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How The Rich Are Different (Hint: Not Much)

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I’ve found the older I get, the more I hear people talk about how some rich or famous person is so smart, generous, insightful, good at business, etc. Only these days, I actually know some of the people being placed on pedestals. I offer you this report as a public service, since I made this mistake for many years, often to my own detriment.

We get confused. We think that if someone’s rich, it means all kinds of other things about the person. We’re probably biologically hardwired to think this way. in our societies, money connotes status, and humans (being primates) seem to believe that status corresponds with all kinds of other qualities.

Let’s be clear:

  • Rich people aren’t necessarily smarter than you (though some are).
  • Rich people aren’t necessarily any better at business than you (no one ever writes an autobiography called “I was born to the right parents and was in the right place at the right time,” but they should. Nor do any tomes get written about the supremely competent who just happened to have bad luck)
  • Rich people aren’t necessarily any more moral than you (no matter what Ayn Rand writes in her fiction books)
  • Rich people aren’t necessarily any more generous, any greedier, or any more insightful as to what the world’s problems are or how to solve them.

The next time you go looking at a rich person and proclaiming how smart they are, how insightful they are, or how much good they’re doing for humanity, stop and double-check yourself. Go find some poor people who are also smart, insightful, or doing good for humanity. Then give a long, hard look and decide whether the rich person actually has all those qualities, or whether you’re confusing bank balance with human attributes.

(*) For the psychologically-inclined among you, this is called the “fundamental attribution error.” We tend to underestimate the role environment plays in outcomes, and overattribute outcomes to personal qualities.

You have to want to succeed as much as you want to breathe. Really?

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I just saw this video, shared on Google+:

“When you want to succeed as bad as you want to breathe, then you’ll be successful.”

How Bad Do You Want It from Greyskale Multimedia on Vimeo.

The sentiment is common: in order to succeed, you have to want it so bad you burst a blood vessel. The only problem with this sentiment is that I don’t know that there’s any truth to it. Maybe it’s true in weight lifting (I’d like to see the study), but I’m not aware of psychological research or motivation research that supports it. While it’s true if you want something badly, you’ll go after it, it’s also true that too much urgency shuts down creativity, problem-solving ability, and even perception. There are plenty of domains where it’s possible to succeed without that kind of motivation1.

There’s a similar zen fable about enlightenment. The story ends differently. The student goes to the zen master and says, “Master, how long will it take me to become enlightened?” “Ten years,” replied the master. “What if I work at every day of the year, every waking hour, and try harder than I’ve ever tried before?” “Then, it will take a lifetime.”

I think we do ourselves a disservice in looking only at the “work unbelievably hard and you’ll succeed” situations in life.

There are plenty of successful people who are motivated by peace, serenity, and joy. And yet they still seize opportunity, they still do work, and they still get what they want out of life. But they don’t have to force themselves into an asthma attack to get there.

There are plenty of people sitting on their asses doing nothing. I agree that asthma-attack motivation is better than nothing for those folks. But it would be nice to put the last few decades’ research into the psychology of achievement into practice and teach people to achieve without needing this stress-filled style.

There are plenty kinds of achievement that are motivated the other way. Do yourself a favor and find one of them. Train hard, keep your eye on your goal, but don’t give yourself a heart attack in the process.

1 Forbes recently did a study of the Forbes 400 and discovered that half of those folks inherited their money. I would submit that those folks reached positions of success without the kind of unbelievable franticness we see in this video.

The Power of Visceral Relationships

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I’m having a conversation on Google+ about social media, and it connected up with an exercise I did today to produce a rather puzzling realization.

Social media has certainly broadened who I know and how we connect. It’s because of social media that I have met some of the great in-person people I know. And I definitely use it to keep in touch with people I’ve met at conferences, etc. It’s just such a weird thing to me.

I’m working my way through a process of re-examining my life, and I did an exercise today of writing down my happiest memories. They mostly fell into categories of: “times I was hanging out in person with friends,” “times I was alone in a nourishing/replenishing environment,” and “times I was performing.” When I think about those memories, I feel really good. I don’t feel really good when I think about my social media interactions, however. I don’t feel bad, either. And that, I think, is why I raised the question. For me, social media relationships are cerebral, not visceral.

That’s great for work, accomplishment, and idea exchange. But it’s the visceral community that, as revealed by this exercise, brings me joy. It’s also the visceral community that make me feel supported, like someone’s got my back, etc. So I wonder how much my social media actually supplants or shifts my relationships from “happy-making” to “engaged-making.” Those aren’t the same thing, and I personally prefer the former to the latter.

Income Distribution and the Ultra-Rich

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A friend wrote to a group I’m part of:

Some folks I know who are at pre-IPO companies are really opposed to Warren Buffett’s support of raising taxes on the ultra-rich, saying that Buffett is helping keep a glass ceiling in place between them and being super rich.

They say we shouldn’t discuss politics in public, because then people won’t like us and we’ll die alone in a gutter. So after much deliberation, I decided to risk ending up in the gutter and posted my response to my friend’s post:

My Response

And thus we find the problem: the vanishingly small percentage of people who stand to benefit from low tax rates on the rich are vocally opposed to changes.

I’m surprised at how vehement and negative my reaction is to your friends’ outrage.

First of all, it’s stupid to complain about taxes and ignore the rest of the costs of their equity.

Tell your friends if they are concerned about increasing their take, they should lobby for the investment banking fees that get withheld from their IPO proceeds to get capped at some rational number. The banking fees are financial rape, but since they’re “standard,” no one bothers to protest. And they should read the prospectus carefully to see how badly their stock and options got diluted by sweetheart deals in the footnotes.

Speaking of which, do they track outstanding shares on a weekly basis and calculate their ongoing dilution? Or market fluctuations? If not, why not? Those effects can have far more effect than the tax rate differences. Did they quiz the founders on the dilution that last round of funding brought, and whether the return to your friends was negatively affected? Was that last round really necessary? Did those capital improvements really need to be made pre-IPO? Etc. Most people cry foul when the government wants a share, but ignore all the others who take a bite. They don’t ask whether those others are providing value for their money.

I’ve been through 4 IPOs and they’ve all been feeding frenzies. Of all the parties who lifted significant sums (sometimes many millions) out of the transaction, at least the government provides something in return:

  • A stable system of contracts, which makes IPO-able business possible in the first place.
  • A public infrastructure that gives them electricity, water, food, etc. so they can spend their time building their business instead of worrying about the logistics of running a server farm when power is spotty and only available for part of the day.
  • Financial markets that, no matter how corrupt individual players may be, at least provides liquidity for those IPO-bound friends.
  • A justice system that enforces the contracts allowing business to rely on them.
  • Etc.

Perhaps your friends should learn something called gratitude for having the privilege of living in one of the very few times in human history where we had an infrastructure that afforded them any chance at an IPO, combined with the incredible luck to be at a company that can viably go public (which only ~.02% of companies do).

On the other hand, I’ve been through 4 IPOs—all when the tax rate was a lot higher than it is now—and still have to work for a living. Maybe I’m just bitter and begrudge your friends a lifetime’s worth of free money without them having to contribute to the upkeep of the system that made it all possible.

How rich is an ultra-rich person?

Most people have no idea how truly ultra one must be to be one of the ultra-rich. Let’s tie the numbers to something real:

A million dollars is 25 years’ income for an American median family (median income is about $40K)

Ten million dollars is 250 years’ income.
100 million dollars is 2,500 years’ income.
A billion is 22,500 years’ income.
Ten billion is 225,000 years’ income.

John Chambers stashed four of those overseas to avoid taxes. Bill Gates has four of those in his bank account. In other words, enough money for a family of four to live at an American median standard of living for a million years, ten times as long as our species has existed.

Explain to me the value system in which there is any way to justify that concentration of wealth.

Yes, the mechanism of the system allows that to be accumulated by one person. But to argue that somehow we should be concerned about his tax rate seems bizarre. Honestly, a 100% marginal tax rate seems perfectly reasonable to me. He has enough to survive for a million years. No matter how hard he works, or what he contributes, he doesn’t need a single cent more.

(Nor do I believe his contribution to the human race approaches the contribution a family of four would make over a million year timespan, no matter how much one may like Windows.)

Tell your friends to use their after-tax proceeds to start another company that’s more successful, only they can do it in another country with a more favorable tax structure. I suggest Haiti. Port-a-Prince is looking for commerce.

Is The Marketplace of Ideas Turning Into a Swamp?

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We take it for granted that making things easier is always a good thing. I disagree. Sometimes it is, while sometimes it isn’t. Today, I’ve been contemplating the case where maybe it’s good to make things harder.

Technology has made it so that anyone can produce music or publish books. This is a very good thing, in that it means people driven by the desire to do those things can now do them far more economically. But there’s a downside to technology that enables: it drives the supply of those goods up, without necessarily driving demand up. More supply without more demand means prices will fall. In both arenas—neither of which have been famous for paying creators very much money—we’re seeing so much content being created that it’s hard for anyone to make a living anymore. The very few who manage to rise above the fray capture most of the money, and everyone else has to work as a waiter to get by.

In some abstract way, this may be good for the consumer by giving the consumer more choice (though the book The Paradox of Choice discusses about a dozen reasons why more choice is not necessarily good). But there’s now so much noise in the market that matching that consumer with the perfect author/musician is harder than ever. Unless the musician/author is one of the winners with a huge marketing budget, the consumers will never find them.

There may actually be benefits to markets that are somewhat harder to enter. Fewer players enter, but the ones who do can make enough money to make a living, and the number of entrants is low enough that consumers can at least have a decent shot at discovering the product that’s best for them.

Do we create our institutions to stifle creativity?

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My friend Michael posted on Facebook: I’m feeling sad today, because I’m already one of those people who works his butt off and doesn’t do much of anything to be creative, innovative or out-reaching. How did I stray from the ideals so quickly?

My response: I think most of our institutions are designed (or have evolved) precisely into places where creativity and innovation are squashed. It isn’t deliberate in the sense of some evil dictator trying to keep us down, but it *is* deliberate in the sense that we create institutions to be stable. That means, to do the same thing day in and day out. We scope the jobs, workload, and responsibilities around just enough to get things done the way they’re currently done. When was the last time a job description included, “Four hours a week to be spent day-dreaming, engaging in creative flights of fancy, and redesigning how things work?” (Well ok, Google has a similar policy, but who else?)

What do you think?

An NLP hint on writing and emotion

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NLP has taught me a lot about how people experience words. By carefully considering your words, you can change the whole mood that people get left with.

I recently posted a Facebook update: For those that missed it, here’s my popular ‘Modern Vacation’ video spot (don’t worry – just 36 seconds!): http://www.youtube.com/watch?v=Gt0Bs0frEnM

Once I’d posted it, I re-read it and realized it used language poorly. The evocative words in the post are:

  • popular
  • worry
  • just 36 seconds

As people read each word, they access the meaning of that word and any associated feelings unconsciously. What then comes to mind is a gestalt of those meanings and feelings. How’d I do?

  • popular – evokes ideas of something desirable
  • worry – evokes the sense that something’s wrong
  • just 36 seconds – implies that it’s fortunate that there’s not much of it

Once through the reflection process, it makes sense to ask what feelings I’d like to leave the reader with. Excitement, curiousity, and a desire to see the video would be a better frame of mind for the reader. Here’s my rewrite:

For those that missed it, here’s my popular ‘Modern Vacation’ video spot (the best 36 seconds you’ll have all day): http://www.youtube.com/watch?v=Gt0Bs0frEnM

Try reading both versions back-to-back and notice which images and feelings each one leaves you with. It’s subtle, but it has an impact. When you’re writing a longer piece of writing (like a podcast episode or an article), what you write will move people through a series of images and feelings. Think carefully about the sequence! The emotions you evoke may be positive (desire) or negative (fear), but if it’s negative, you probably want to lead somewhere else, like hope or resolution. The feelings people have when reading your material get connected to their concept of you. That’s called branding.

Go forth. Write with emotion. And make sure the emotions leave people in a good place. Giving people nice emotions is good for them, and you’ll find it’s good for you, as well.

There’s such a thing as too much convenience.

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One of the things that amuses me most about Americans (of which I am one) is how we blather on and on about “freedom” and then voluntarily give it up at every available opportunity. As long as we give it up in the service of commerce, rather than in the service of government, we seem to embrace the steady erosion of our rights, our health, our privacy, and even our minds.

After a decade of brainwashing that I need to have the latest and greatest gadget on my body at all times, I tried an experiment. A few weeks ago, I went to a conference and made the conscious decision to leave my cell phone in my hotel room safe each day. After a couple of days of fidgeting and feeling disconnected, I relaxed and returned to my pre-cell-phone state of attention and being-present. It was a really wonderful feeling. I picked up my messages after the conference each day and was able to be focused in how I returned and responded to those calls.

The moment the conference was over, of course, I went right back to being a cell phone addict.

Last night, I met a friend for dinner. I purposely left my cell phone at home, and surprise!, my attention was on her all throughout dinner. It felt kinda neat.

If you’re up for an experiment, try going 2 days without your cell phone. Pretend it’s a landline, leave it at home, make plans with people before leaving the home, etc. It actually produces a nice, high-quality evening. I’m starting to believe there’s an optimum convenience point. Too little convenience and life is drudgery. But too much and life becomes an endless stream of distractions/interruptions.

Hint: If your immediate response to this is “there’s no way I could ever do that,” stop and think again. You absolutely could. The fact that you’re so defensive about it and eager to justify not even trying has more to do with the symptoms of addiction that cell phones trigger than with reality. Just do it! You’ll survive!

When neighborhood institutions die

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I live in a very special city in America. Boston is one of the few cities in the country where chain stores have been relatively slow to take hold. For much of my time living here, most of the stores I have frequented have been locally owned and operated.

Today, I visited my awesome and amazing stationery store, Bob Slates. They’ve been in business for 83 years, and they are closing their doors next month. Are they the cheapest? Absolutely not. “Big box” stores like Staples are cheaper. But Bob Slate has merchandisers always looking for cool new niche products and a product selection you can’t get anywhere else. The staff tends to be stationery geeks, so we can waste tons of time every visit gabbing about how much more we like one fountain pen nib than the other.

Small stores like this can never compete against a Staples on price. Staples can win every time, just because they’re bigger. Maybe there are “economies of scale” to a big store. Maybe. It may be that a big store simply limits their selection to very mainstream products, and they are big enough to have negotiating leverage to force suppliers to provide low prices or be shut out of he market. “Economies of scale” may simply be the reallocation of profit to Staples, thanks to their bargaining power. Sadly, lower prices do result in more sales, because at the moment of purchase, price is often all we consider.

Personally, I think this is a bad thing. I value variety, community, and connection for their own sake. When I visit certain American cities, I’m astonished at the incredible lack of choice and variety people have in their restaurants and stores. People proudly proclaim, “We have our very own insert-name-of-huge-chain-store here!” without realizing that there could be plenty of alternatives, many of which might actually be much nicer to shop in for a variety of reasons.

It also makes our cities far less interesting and relevant. Why should I visit insert-your-city-here when all I’m going to find is three historic sites and the rest of a city that’s a carbon copy of the city I visited last week? To the extent that large companies do reap economies of scale, they do it by eliminating individuality and turning their customer experience into a consistent—but limited—cookie-cutter approach.

Once upon a time, you could find drinks other than the Standard Coke or Pepsi Panoply (cola, lemon lime, orange, lemonade and diet versions of same) if you wanted to get a drink at a restaurant. But Coke and Pepsi have pretty much taken the entire fountain market. What’s been great for the companies has resulted in me as a consumer having far less choice and variety.

I’ll miss Bob Slate’s, as I’ve missed the succession of wonderful, local stores that have been replaced over the years by nationwide brands. Maybe we’ll be lucky and get a new Staples.

Entrepreneurial Culture: Creating it is the CEO’s job!

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Sometimes, we treat corporate culture as something that “just happens.” By the time we realize we want to influence it deliberately, it’s often too late to change it very much. An entrepreneurial CEO has no such problem, however. Culture begins to be set the moment a company gets formed, but an entrepreneurial CEO can influence it tremendously. Read how in my Harvard Business Review article on the Entrepreneurial CEO and Building Culture.

You can find the article on corporate culture and how it begins as entrepreneurial culture here: http://blogs.hbr.org/cs/2010/07/advanced_entrepreneurship_your.html