Greg Tirico
Episode #490: Friday Farrago
Episode #490: Friday Farrago
Greg Tirico
Episode #489: Technology Trends with Greg Tirico
Episode #489: Technology Trends with Greg Tirico
Greg Tirico
Episode #488: Wealth’s Way — The Wisdom and ...
Episode #488: Wealth’s Way — The Wisdom and Wonders of Shareholder Capitalism
Greg Tirico
Episode #487: Is the CPA shortage a feature or ...
Episode #487: Is the CPA shortage a feature or a bug?
Greg Tirico
Episode #486: Hearth of a Cheetah — Second ...
Episode #486: Hearth of a Cheetah — Second interview with Magatte Wade

September 2021

Episode 359 - Third interview with Joe Woodard

joe woodard

Ron’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by sage, transforming the way people think and work so that organizations can thrive. I'm Ron Baker, along with my good friend and VeraSage Institute colleague Ed Kless. On today's show, folks, we have for the third time, Joe Woodard. Hey, Ed, how's it going?

Ed

If I were any better, it would be illegal.

Ron

Okay, good. Well, I'm looking forward to this conversation. Let me read Joe in here, as if people don't know him, but just real quick. Joe Woodard is an author, consultant, business coach, and national speaker. He's trained over 100,000 accounting and business professionals. He's been on the Accounting Today’s Top 100 Influential people in the profession for many years, and he is the CEO of Woodard events, which includes education, coaching resources, and a community for small business advisors and small business owners within the accounting industry. I love his vision: “To transform small businesses through small business advisors.” Joe Woodard, welcome back to The Soul of Enterprise.

You were here in December 2016 [Episode #119], and in September 2019 [Episode #258]. We had a little thing in the interim since we last met Joe, called COVID. What lessons did we learn?

I think it drove home the point for me that this, at the end of the day, is a relationship business. And you know, the tech stacks we talk about, and the transition to advisory, and all of that, at the end of the day, it is about belly button to belly button. And we're just like healthcare workers, we're on the front lines.

Something we have talked about with other guests on the show, if you spun back to 2010, or 2000, with COVID, I don't think many businesses would have been able to handle it very well without all the amenities we have today with the internet and everything. So what innovations have you seen from firms? I mean, we talked about the switch to the cloud and firms said, “Oh, this could never happen.” Obviously, remote work became a thing. And we're very interested here in the Results Only Work Environment [ROWE]. Have you seen other innovations come from firms during the past year-and-a half or so?

Have you seen more and more firms adopt a value pricing model out of this COVID pandemic?

That's wonderful, because that gives them capacity. And we've always argued that you should put capacity before revenue. Unfortunately, we find most firms do the opposite. They won't hire somebody until they're busting at the seams.

I love it. Last time we had you on, Joe, you said you changed your mind, I think it was before we went live, on two topics. And one of them was on timesheets. I'm just curious, in the training of these 1,000 firms or so in value pricing, what do you tell them about the timesheet and their measurements?

I love it because the timesheet has no granular information like that. And you're only able to get those insights because you were looking at how work flowed through the organization. Anyway, Joe, this is great, it’s flying by.

Ed’s Questions: Segment Two

We are talking today on The Soul of Enterprise with Joe Woodard. Joe, you and Ron having that love fest to the accounting profession. Now, I want to ask you, so what did they miss during COVID? What did they get wrong? What should they have done in addition to all that?

Well, one thing I think they did miss—and we're starting to see reverberations of this right now as we begin to come out of COVID, and last reports that I've read, there's some really good signs that we're starting to see that this last jump is starting to go back down, so maybe we're really coming around where we were maybe late June, early July—was the Great Resignation. I talked to one firm leader who had 17 people during COVID, and in the last two months 10 of them have left, 10 out of 17. Now, he's probably an outlier. But we're hearing stories, especially among some of the mid-size firms, that this is really a big problem. And I have my ideas as to what might be causing it, but I'd be curious as to your thoughts on it, and what you're seeing too, maybe in the smaller firms that you work with it's not so much of an issue?

You just don't want them to move to California so they have Nexus in California, that would probably be a bad idea, Joe.

See, I'm trying to get Baker to move to Texas for years now. But picking up on that, you said two things that reminded me of some previous guests. One is Jody Thompson, her great line is that work is a thing you do, not a place you go. And I think that’s critically important. I would agree with you that the purpose was part of it, because I think that part of the whole Great Resignation across the board was really pent-up demand. In other words, people didn't leave their job and then all of a sudden, boom, now we have the opportunity to do so. The attrition that would have happened normally over time, but I agree the reason why Disney didn't fall prey to that, and probably Southwest Airlines and The Container Store and all of these other places, is because they are purpose driven. That was a great story. Our saying on that is we want you to be efficient with things but effective with people. And what that woman was clearly being effective with that child to make sure that he understood. So, Joe, there's a lot of things going on right now with regard to the accounting profession where more and more companies are virtually abandoning their entire accounting department, and businesses that are in growth stages going through the transition of small to medium are not hiring people in accounting but instead going to CAS services right, client advisory services, as well as just outsourced bookkeeping. We've got only like about a minute or two left before our break, but I think this is a huge trend. I can truly see that five to ten years from now there are going to be very few companies that have anyone in their accounting department at all. Thoughts on that?

I couldn't agree more, and certainly this guy Jeff Bezos putting $400 million into a company called Pilot, so now the bookkeeping profession is also competing with, I don't know, Amazon, effectively. Maybe this will get someone's attention, but alright Joe, this is flying by, as Ron says.
 

Ron’s Questions: Segment Three

Welcome back, everybody. We're here for the third time with one of our most popular guests, Joe Woodard. Joe, I have to ask you, I saw I think you did a webinar, maybe it was this week, on the backseat driver client. I just have to ask you, what is that?

I was going to bring up that Starbucks story, so thanks for telling that story. I love that story. Have accountants gotten better with that?

Let me ask you this, Joe. We've been talking a lot for the last two-and-a-half years about the subscription economy. Ed and I are big believers that the customers of accounting firms should subscribe to the firm. We spent the whole first segment talking about the relationship. But let's face it, when you look at the business model, we don't monetize the relationship, we monetize the transactions. And I think that's a deep flaw. I want to move the accounting profession over to what concierge medicine, or Direct Primary Care medicine, where you subscribe to a general physician, and they handle anything you need, that they're capable of doing. And that's a big caveat—if you need a specialist, they'll get you that—but you’re covered for whatever they're capable of doing within their four walls, and it's inclusive in one price. Now, you could still have options and all of that. But what's your reaction to that?

I love that because that's really leveraging the social capital that all firms have. But it's the least leveraged of the three types of intellectual capital that we talk about. I've got to ask you, Joe, you did a reality TV show [called Tech Makeover], tell us about it.

Wow, that sounds awesome. I'm going to have to check that out. We will definitely link to that in the show notes. Real quick, what books have you read since we last spoke that have really impacted you?

Joe Woodard

Well, I was a little late to the party on it, but I finally got around to Measure What Matters to Customers [Ron’s book] finally, can you believe it? But it impacted me so significantly that it's revolutionized the way we run our business here, with the objectives and key results. We were big on KPIs, and we had really good predictive analytics, we were really good on financial measurements, but we weren't connecting, what we found is between purpose, which is the daily what you do, and vision, which is the magnetic north Compass Point. In between those two things, measurement must take place that is aligned with purpose and aligned with vision. And the key results are more connected to the purpose, the daily grind, the objective is more connected to the vision. And it was the missing bridge between our purpose and our vision. The second book, and I know that we're tight here for the next break, but the second one that really made a difference for me was The Advantage, by Patrick Lencioni. Particularly, his section in that book on company values, and the distinction between core and operational and aspirational values made a huge difference in our business.

Ron

That's awesome. Well, Joe, thank you so much. I'm going to let Ed take you all the way home but I just want to say thanks again for appearing on The Soul Enterprise for the third time.

Ed’s Questions: Segment Four

Finishing up our conversation, our third conversation, with Joe Woodard, Joe, I want to take a macro approach here to this last segment, and just get your thoughts on something that's concerning to me. I see a lot of the new regulations that are coming down from governments all over the place, statewide and also federal. And I think it's potentially starting to have an impact on the creation of new businesses and entrepreneurs really being able to create without permission in some ways. I know you do a lot of reading, are erudite on a lot of a lot of different subjects. Is this something that you're concerned with or have been thinking about as well?

I have a feeling that we're going to see a lot of companies that are 99 and fewer emerge out of what's going on with COVID regulation. At the same time, though, the challenge that I see is that states like California are making it harder and harder to really be classified as gig workers. And they're insisting that Uber and Lyft and all this pay their people as employees when they're really not.

Well, we've got about three or four minutes left. What are you working on?

Amen. We'll just give that an Amen, and we'll wrap it up from there. Joe Woodard, thanks so much for being on The Soul of Enterprise, we really appreciate it. Ron, what do we have coming up next week.

Ron

Next week, we have Kimberlee Josephson. She is the Associate Professor of Business Administration at Lebanon Valley College. I'm sure we'll talk to her about ESG and things that you were asking Joe about with these regulations, she writes for FEE [Foundation for Economic Education] so looking forward to that.

Ed

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

Bonus Content is Available As Well

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.

This pas week was bonus episode 359 - ABCs - Apple, Bees, and China. Here are a few links discussed:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #358: Subscription Economy Update

subscription economy update

We’ve got a special update for you as a part of our show notes for episode 358 on the subscription economy. For our Patreon members, we always provide a short list of notes that follow along with the episode. We call these “Greg’s notes” — sort of like CliffsNotes but specifically for The Soul of Enterprise. For all readers this week, we are presenting these notes below. They follow the structure and timing of the show so they are great to have at your side while listening.

Here are our CliffsNotes (aka Greg’s notes) for the week on the subscription economy:

Bonus Content is Available As Well

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.

This pas week was bonus episode 358 - Trillions and taxes. Here are a few links discussed:

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #357: Behavioral Biases

357 behaviorial bias 300px.jpg

TSOE listener Geir, from Norway, sent us: Influences and Irrationalities of the Human Mind, Ogilvy Behavioural Sciences Practice.

The book lists 29 of most subtle and powerful nudges, “combining gravitas of academic understanding with application of real world communications.”

As Charlie Munger, Warren Buffet’s bridge and business partner said: “If economics isn’t behavioral, I don’t know what the hell is…”

Some of Our Biases

  • Anchoring: Those whose last two digits of their Social Security number was above 80 were willing to spend $20 more on a bottle wine than those last two digits was below 20.

  • Chunking: Ryanair, low seat price, add-ons, already attached to the idea of a holiday, more likely to purchase

  • Over-Confidence: 93% are above average drivers. Lake Wobegon Effect

  • Priming: French music played, French wine outsold German wines 5:1; German music, German wines outsold French wine 2:1

  • Paradox of Choice: Often paralyzed by choice. Prius offered one choice, since the real choice was hybrid or not. If Toyota had offer several, customers might have postponed to buy the best one (Starbucks refutes this Paradox of Choice).

  • Status Quo Bias: Nine out of ten people favor organ donation: Germany donation rate is 12%; Austria is 99%, because in Austria you are opted-in unless you opt-out.

  • Loss Aversion: It’s two times as painful to lose something as a similar gain. “Lose $X if you don’t insulate your attic vs. you will save $x each year if you do.

But then The Economist, August 20, 2021, published this article, “A study on dishonesty was based on fraudulent data,” which questions the data and facts in one of the studies in Dan Ariely’s book, The Honest Truth About Dishonesty.

Jason Hreha, one of Ariely’s collaborators wrote “The Death of Behavioral Economics,” Undated, 2021, wherein he claims: “Behavioral economics is dead.” For two reasons:

1.     Failing to replicate a lot of the studies

2.     Interventions are surprisingly weak in practice

Even Loss Aversion, the field’s most important idea, has failed to replicate. Other have found losses and benefits equally effective in driving conversion because many see loss-focused messaging as gimmicky and spammy. Loss aversion does exist, but only for large losses.

Weak Effect

UC Berkeley researches looked at 126 Random Controlled Trials by two nudge units in the USA. According to papers, the average effect was 8.7%. The researchers found the actual effect to be 1.4%.

Hreha argues that behavioral economics offers up cookie-cutter solutions to complicated problems. Yet specific problems require specific solutions.

He also wrote, “Applied behavioral science is where creativity goes to die.”

Deirdre McCloskey [Episode #6 and Episode #293], in her book Bettering Humanomics, wrote:

Other recent neobehaviorist fashions, such as neuroeconomics and behavioral finance and happiness studies, are dubious—or, they treat creative adults like a flock of little children.

We need, they say, merely to “observe their behavior,” omitting for some reason linguistic behavior.

Ludwig von Mises further developed the idea of praxeology, the science preoccupied with psychology and understanding human decision making. He believed economics is the study of human praxeology under conditions of scarcity.

Humans engage in purposeful behavior, said Mises. Animals behave. Humans act. We have a goal in mind, and we learn. Human action vs. Human behavior:

1.     Each of us acts purposefully, with a goal in mind. It can be fixed, or changed frequently.

2.     Each of us learns

He also wrote: “Error, inefficiency, and failure must not be confused with irrationality. He who shoots wants, as a rule, to hit the mark. If he misses it, he is not irrational’ he is a poor marksman.”

Economist John Kay wrote Obliquity, where he said, “If people are predictably irrational, perhaps they are not irrational at all: Perhaps the fault lies not with the world but with our concept of rationality.

One of Ron’s Top Five book of 2019 [Episode #275] was Cents and Sensibility: What Economics Can Learn from the Humanities, by Gary Saul Morson and Morton Schapiro. They begin by noting the difference between humanities and economics: stories.

“Great novelists understand people better than any social scientist who has ever lived.”

“Surely no one in his right mind ever thought people are rational to begin with? Why, the whole heritage of Western literature has described people as irrational, and the social sciences point to many factors other than reason that shape behavior.

“Why would philosophers since Socrates have been urging people to act rationally, if they always did so anyway?

Behavioral Economics purports to adding the human dimension to economic models, but it does nothing of the kind. The human beings it imagines behave just as mechanically, only less efficiently. They are still abstract monads shaped by no particular culture.

“There’s no way to grasp most of what people do by deductive logic—we need stories. Novels are a distinct way of knowing. Ethics requires judgment, it cannot be reduced to theories, models, or sets of rules alone.

“Economics can’t deal with culture since culture can’t be mathematized. Same with wisdom.”

There is also no place for surprise in either classical or behavioral economics, and yet humans constantly surprise.

Dostoevsky wrote: [If someone would] “some day…truly discover a formula for all our desires and caprices,” there would be no caprices at all. “There will be no more incidents and adventures in the world.”

Another book highly critical of nudges and libertarian paternalism is The Manipulation of Choice: Ethics and Libertarian Paternalism, by Mark D. White.

Bonus Content is Available As Well

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.

Click the “FANATIC” image to learn more about pricing and member benefits. 

Episode #356: Interview with David C. Baker

David C Baker

Let’s learn just a bit more about David C. Baker before we get into the show notes…

David C Baker grew up with a tribe of Mayan Indians in a remote village in the highlands of Guatemala. He's an author, speaker and advisor to entrepreneurial experts. Also a helicopter and airplane pilot, an avid photographer and has taught high performance motorcycle racing. He owned a marketing communications firm for 6 years, then started a management consulting firm focused on helping entrepreneurial experts make better business decisions through his writing, speaking, and advising. He has written five well received books, the third one, Managing Right for the First Time, recently being named by Inc. Magazine as one of the Top Ten Books on Management that Entrepreneurs Should Read.

Ed’s Questions: Segment One

Welcome to The Soul of Enterprise: Business in the Knowledge Economy, sponsored by Sage, transforming the way people think and work so their organizations can thrive. I'm Ed Kless with my friend and co-host, Ron Baker, and folks on today's show, we are pleased to have our interview with David C. Baker. How's it going, Ron?

Ron

It's going good. This has been a weird week, but I'm really looking forward to our conversation with David.

Ed

Absolutely. It has been a weird week. We'll perhaps get into that on our bonus episode later. But let's get to our guest right away. David C. Baker was born in Michigan, but lived in Guatemala with a tribe of Mayans until he was 18 years old. He spent six years in graduate school earning advanced degrees in ancient languages in theology, but wishes he had a degree in anthropology. He's an author, speaker and advisor to entrepreneurial experts. And he owned a marketing communications firm for six years and then started a management consulting firm focused on helping entrepreneurial experts make their business decisions through his writing, speaking and advising. He's the author of three rock bench titles, Managing (Right) for the First Time, Financial Management of a Marketing Firm, and The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth. Welcome to The Soul of Enterprise, David C. Baker.

Well, we're happy to have you. So my first question is Mayans, fascinating. Talk to me.

Which, of course, probably led to your then getting advanced degrees in ancient languages and theology as part of the tie-in. I could see that would give you a push in that direction. But then you do say, in one of the bios that I read, and I worked it into the bio, that you preferred you would have had a degree in anthropology. And I think you probably know Rory Sutherland has called marketing the modern equivalent of anthropology in the current day, marketers are anthropologists on the current set of human beings that are around. So why did you want anthropology after all that?

Which leads me to this next question. I'm really curious as to your thoughts on this. And this is kind of a running theme, or question, that Ron and I have bounced back and forth on for quite some time. The word fair, and we often use in the business context of a “fair price.” Fair is an Anglo Saxon word, it only exists in Anglo Saxon type languages. Because if you translate fair to Spanish or French, it gets translated as “just” and then if you translate that word back to English, you would never translate it back to fair, you would translate it as “just,” that would be the word that you would use. And it's amazing to me how the concept of fair, which the opposite by the way in the original word is foul, and we would never say, “Well, that was a foul price.” And so in your in your experience with understanding languages, it's amazing to me how languages have concepts like that, that the concept doesn't even translate one to the other.

And that's what I wanted to lead to and ask you about this, because I think there's an analogy to business in that these different areas of expertise, and of course in your book, have different languages in a sense that are used, and some of them don't translate well, one to the other. So I think there is a language of marketing, a language of sales, a language of finance. And oftentimes, I think we're talking past each other linguistically, even though we're talking the same English, it's different concepts come into our mind when we talk about things like price, cost, value, they sometimes mean different things to different people when you say them, right?

I think it was Plato, all wisdom begins with the definition of words. We can't build wisdom unless we agree on what some term means. And I think oftentimes, a lot of people are talking past one another when we do say things like price, value, specifically those words in business. So curious as to when you hear value-based pricing, what does that mean to you? Why is that a struggle for you?

That's why I think Peter Drucker was great at, asking some of those very basic questions that you would think okay, what's the purpose of your business, sell what your customers buy. Well, duh, no kidding, but it's amazing how many people don't actually sell what their customers buy. It's really quite incredible. I've got of just a few minutes with you, so to pick on this value conversation, I agree with you that oftentimes people who have espoused some of the concepts that Ron and I talk about have done it and come about it more from a manipulative standpoint, I will not deny that stamp at all, which is why I always go back to the work of Mohan Khalsa and his book—and to me wrote the definitive book on the value conversation—which is Let's Get Real, or Let's Not Play. The whole concept is exactly what you said, we're going to have a real, authentic conversation, and I am going on a value quest with you in this conversation to try to find out if there's enough there there, as you know, the politicians once said, to see if it's worth us doing business at all, and I'll be the first one to say, I don't think we should do anything with you.

Interesting, well that's unfortunate, because I think one of the things that I found is that when people are really good at the value conversation, you do have that experience of being well-listened to. That's one of the things that people will say, and I will agree. I think Margaret Wheatley, a previous guest on this show [Episode #308], in one of her books, which is on great questions, about asking great questions. She does ask that exact question. When was the last time you experienced good listening? And that's a very challenging,

Yeah, it really is. And it changes the way we go about doing our business on a regular basis. Well look at this, we're up against our first break already.
 

Ron’s Questions: Segment Two

Welcome back, everybody, we're here with David Baker, and he's the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, published in 2017. David, this was a great book, I really got a lot out of it. I love how you talk about positioning, but on the wealth + making an impact in your subtitle, I just want to ask you about this from a knowledge worker perspective. When you look at doctors, or lawyers, or even advertising folks. They joined the profession or the industry for some reason, they wanted to help people, they wanted to make an impact, whatever. And then they get in there, and they spend half their time doing paperwork, like how doctors feel they're overwhelmed with too many patients, and they don't burn out—they rust out. What's your reaction to that? 

We have a saying around here: growth for the sake of growth is the ideology of the cancer cell not of a profitable, sustainable business. I love how you say it's not about revenue, or growth, it's about impact. You also wrote this, and I really want you to explain this: “Expertise (or insight) is based on focus, which is based on positioning. Now, I'm going to ask you later about vertical and horizontal positioning. But just unpack that why “expertise, or insight, is based on focus, which is based on positioning”?

And I love that because on the positioning end of it, it also gives you the ability to say no easier and I love when you say “Your only real control is to withhold your expertise.” I mean, he who says no has the power.

There's nothing more liberating than being able, and willing, to say no. But we learn that so late, or a lot of us do. I wish I would have known that in my 20s.

By the way, David, my favorite way to say no, is tell somebody, “I'd love to, but I don't want to.” And you'll get a really weird look, and they'll have to process that for a minute. But it's a very nice way to say no. Great conversation you were having with Ed about pricing. And you say pricing to you is a leading indicator, as a consultant you like to go in, take a look at their pricing, it gives you a sense of their confidence level, do they offer free consultations, you have all of these different things that you look at. Why do you think so many firms have a problem with pricing?

I'd rather have no business than bad business, or where I have to compromise my principles. I love the way you say—and I am a big fan of Dr. House—and the second law of medicine, which is prescription without diagnosis is malpractice. And you say, and I love this—and I am stealing this by the way—if you don't diagnose, or even prescribe, you're just the pharmacy. I love that. And it kind of leads to, if you kind of blow that up and go even higher, we have a saying that, and you say don't confuse expertise with implementation. I have a saying, good ideas are more valuable than the mere execution of them. In other words, to prescribe with the wrong diagnosis, there's no good way to implement a bad idea. I don't think good ideas are everywhere. I think they're rare. Otherwise, we wouldn't get the remake of The Dukes of Hazzard and Bewitched, and all this crap, all these sequels. But just wanted your reaction to that.

I love how you have the strategy room and the implementation room, and how the strategy room should slowly encroach, and grow bigger over execution. I learned this from economists, I know it's a very counterintuitive idea, but countries that come up with better ideas, and more ideas, have a higher standard of living than those countries that merely execute on those ideas. So I rather live in the country that comes up with the concept of the iPhone, rather than the country that assembles it. The other thing, and I love this, and I've only got about a minute, but maybe Ed can get into this, you say there's a temptation to match capacity to opportunity, which is kind of that whole growth for the sake of growth. You say the right size capacity is slightly smaller than the amount of opportunity within reach. That's brilliant, by the way, I love that.

And if you never have spare capacity, not only can’t you get better opportunities, or drive more opportunities for existing customers, but you're going to rust out your people if you put them on this treadmill, especially knowledge workers.

Awesome. Well, David, this has been great.

Ed’s Questions: Segment Three

And we are back with the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth, David C. Baker. And David, would you walk us through a typical day for you? And if you don't get the reference there, that is the opening line of the two Bobs in the classic scene in the movie Office Space. So I want to I want you to talk to me a little bit about the Two Bob's podcast, which I assume is based on that great scene in that movie.

Probably the only more famous scene than that is the PC load letter, when they take the baseball bat to the printer. [The movie was] shot in North Texas, by the way. A lot of those interiors were shot in North Texas. But David, back to the book. So I'm going to quote for from the book here. And this, I think, alludes to the conversation that you were having earlier with Ron. You said, “If I could reach inside my unconfident clients and raise their confidence level, we would move on and solve the next challenge for them. Truth be told, I often thought more highly of their abilities than they did themselves.” Why do so many professional organizations actually suffer from, as crazy as this seems, self-esteem issues?

As one of our colleagues of VeraSage colleagues [Dan Morris] said when he was shifting his last customer over from billing by the hour to a fixed price agreement, he said to him, “I'm too old and too talented to continue to charge you by the hour. And I think that's part of it. But I also do think that it relates back to the conversation we were having earlier, which is the professional tends to focus on “It only took me 15 minutes.” The reality is no, it took you your whole lifetime to get to that 15 minutes. And then you're not selling expertise. And I was so much in agreement with what you were saying about them not being service workers. That's one thing I wish I could beat out of them, that you are not in a service firm, but in a knowledge firm, what we like to call access to, or transfer of, knowledge. That's what you're really selling.

Alan Weiss tells a story about this whole confidence thing. When he was a junior implementer for a larger consulting firm, and after the guy gave the price out to this bank manager, he would put a cigar in his mouth. And one day Alan Weiss screwed up the courage and asked him, “So Bernie, what's with the cigar?” He said, “I need the cigar, because if I don't put the cigar in my mouth I start to giggle.” We've only got about four minutes left, and you started this conversation with Ron, and I thought it was really interesting. You talk about the six different things about positioning, five are in one chapter and then you dedicated an entire chapter, chapter 10, to how positioning is built on your expertise and not your implementation. You started to talk a little bit about that with Ron. Unpack that with the last four minutes or so that we have left to talk here.

That's so great. Our friend, Tim Williams, who I know you know, talks about the difference between logic work and magic work. I think they are very similar to what you're talking about. Charge a lot for the magic work, and you can even “give away” the logic work, the stuff that's got to be done no matter what, say that's free. I mean, it's not, because the value is really on that magic work.

That’s right. None of us wants to be charged $150 an hour to resize a banner ad. We do not want that at all. Well, David, this has been great. Ron's going to take you home in the fourth segment, but I just want to thank you for appearing on the show today. We hope you'll come back and maybe talk to us some more. But right now, we want a word from our sponsors, and my employer, Sage.
 

Ron’s Questions: Segment Four

Welcome back, everybody. We're here with David Baker, the author of The Business of Expertise: How Entrepreneurial Experts Convert Insight to Impact + Wealth. And David, we've only got about nine minutes, and you could probably use the whole thing [on this one topic]. And I just want to tell people, please, please, please read David's book, because your discussion on vertical versus horizontal positioning is brilliant. And there's a lot in there, and firms need to go through every portion of it. But you also say, “Most well positioned experts have vertical positioning.” So give me your explanation. How do you explain vertical versus horizontal positioning?

And you say that this needs to be reevaluated at least every five years or so, maybe 10 ideally. Explain that?

I know it's in your contract with Blair to give him a shout out. And I hope we've fulfilled that. Well, one more shout out to Blair. He says, “Positioning is an exercise in irrelevance.” Explain that?

And I love this, too. You have a really good way to explain how, when you're in a vertical positioning framework, it's so much easier to find prospects, because essentially, you can buy a list. And the other thing you said is, when people change jobs, they usually take you along with them, which is a fantastic point.

Yes, that's a fantastic acid test, can you buy a list. Then you say this, and I love this too, and I know this goes back to our conversation about growth for the sake of growth, but you say, “Drop the irrational fear that to keep a customer you have to meet all of their needs.”

I also love this, you said, “Quit protecting what you learned in the past and learn new things now.” I have this philosophy that I should give away my intellectual capital. That way, I have to replenish it to keep at the cutting edge. To me, it's a lagging indicator that your ideas are stale when you start copywriting your own jargon.

Excellent. Well, David, thank you so much for appearing on The Soul of Enterprise. We’ve got to bring you back and talk about some of your other books. And Ed, what’s coming up for next week?

Ed

Next week, Ron, we are going to talk about a little book that we found called on behavioral economics: Influences and Irrationalities of the Human Mind, by none other than our friend Rory Sutherland.

Ron

I’m looking forward to that, see you in 167 hours.