five segments:

A. First class
B. Business class
C. Full fare coach
D. Coach
F. Leisure, Priceline.com, and Bereavement fares 

The airlines—and hotels, cruise lines, golf courses, car rental agencies, and other industries with fixed capacity—are adept at managing and predicting their adaptive capacity to maximize profitability. 

Lessons from Yield Management

The airlines understand it is the last–minute customer who values the seat the most and hence they reserve a portion of each plane’s capacity for their best customers. They do this even at the risk the plane will take off with some of those high price seats empty—and that revenue can never be recaptured since they cannot inventory seats. 

Why do they take that risk? Because the rewards of reserving capacity for price insensitive customers comprise the majority of their profits.

Airlines allocate only so many seats to coach, leisure, Priceline.com (or bereavement) seats, which they offer well in advance of the flight. However, no airline adds capacity in order to accommodate these customers. 

This point is noteworthy, as too many firms will, in fact, add capacity—or reallocate capacity from higher-valued customers—in order to serve low-valued customers. This is the equivalent of the airlines putting the upper deck in the back of the plane rather than the front.

Furthermore, many companies will turn away high–value, last minute work from its best customers because it is operating near maximum capacity, usually at the low–end of the value curve for price sensitive customers. This is common during peak seasons; the lost profit opportunities are incalculable.

Many worry about running below optimal capacity and cut their prices in order to attract work, especially in downturns or slow cycles. This strategy is fine, but you must understand the tradeoff you’re making. Usually, that capacity could be better utilized selling more valued-added services to your first–class and business-class customers, who are less price sensitive than new customers.

This way, the firm does not cut its price and degrade its pricing integrity in order to attract price sensitive customers, sending a signal into the marketplace it is willing to engage in this strategy and affecting the perception of its value proposition. 

The conventional wisdom is you have to be at maximum capacity—where demand exceeds supply—to raise prices. But since when do you have to wait to be fully booked to demand a premium price? Do not confuse working harder (supply-side capacity) with working smarter (demand side pricing).

Prices are determined by value created for the customer, not the internal capacity constraints of your firm. How much fixed capacity are you allocating to each customer class? What will be the criteria you use to ascertain where in your airplane each customer sits? By viewing your firm as an airplane with a fixed amount of seats, you will begin to adapt your capacity to those customers who appreciate—and are willing to pay for—your value proposition.

Additional Reading 

Episode #207 Reprise: Interview with George Gilder

Did you catch the reprise of Episode #207 while Ed and Ron were on vacation last week? In lieu of show notes, we have opted to post the transcript of our interview with George Gilder about his book, Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy

The transcript can be found here.

If you would like more on this or want to listen commercial free, please consider subscribing to our premium service at Patreon.

Episode #248: Free-Rider Friday, June 2019

We had another great Free-Rider Friday show! 

Here are Ron’s Topics: 

  • Picking up the Bill,” Bartleby, The Economist, May 25, 2019. Great Yogi Berra line: “I’m not going to buy my kids an encyclopedia. Let them walk to school like I did.”

  • Remember the Polar Bears,” National Review, April 22, 2019.

  • Why the UK Suddenly Is Suffering from a Physician Shortage,” FEE, June 1, 2019.

  • Our VeraSage colleague Paul Dunn sent us another example of the subscription business model: Rent the Runway, where you can rent your wardrobe. The company has become a Unicorn (a startup with a $1 billion+ valuation). Urban Outfitters is also launching a subscription service where you’ll be able to rent up to six items a month. This will help curb “wardrobing”—customers returning clothes after wearing them. The online market for renting clothes was worth $1 billion in 2017 and is forecast to double by 2023.

  • A forum in National Review from May 20, 2019, “In Defense of Markets.” Some excellent points from Jonah Goldberg, Marian L. Tupy, Deirdre McCloskey, Scott Lincicome, and Yuval Levin. 

And Here Are Ed’s Topics:

Episode #247: Memorable Mentors — Tom Peters

Do you have a memorable mentor? We do! 

Well, we tried, but we could not land Tom Peters to be a Guest on The Soul of Enterprise. Instead, we decided to do the next best thing - a Memorable Mentors episode.

On this show, Ron and Ed recapped the career and work of the person whom many claim as the father of the business book genre. His classic, In Search of Excellence, co-written with Robert Waterman, launched his career into a near-Earth orbit. His presentation style influenced both Ed and Ron with his wit and willingness to say outrageous "stuff." 

We discussed the following Tom Peter’s books in addition to In Search of Excellence.

We also discussed the antithesis to Tom Peters:
The Management Myth by Matthew Stewart


Check out some of these related resources.

  • Episode #120: Strategic Planning: Efficient, effective, neither, including a discussion on The modified Seven S Model.

  • Ed’s post “On Client vs. Customer”

 

 

Episode #246: Interview with Chief Pricing Educator Mark Stiving

Mark+Stiving.jpg

Mark helps companies discover how buyers perceive value and how to price offerings to capture more of the value they create. For over 25 years he has studied, led and coached businesses through the lens of pricing, a radically different approach from other business experts. He knows that every person inside your company affects the price a buyer is willing to pay. The prices you achieve ultimately indicate how well the entirety of your company operates. Mark has driven a company-wide pricing initiatives worth hundreds of millions of dollars in incremental profit. He started and sold three companies, improving his championship pricing skills in each one.  Mark will change the way you think about pricing and business as a whole.

From 10 years old to his doctorate studies at UC Berkeley, Mark gets RIGHT into the good stuff in this great interview. Check out the full show notes at this link.

Here are some additional links we mentioned during the show:

Episode #245: Interview with Justin Lake

A Special Episode: Interview with Justin Lake

Especially for those who know someone with diabetes, this very special episode features Justin Lake. The full transcript of the interview can be found here. Here are some of the links mentioned in the show:

Justin also wrote this article back in 2016 which drew the connection between his son's experience and his business of mobile technology.

justin lake.jpg

Justin Lake is an owner and principal at Venado Technologies, a digital technology consultancy. As a lifelong mobile tech enthusiast, Justin has dedicated his career to leveraging modern technologies to improve the effectiveness of organizations with highly mobile workforces. He has held roles in companies including wireless carriers, mobile device manufacturers, mobile managed service providers, and software development teams. And while that experience helps drive much of Justin's counsel with his clients, the real fuel is bringing creativity to every new challenge. Through his own ideas, and leveraging his extensive network of industry professionals, Justin and his team are able to bring value to the digital transformations of the most exciting companies in the world.