THE BIG IDEA: To build a dream team, find independent thinkers from diverse backgrounds. Then ensure there is just enough tension to generate creative solutions but not so much tension that the team is dysfunctional.
Between 1960 and 1990 , the Soviet national hockey team won nearly every international match it played. It was one of the best sports teams of all time. The same Soviet players underperformed when split up in the NHL. Then Detroit Red Wings coach Scotty Bowman reunited them and they won the Stanley Cup again.
Research shows, that for some tasks, individuals always outperform teams. But for hard things in work and life, for thing that require creativity and innovation, teams are required.
Humans are built for collaboration. There’s science behind this kind of magic that results in magical teamwork.
CH 1: BUDDY COPS AND MOUNTAINTOPS
The Pinkerton detective agency foiled a plot to assassinate Lincoln. A female detective Kate Karne provided the insight needed to save Lincoln.
Adding women to law enforcement improves performance not because they are smarter but because they add a different perspective that forces others to think differently.
These two parts of our mental tool kit — perspective and heuristics — go hand in hand. Our teammate’s diverse heuristic allowed him to find a better solution .
If you want innovation, put people with different specialties together. It helps prevent groupthink.
Dr. Scott Page, professor of “complex systems” says teams with diverse mental tool kits consistently outperform groups of “the best and the brightest.”
Cognitive diversity is a key element of teams that exceed the sums of their parts.
Routine problems don’t require much cognitive diversity, while novel problems benefit from it greatly.
The more diverse the thinkers in a company’s higher ranks, especially its boardroom, the better a company performs.
Cities with more immigrants from different parts of the world tend to produce more patents.
This runs counter to the advice that we tend to get in many of our organizations. “Get more people like that on the bus!” “Let’s double down on our strengths!” “She’s not a culture fit!”
CH 2: TROUBLE IN SHAOLIN
The merger of Daimler and Chrysler failed because they couldn’t resolve organizational cultural differences.
Hip-hop was found on battles (rap battles) but Wu-Tang Clan was able to use friction to drive creativity and change music history.
The Tension Zone is the zone in which there is enough tension to drive innovation but not enough tension to explode.
The Wright brothers would resolve arguments by taking turns arguing both sides. This helped decouple arguments from ego.
Couples that know how to argue last the longest.
Businesses that rank high in “innovation”—the ones that grow quickly and produce game-changing products and services—tend to encourage the airing and clashing of diverse viewpoints. Not just having differences, but speaking up.
Companies that don’t innovate tend to make people follow a single, “approved” way of thinking.
“Having a manager who ignores you is even more detrimental than having a manager who primarily focuses on your weaknesses.”
When steel rubs against steel, it makes both blades sharper.
CH 3: THE MAGIC CIRCLE
Argentina has one of the largest populations of Jews in the world. They are well-known for being friendly to Jews. Why? Because the culture encourages everyone to play soccer together.
Playing together resolves tension, breaks down barriers, and builds friendships.
You can learn more about someone in an hour of play than in a year of talk.
RZA’s rap battles were actually a kind of game that helped dissolve tension and keep driving creativity.
CH 4: ANGELIC TROUBLEMAKERS
Picasso’s most productive years as a painter was when he was living with a girlfriend who pushed him out of his comfort zone.
Cognitive entrenchment is when our brains become inflexible because of certain habits and heuristics. These habits and heuristics that are useful in prior situations are no longer useful.
The longer people work together, the more similar their work styles tend to become. The business world often calls them “best practices,” but psychologists correctly call them “groupthink.” If we’re not aware of them, they can stifle innovation and peak performance.
In Dream Teams, there is often a teammate who can give us a nudge away from groupthink.
For developing new insights, it’s often more helpful to study the extremes (outliers) instead of studying the typical (focus groups.) Eg. Dominatrix-for-hire and comfortable shoes. (Tim Ferriss: but ignore those who are an outlier bc of natural ability or a head start.)
Dr. Charlan Nemeth of UC Berkeley spent her career studying the science of human influence. Having a naysayer in the group made the rest of the group think harder. Dissenters stimulate the kinds of thought processes that lead to progress.
CH 5: THE BLACK SQUARE
Sometimes bad ideas can be useful because a bad idea can be very good at pointing us in a new direction.
Eg. International Dome Symposium in Winooski, the painting The Black Square in Moscow
Provocation spurs us to action.
Cognitive expansion happens when we add cognitively diverse people to our team and pay attention to them.
Dissent helps groups think harder about problems together.
Many of our most successful modern companies — from Apple to Airbnb — seemed like bad ideas in the beginning.
CH 6: WELCOME TO PIRATELAND
Shared values are long-term. Shared goals are short-term.
Companies who talk about shared values a lot will tend to unify their people quickly and effectively. They have low turnover and relatively stable businesses.
Values that are too strict and cult-like will tend to stifle dissent, stifle innovation, and stagnate a company.
Some organizations try to combat stifling values by making “creativity” and “experimentation” values themselves.
Superordinate goals can get different people to work together. Play and humor can depressurize groups that have too much tension between them.
Values are not created equal. Values that help us include different kinds of people and ideas are the kinds of values we want our teams to share.
Eg. Battle of New Orleans, Rattlers vs Eagles, Built to Last companies.
CH 7: WHEN MALCOLM CHANGED HIS MIND
People who are open-minded are more likely to consider creative solutions and to innovate.
What does it take for humans to become open-minded?
The answer is something psychologists call “intellectual humility.”
How do you increase open-minded and intellectual humility?
People who travel become better at “idea flexibility” or being able to solve problems. They are more open-minded.
People who actually live in foreign places are even more likely to have high intellectual humility than those who just visit.
Dr. Galinsky and his colleagues found that graduate students who had lived abroad were more likely to consider out-of-the-box solutions to problems in group projects.
Neuroscientists find that multilingual people’s brains do look physically different.
Eg. Malcolm X’s transformation after his pilgimage to Mecca.
Eg. Saul the Christian persecutor became Paul the Christian apostle.
CH 8: OXYTOCIN, A LOVE STORY
Stories have power. Stories can activate oxytocin and empathy, or they can turn on primal fear .
Stories Asians told others about themselves helped change their position in America. Eg. George Takei and Bruce Lee.
Stories Hollywood told about gays generated oxytocin + empathy and helped increase acceptance of gays in America.
Anytime people experience character-driven stories, their brains pump out more oxytocin .
Positive social encounters release oxytocin — things like hugs , acts of kindness , and emotional stories .
Every one of the world’s greatest sports dynasties had something surprising in common: their players, and in particular their team captains, had a whole lot of humility.
This isn’t just humility; it’s intellectual humility. It requires being open to and willing to change when change is hard.
People who read a book or more per month, the data shows, are significantly more likely to be have intellectual humility.
Readers experience more stories, have more empathy, and are more open-minded and have more intellectually humility.
DREAM TEAMS CHEAT SHEET
Recruit for “culture add” not “culture fit.”
Recruit for ability to elevate team, rather than for individual stats.
Determine team members’ dimensions of internal and external differences that could lead to productive tension and innovation.
Make sure everyone on the team knows each other’s “superpowers” or unique abilities.
Use play and humor to depressurize group tension.
Give explicit permission (or even rewards) for dissent and productive criticism.
Have team members get to know each other’s stories.
Debate instead of brainstorm; when necessary, switch sides of the debate.
It’s the leader’s job to make sure tension does not get personal.
Seek diverse sources of information.
Develop and prioritize curiosity.
Pay attention to outsiders, weirdos, and far-out ideas.
When possible, rally teams around superordinate goals.
Celebrate the uniqueness of the subgroups within the organization.
Allow subgroup members to have their own values.
Create unique rituals that the organization can do together to bond.
Spend significant time immersing yourself in places with cultures different.
The Big Idea: 1) IQ matters but the best predictor of success is relevant experience plus high emotional intelligence (EQ). 2) Interview 20 individuals before selecting finalists. 3) The preferred strategy for sourcing is to contact people who may know the best candidates.
Organizations are all about people.
People are the problem, but they are also the solution.
Making great people decisions is vitally important to your organization.
CHAPTER ONE – Great People Decisions: A Resource for You
As an individual, people decisions are also the single most important contributor to your career success. Once you become a manager, you start working through others.
As a CEO or chairman, people decisions are both your highest challenge and your biggest opportunity.
Great management, according to Marcus Buckingham, is to first hire great people, then to assign the right person to the right job.
The first step in any hiring decision is to think very carefully about what you really need. Outside of work, you should also choose nannies and gardeners just as systematically.
According to some studies, the best interviewers had predictive validities 10 times better than the worst interviewers. So some people are better at evaluating talent.
Larry Bossidy and Ram Charan say “having the right people in the right place is the job no leader should delegate.”
When hiring, figure out what are the key indicators of a successful hire, assign appropriate weight to those different dimensions.
Managers can definitely improving their hiring success. A few basic concepts about people assessment allows managers to become much better at hiring. These are learnable skills .
Hiring is an area where very few business executives get any formal training at all. You don’t necessarily learn from your experiences, sometimes, because there is a lack of immediate and clear feedback on your people decisions.
In addition to career success, better hiring decisions will increase your personal happiness. Your work relationships and your professional satisfaction impacts your personal happiness.
CHAPTER TWO – Great People Decisions: A Resource for Your Organization
According to Built to Last, greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice, and discipline.
According to Jim Collins, outstanding leadership and the ability to build superior executive teams were the two essential and foundational prerequisites for remarkable, long-lasting corporate excellence.
First, get the right people on the bus.
The choice of CEO has an impact on profitability as big as the choice of industry.
In The War for Talent, people choices are a key driver of organizational performance.
According to McKinsey, poor performance was often caused by the wrong people at the top.
According to Jack Welch, “you can have all the greatest strategies in the world, but they aren’t worth much without the right people.”
GE has been an outstanding breeding ground for great leaders. GE’ most important product was not light bulbs or transformers, but managerial talent .
CHAPTER THREE – Why Great People Decisions Are So Hard
The best organizations in the world made all sorts of mistakes when it came to people decisions.
4 Hiring Traps
1. The odds are against you. There are only a small number of exceptional performers
2. Assessing people for complex positions is inherently difficult. Many knowledge worker jobs are truly unique. Requirements and priorities can rapidly shift. Intangible traits are much harder to evaluate. Many top candidates have no tolerance for any kind of thorough evaluation.
3. Powerful psychological biases impair the quality of the decision-making process. We tend to procrastinate about our people decisions. We tend to overrate a person’s capabilities. Individuals also tent to overrate our own capabilities and skills. Motivation does not equal skill. We tend to overweigh first impressions and make snap judgments based on criteria not related to abilities. We tend to overrate a candidate based on a company reputation from their resume. We tend to overweight an individual’s abilities and underweight the situation they worked in. We tend to seek out confirmatory information and avoid disconfirmatory information. We tend to hire someone based on familiarity. The most important step for avoiding these biases is awareness.
4. Misplaced incentives and conflicts of interest can easily sabotage these decisions. Keep an eye out for candidates who feel like a position is the perfect fit for them based they want (or need) the job. Such a candidate is likely to exaggerate their capabilities and resume. Also keep an eye out for nepotism and cronyism during the hiring process.
CHAPTER FOUR – Knowing When a Change Is Needed
Human nature inclines us to procrastinate in our people decisions, so few executives have a succession plan.
Five Discontinuity Scenarios That May Require Change in Leadership
1.Launching New Businesses
When the launch of a new venture calls for a people change, both types of candidates — internal and external — should be properly considered.
2.Doing Mergers and Acquisitions
3.Developing and Implementing New Strategies
When you change strategies, you very often have to change horses. Jim Collins’s Good to Great says “First Who . . . Then What. They first got the right people on the bus, the wrong people off the bus, and the right people in the right seats — and then they figured out where to drive it . ”
4.Dealing with Performance Problems
Fundamental attribution error: sometimes the situation is the cause, not the leader. Are you experiencing a bumpy ride? Is it your car? Or is it the road?
5.Coping with Growth and Success
Leaders mush manage the present and anticipate the future.
Powerful forces that tend to work against change. 1) The universal human impulse to prefer short-term comfort over uncertain, but possibly better, future. 2) Culture in which personal relationships trump the rules. 3) People underreact when things are tranquil and overreact when there is chaos.
Jack Welch says candor is very hard to achieve and even runs up against human nature.
Howard Stevenson says the most common mistake: you never fire people early enough.
If you as a boss are “ loyal ” to an incompetent employee, that makes you appear less honest and therefore costs you more than it gains.
We tend to escalate our commitments and try to hang on, despite clear signs that it is time to bail.
Jim Collins on how “good to great” companies decide who should get off the bus, and how: they apply exacting standards at all times and at all levels. They are rigorous, not ruthless.
CHAPTER FIVE – What to Look For
What is the best predictor of a person’s success in a job?
First of all, the ideal candidate doesn’t exist.
So you want to understand which strengths are critically important and which weaknesses aren’t fatal.
Does IQ matter? Yes, but it’s not usually the critical factor. It matters most when you hire someone with no previous experience in the job
Does experience matter? Yes, experience matters a lot .
Does personality matter? Personality is too subjective. Personality tests are not particularly valid and any conclusions should be taken with a grain of salt.
Emotional intelligence, in business where we depend on others, could be more important to personal success than IQ .
Actual job-related behaviors were the best indicators of potential success.
Richard Boyatzis published The Competent Manager to describe competencies and job performance.
First, a distinctive set of competencies is required for every job and for every company.
Second, the list of typical key competencies for managers and senior executives tends to be short.
Egon Zehnder identifies four key competencies for successful managers.
1. Successful managers need to have a strong “results orientation” (i.e., be focused on improving the results of the business).
2. Successful managers know how to focus, align, and build effective groups.
3. Successful managers how know to work with peers and partners they have no direct authority over.
4. Successful manager have a “strategic orientation” that enables them to think Big Picture.
The candidates who were most likely to be extremely successful combine relevant experience plus high emotional intelligence (EI).
Lack of EI is very highly correlated with failure.
What is Emotional Intelligence? a. self – awareness b. self – management c. social awareness d. social skills
How are emotional intelligence competencies measured ?
Observations, particularly 360° assessments.
The effects of conventional management training seem to vanish within a few months.
Emotional intelligence can be developed, but this will not happen in traditional developmental programs. First, managers must want to change. Then there must be a realistic learning agenda and the opportunity to practice the competencies. It requires a significant personal effort and time.
One of the things that you should be looking for when making people decisions is potential. What is potential? Ambition + ability to learn from experience.
What is ambition? Need for achievement + need for affiliation + need for power .
Should you be looking at values when evaluating someone? Yes. Should you aim to develop those values? No.
The right people share the core values of an organization. A company can teach skills, but not character. You’re better off finding someone who’s already on board with your values ,
What about the concept of teams? Performance depends on good team work. Effective teams easily outperform individual stars. Aim for competency diversity in your teams.
Summary a. Never compromise on values. b. IQ is indeed important. c. EQ – based competencies are absolutely essential. d. Hire individuals with high potential. e. For very senior positions, experience assumes more importance.
Avoid the trap of thinking that any single candidate will have every quality.
CHAPTER SIX – Where to Look: Inside and Out
When is it better to go for outsiders versus insiders?
Statistically, promoting an insider doesn’t have a significant impact on company performance.
Outsiders add great value when the predecessor was fired and change is needed. Outsiders destroy value when the succession is natural (retirement.)
When promoting an insider, always make sure that the person you are promoting has the necessary capabilities. Insiders tend to get scrutinized less carefully than outsiders.
Large companies skilled at developing internal people, such as GE, will quite likely have the best candidates within.
Always better to consider both internal and external candidates for a search .
Companies underinvest significantly in the generation of potential candidates.
How do you know when to stop looking ?
Statisticians have demonstrated that in such a situation , the best strategy is the “37 Percent Rule .” You would need to interview and pass on at least 37 people women (on a base of 100) and hire the next person who is more qualified than the best from the 37.
It’s more practical to reduce this rule from 37 to 12.
Because candidates are also evaluating you, statistics says to interview 20 individuals before setting your aspiration level.
Remember to look internally, scrutinize insiders just as carefully, and invest time building an internal talent pipeline.
How do people find jobs?
Personal contacts were the predominant method of finding out about jobs. Weak ties were the key, so develop a good personal network.
Job postings have serious limitations. It is hard to get the attention of the best candidates. The pool of respondents is typically very large, but of very limited quality.
The preferred strategy for sourcing is not to think about candidates, but to think about people who may know the best candidates. It makes much more sense to drum up people who are likely to know of several high-quality candidates right off the bat.
CHAPTER SEVEN – How to Appraise People
Investing time, effort, and money in better assessments is your largest opportunity for making great people decisions.
The best tradeoff for the candidate and the company is a combination of effective interviews and reference checks.
There is always some analysis of a resume, however, the vast majority of resumes are misleading.
Reference checks are typically used in practice to eliminate candidates.
Interviewing can be improved by the use of the situational interview and the behavioral interview.
Untrained interviewers make snap judgments and then look for evidence to support those judgments.
Most interviews are ineffective at best, highly unstructured, with the interviewer doing most of the talking.
The key to effective interviewing is first identifying the critical competencies, for this particular position, and describing them in behavioral terms.
Past behaviors are the best basis for predicting future behavior.
If you focus only on the critical competencies, you will achieve much better assessments and much more powerful people decisions , and do less work in the process.
In short, research confirms that identifying the relevant competencies for a job, and assessing them through effective interviews, is an extremely valid and powerful way to predict outstanding performance.
There are two distinct approaches to the structured interview: behavioral questions (past behavior) and situational questions (hypothetical behavior). I prefer behavioral questions.
Effective interviewing requires significant preparation. Your questions should be focused on behaviors, and should be followed up with significant probing to understand what was the candidate’s exact role, and what were the consequences of his or her actions.
Interviewing skills can be learned through role-playing, often videotaped, training sessions.
Proper reference checks are an essential condition for success in any assessment.
When I asked Jack Welch how he really found out about a person. He told me that he never trusted the references given by the candidate.
Weeding out the outright fakes is entry-level reference checking. Second level involves finding people who can confirm that your candidate’s self-reported achievements are real. A third type of reference helps you hone in on competence and potential.
A former boss would tend to be very good for assessing things like results orientation and strategic orientation. A peer would be well positioned to assess collaboration and influencing skills. Direct reports could comment on the candidate’s competence in the areas of team leadership.
Some interviewers are better than others. The best interviewers had predictive validities 10 times bette. R
Instead of a panel interview, have more than one highly effective interviewers independently in the finalist.
Team interviews can be more effective for higher-level positions, more complex jobs. They also reduce the duplication and exhaustion of back-to-back interviews.
When the final decision approaches, strict discipline becomes absolutely crucial. All too often, expediency intervenes, discipline breaks down , and terrible people mistakes are made. “Discipline” means reviewing, once again, the performance expectations, and reviewing the evidence
Once you become more experienced you can listen more to your own intuition. Until then, you should question your intuition frequently.
Developing your assessment skills will be key for your career success and for your company’s success.
Invest in good interview training.
Review the recruitment and interview process.
Remember to review people decisions again, one or two years down the road.
Be willing to undo a bad decision .
CHAPTER EIGHT – How to Attract and Motivate the Best People
The first critical step of selling a job is understanding the main motives and the primary concerns of the candidates.
Anyone can hire average people. Hiring the best people, especially those who aren’t looking for a job, demands your best.
Take time to understand the candidates and their motivations. Address your concerns. Share your passion about your company, your projects, and the job you are offering.
Make sure that your compensation packages are aligned with your retention priorities.
The evidence about the inherent power of “pay for performance” is surprisingly inconclusive.
A reasonably high level of total compensation is needed to attract the best .
Balance long-term with short-term incentives. Long-term incentive should be along the lines of restricted shares rather than stock options (which have strong upside but limited downside.) Short-term incentives might be a yearly bonus.
Most complex jobs require collaboration, and therefore individual incentives can be extremely negative.
Avoid the “golden parachute,” which creates a perverse incentive to promote conflict and get fired.
The signing bonus is nearly as bad , because it pays reluctant candidates to suspend their judgment about the job to earn the signing bonus.
What candidates look for, first and foremost, is not more money, but a job where they can do their best, with a challenge that perfectly matches their skill level, in a place where they will grow and develop, in an organization they like, with a good boss and a great group of peers.
You want the right candidate, one who really cares about the job and the organization.
If you have the right people, they will do everything in their power to make the company great. —Jim Collins
When working with an executive search firm, a fixed flat fee and a retainer arrangement can sidestep all of these fee-related structural problems . It can reinforce personal trust with structural integrity.
CHAPTER NINE – How to Integrate the Best People
Bringing a spacecraft safely back to Earth is similar to integrating a successful candidate into a new job.
External candidates are usually expected to hit the ground running and also often have a compensation package that creates jealousy and resentment.
The Dynamics of Taking Charge by John J . Gabarro is the best book ever written on the integration of new managers.
Integration is hard. Integration takes time. If managers act too quickly, they may do so based on the wrong diagnosis, and fail. If they take too long, they will frustrate the organization.
The manager most likely to fail at integration is the “Lone Ranger,” who can’t involve others in the learning and action stages. So, hire emotionally and socially intelligent managers who can get others to help them in the diagnostic phase.
To avoid integration failures: be aware of the common traps, prepare the manager, and follow up closely.
When it’s clear the integration isn’t working, pull the plug. This is never easy.
New managers should always have a sponsor, a champion. The power of “personal touch” can’t be overemphasized. There’s simply no substitute for one-on-one sessions .
CHAPTER TEN – The Bigger Picture
Just like hiring and promoting, delegating more often and more effectively improves your organization’s results, and helps ensure your own career success.
The Big Idea: choose to have a calm, profitable, healthy workplace.
Why is work so crazy? Physical and virtual distractions at work. And an unhealthy obsession with growth.
Sustained exhaustion is not a badge of honor, it’s a mark of stupidity.
How many hours at the office are really spent on work itself?
The answer isn’t more hours, it’s less bullshit. Less waste, not more production. Fewer distractions and less stress.
It’s time to give people the uninterrupted time that great work demands.
Basecamp has been profitable every year. Profitability alleviates stress.
Where does our money come from? Customers, not venture capital.
We don’t have a single employee in the Valley.
We put in about 40 hours a week most of the year and just 32 in the summer.
On balance we’re calm — by choice, by practice. We’re intentional about it.
Protect people’s time and attention.
40 hours of work per week.
Ample time off.
Meetings are a last resort.
Asynchronous communication first, real-time communication only when necessary.
Sustainable practices for the long term.
Focus on profitability.
When you realize the way you work is malleable, you can start molding something new, something better.
We didn’t just assume asynchronous communication. We tested out everything and figured it out.
We found that paying for people’s vacations was better than cash bonuses.
Hustlemania has captured a monopoly on entrepreneurial inspiration.
You’re not very likely to find that key insight or breakthrough idea north of the 14th hour in the day.
Improve iteratively and continuously. Fewer explosions and more laying of bricks and applying another layer of paint.
Put in a good day’s work, day after day, but no heroics.
The business world is obsessed with fighting, winning, dominating, and destroying. But there is another way.
Do we have enough customers paying us enough money to cover our costs and generate a profit? Good. Then we’re successful.
What matters is that we have a healthy business with sound economics that work for us. Costs under control, profitable sales.
We’re serving our customers well, and they’re serving us well. That’s what matters.
“Comparison is the death of joy.” —Mark Twain
There’s no chasing others at Basecamp, just deep work and keeping customers happy.
We don’t do goals.
We don’t mind leaving some money on the table and we don’t need to squeeze every drop out of the lemon. Do we want to maximize value through constantly chasing goals? No thanks.
We are working on building a long-lasting sustainable business with happy employees.
How about something really audacious? No targets, no goals. And if you must have a goal, how about just staying in business? Or serving your customers well? Or being a delightful place to work?
Everyone wants to be a disrupter these days. If you stop thinking you must change the world, you lift a tremendous burden of yourself and your team. 9pm. meetings and weekend sprints are not as necessary.
“NO PAIN, NO GAIN!” looks good on a poster at the gym, but real life is not like the gym.
Most of the time, if you’re uncomfortable with something, it’s because it isn’t right. Listen to your discomfort. It was the discomfort of knowing two people doing the same work at the same level were being paid differently that led us to reform our payment structure.
It was discomfort working at companies that had taken large amounts of venture capital that led us to pursue a path of profitable independence.
Working 40 hours a week is plenty. During the summer, we even take Fridays off. If you can’t fit everything you want to do within 40 hours per week, you need to get better at prioritizing and focusing, instead of working longer hours .
Cut out what’s unnecessary.
Protect what’s both most vulnerable and most precious: your employees’ time.
Eight people in a room for an hour doesn’t cost one hour, it costs eight hours. Plus the cost of the interruption in concentration.
Instead of update meetings, we ask people to write updates daily, when they have a free moment. Others can read them when they have a free moment.
60 minutes isn’t really an hour if it’s broken up into four 15 minute blocks.
Productivity is for machines, not for people. We believe in effectiveness .
Stop equating work ethic with excessive work hours.
Work doesn’t happen at work because of all the interruptions. To facilitate collaboration, we borrowed an idea from academia and have people schedule office hours. People are welcome to stop by and discuss work during office hours.
The shared work calendar is one of the most destructive inventions of modern times. Taking someone’s time should not be easy. Meetings should be a last resort, especially big ones.
We don’t require anyone to broadcast their whereabouts or availability at Basecamp. Hours worked and butts in seats don’t matter; only actual work matters. The only way to know if work is getting done is by looking at the actual work. That’s the boss’s job.
We don’t require anyone to broadcast their availability and we reject the proliferation of chat tools invading the workplace. Know how to reach someone in an emergency but also recognize there are very few actual emergencies.
The expectation of an immediate response is the ember that ignites so many fires at work. Create a culture of eventual response rather than immediate response.
Instead depending on chat to stay caught up on work, catch up on what happened today as a single summary email. We also write monthly updates called “Heartbeats.”
We do care and we do help. But a family we are not. A family sacrifices everything for each other. We’re people who work together to make a product that we are proud of. You don’t have to pretend to be a family to be courteous. Or kind. Or protective.
The best companies aren’t families. They’re supporters of families.
A leader sets the example that everyone follows. If you value reasonable hours, plentiful rest, and a healthy lifestyle for yourself, then others will follow. If you, as the boss, want employees to take vacations, you have to take a vacation. Workaholism is a contagious disease.
The trust battery between the two of you is either charged or discharged, based on things like whether you deliver on what you promise.” A low trust battery is at the core of many personal disputes at work.
What the boss most needs to hear is where they and the organization are falling short. The boss needs to ask: “What can we do even better?” “What’s something nobody dares to talk about?” “Are you afraid of anything at work?” “Is there anything you worked on recently that you wish you could do over?” “What do you think we could have done differently to help Jane succeed?” “What advice would you give before we start on the big website redesign project?”
The CEO is usually the last to know how things are really going.
There’s no such thing as a casual suggestion when it comes from the owner of the business.
On low-hanging fruit: he further away you are from the fruit, the lower it looks. Declaring that an unfamiliar task will yield low-hanging fruit probably means the person doesn’t know what he’s talking about.
In the long run, work is not more important than sleep.
At most companies, work-life balance is a sham. If work can claim hours after 5:00pm, then life should be able to claim hours before 5:00pm to regain the balance.
CVs might as well be tossed in the garbage. Everyone know they are exaggerations. To work at Basecamp, you have to be good people.
To evaluate someone, we put a real project in front of the candidates so that they can show us what they can do.
Be wary of senior people from large companies. Trying to teach a small company how to act like a big one rarely does anyone any good. Unlearning can be just as hard as having to pick up entirely new skills.
But be patient. Unless you hire someone straight out of an identical role at an identical company, they’re highly unlikely to be instantly up to speed and able to deliver right away.
Talent isn’t worth fighting over. Someone who’s a superstar at one company often turns out to be completely ineffectual at another, so a superstar somewhere else is not worth fighting for.
Talent at Basecamp rarely comes from traditional war zones like San Francisco or New York. More likely, it’s Oklahoma, Tennessee, or Toronto.
We look at people’s actual work, not at their diploma or degree.
It takes patience to grow and nurture your own talent.
Most people just don’t enjoy haggling, so Basecamp has a fixed salary structure. Everyone in the same role at the same level is paid the same.
Once every year we review market rates and issue raises automatically.
The goal at Basecamp is to pay everyone at the top 10 percent of the market for their role and level.
We get the market rates through a variety of salary survey companies.There’s also no penalty for relocating to a cheaper cost-of-living.
We don’t pay traditional bonuses, just a generous salary.
There are no stock options at Basecamp because we never intend to sell the company.
We’ve vowed to distribute 5 percent of the proceeds to all current employees if we ever sell the company.
There is profit-sharing. Basecamp distributes 25 percent of growth in profits to employees in that year.
Basecamp isn’t a startup. Basecamp is a stable, sustainable, and profitable company.
Happiness and productivity are found in working with a stable crew.
Free dinners are a hoax. A free dinner for working late sounds more like a bribes than a benefit.
We don’t offer gotcha benefits, only relevant “outside the office” benefits. Benefits: fully paid vacations, 3-day weekends all summer, paid sabbaticals, continuing education allowances, charity matching, CSA (community-supported agriculture) shares, one monthly massage, a monthly fitness allowance.
Offices should operates by library rules. The office should be quiet and calm. Conversations should be kept to a whisper.
The purpose of a vacation is to get away. We used to offer unlimited vacation, but we eventually noticed that people actually ended up taking less time off.
When someone leaves, be honest and clear with everyone about what just happened. At Basecamp, an immediate goodbye announcement is sent out companywide.
Following group chat at work is like being in an all-day meeting with random participants and no agenda. It’s completely exhausting. Chat puts conversations on conveyor belts that are perpetually moving away from you. Chat is great for hashing stuff out quickly.
The two rules for chat at Basecamp is “Asynchronous most of the time. Real-time only sometimes.” And if it’s important, slow down and take it offline to think.” Important topics need time.
A deadline with a flexible scope will result in a healthy, calm project.
When we present work, it’s almost always written up first. Then it’s posted to Basecamp, so people can have time to digest and respond, with a written respond on Basecamp. We don’t want first impressions.
Friday is the worst day to release anything.
Culture isn’t what you intend it to be. Culture is what culture does. What we do repeatedly hardens into habits and that becomes your culture.
Right from the beginning of Basecamp, we insisted on a reasonable workweek. We didn’t pull all-nighters to make impossible deadlines. When calm starts early, calm becomes the habit. If you start crazy , it’ll define you .
Today we ship a feature when it’s ready rather than waiting until all features are ready.
If every decision has to be made by consensus, you’re in for an endless grind. Someone in charge has to make the final call. Instead, get used to saying “I disagree but let’s commit.” Then move forward.
Knowing when to embrace Good Enough is what gives you the opportunity to be truly excellent when you need to be. Separate what really matters from what sort of matters from what doesn’t matter at all. Be clear about what demands excellence.
When we spend six weeks on a project, we begin prototyping as soon as we can in those first two weeks. As we pass the mid-point, it’s time to focus in and get narrow. New ideas that arrive too late will just have to wait.
“Doing nothing” should always be on the table. It’s too easy to fuck up something that’s working well. “What if we did nothing?”
Calm requires getting comfortable with “enough.” If it’s never enough, then it’ll always be crazy at work.
Every mature industry is drowning in “best practices.” So much of it is bullshit. There are so many reasons to be skeptical of best practices.
Unless you’ve actually done the work, you’re in no position to encode it as a best practice.
Many best practices are purely folklore. No one knows where they came from, why they started, and why they continue to be followed.
All this isn’t to say that best practices are of no value. Some are helpful to get you going, at which point you can abandon them as you need.
You can’t develop a calm culture if you’re constantly fretting about what the best practices. Create your practices and your patterns.
“Whatever it takes” is the rallying cry for captains of industry and war generals. Reasonable expectations are out the window when we operate according to “whatever it takes.” There certainly will be rare moments when whatever it takes is truly called for .
Rather than demand “whatever it takes,” ask , “what will it take?” Then decides if it’s worth it. Discuss strategy, make tradeoffs, make cuts, or come up with a simpler approach.
Too much shit to do is the problem if you’re obsessed with productivity hacks. The only way to get more done is to have less to do. Saying no is the only way to claw back time.
“There is nothing so useless as doing efficiently that which should not be done at all .” — Peter Drucker
At Basecamp, we’ve become ruthless about eliminating wasteful tasks.
Nearly all product work at Basecamp is done by teams of three people. The team is usually two programmers and one designer. We don’t throw more people at problems, we chop problems down to size. Big teams make things worse all the time.
Work expands to fill the time available. Work expands to fill the team available. You can do big things with small teams.
Rather than jumping on every new idea right away, we make every idea wait a while. First we finish what we started, then we consider what we want to tackle next. New ideas can wait.
Learning to say no is a required skill if you want to be calm.
We’ll take a risk, but we won’t put the company at risk.
When we make big changes to Basecamp, we give it six months and see how it turned out. We’ll tweak it along the way. We’ll be ready to revert if needed. We prefer managed, calculated risk with a safety rope attached.
In the summer, we work 4 day, 32 hour weeks.
In the autumn, we pay for a weekly community-supported agriculture share for each employee .
Until you’re running a profitable business, you’re slowly (or quickly) running out of business. We focus on keeping out our costs in check.
Being profitable means having time to think and space to explore. Being profitable means being in control of your own destiny and schedule.
When companies are in the red, employees worry about their jobs. When companies talk about burn rates, two things are burning: money and people.
Selling to small businesses and selling to enterprises are two very different approaches requiring two very different kinds of people.
Learn to launch. Generally, you just have to ship it. Do your best, believe in the work you’ve done, and ship it. After you ship, you can iterate on real insights and real answers from real customers.
We’ve never committed to a product road map. Promises in a product road map pile up like debt. Promises are easy and cheap to make, while actual work is hard and expensive.
We’ve been ripped off and cloned a hundred times. We’ve learned you have to move on.
People don’t hate all change. What customers and employee don’t like is forced change. We still run three completely different versions of Basecamp, so that customers don’t have to change if they don’t want to.
Things get harder as you go, not easier. The easiest day is day one of a new company. As you get bigger, you hire people, there is more competition, and there are increased costs.
When it comes to complaints, remember that, mostly, everyone wants to be heard and respected.
Companies are culturally and structurally encouraged to get bigger and bigger. But the good old days, the founders miss, are when their business was simpler and smaller.
We wonder why didn’t they just grow slower and stay closer to the size they enjoyed the most?
Our goal is to maintain a sustainable and manageable size. We still grow, but slowly and in control.
We chose calmness, so we cut back on products and features, even when times are great. Cutting back when times are great is the luxury of a calm, profitable, and independent company.
A successful business is healthy profits, increased benefits for our employees, and an environment where people can do the best work of their careers.
Choose to: protect people’s time.
Choose to: work reasonable number of hours.
Choose to: relieve people from the conveyor belts of information.
Choose to: give employees the focus that their best work requires.
Choose: contemplation and consideration prior to communication.
Choose to: give endless growth a rest.
Choose to: give teams control over what can be reasonably accomplished given the time.
Choose to: finish what you started before moving on to the next idea.
You don’t have to work miserable 60 / 80 / 100 – hour weeks to make it work. You don’t even need an office.
Ignore the real world. It’s a place where new ideas , unfamiliar approaches , and foreign concepts always lose .
Learn from your successes. Failure is not a prerequisite for success.
Long-term business planning is a fantasy. You have to be able to improvise. This isn’t to say you shouldn’t think about the future or contemplate how you might attack upcoming obstacles. That’s a worthwhile exercise. Just don’t feel you need to write it down or obsess about it. Working without a plan may seem scary. But blindly following a plan that has no relationship with reality is even scarier.
Why grow? Why is expansion always the goal? You’ll need a better answer than “economies of scale.” Grow slow and see what feels right. Premature hiring is the death of many companies. Once you get big, it’s really hard to shrink without firing people, damaging morale. Runs a business that’s sustainable and profitable.
Workaholism is stupid. Working like crazy just isn’t sustainable. Workaholics try to make up for intellectual laziness with brute force. Workaholics create guilt and poor morale among their coworkers. You end up just plain tired. No one makes sharp decisions when tired. The real hero is already home because she figured out a faster way to get things done.
Instead of entrepreneurs, let’s just call them starters.
To do great work, you need to feel that you’re making a difference. This doesn’t mean you need to find the cure for cancer.
Scratch your own itch.
Start by making something, now. What you start is what matters, not what you think or say or plan to start. Ideas are cheap and plentiful.
The most common excuse people give: “There’s not enough time.” There’s always enough time if you spend it right.
Keep in mind why you’re doing what you’re doing. A strong stand is how you attract superfans, not just customers. Also, when you stand for something, decisions are obvious. Ex: Whole Foods.
Be authentic with your mission statement. Having an authentic mission statement means truly standing for something.
Outside money is Plan Z. When you take outside money, you give up control. The pursuit of “cashing out” begins to trump building a quality business. Spending other people’s money is addictive. Customers move down the totem pole. Raising money is incredibly distracting. You start having meetings with your investors and / or board of directors.
You need less than you think. There’s nothing wrong with being frugal. Great companies start in garages all the time.
Start an actual business not a startup. Actual businesses worry about profit from day one.
You need a commitment strategy, not an exit strategy. You’ll be able to focus on getting customers to love you, instead of getting acquired.
Be the smallest, the leanest, and the fastest. Avoid: excess staff, meetings, thick process.
Constraints are actually advantages in disguise. Southwest — unlike most other airlines, which fly multiple aircraft models, flies only Boeing 737s. Because of this, Southwest has lower costs and a business that’s easier to run.
You just can’t do everything you want to do and do it well. Sacrifice some of your darlings for the greater good. Getting to great starts by cutting out stuff that’s merely good .
There’s the stuff you could do, the stuff you want to do, and the stuff you have to do. Find out what’s essential and focus all your energy on making it the best it can be.
Ignore the details early on. Nail the basics first and worry about the specifics later. We sketch out ideas with a big, thick Sharpie marker, instead of a ballpoint pen.
Long projects zap morale.
Be a curator. Constantly look for things to remove, simplify, and streamline.
Gordon Ramsay’s first step is nearly always to trim the menu. When things aren’t working, cut back.
Focus on what won’t change. The core of your business should be built around things that won’t change. Things that people are going to want today and ten years from now. Those are the things you should invest in. Eg. Amazon and Japanese automaker focus on core principles.
It’s not the gear that matters. Content is what matters.
Launch now. Once your product does what it needs to do, get it out there. When you impose a deadline, you gain clarity.
Instead of describing what something looks like, draw it. Get to something real (a prototype) right away because people need to see something to start working on it.
Sometimes abandoning what you’re working on is the right move.
Interruption is the enemy of productivity. Long stretches of alone time are when you’re most productive. Use email, over chat/meetings/call, as much as possible.
Meetings are toxic. The true cost of meetings is staggering.
If you must have a meeting, follow these simple rules: set a timer, invite as few people as possible, always have a clear agenda, meet at the site of the problem, end with a solution.
Good enough is fine. Aim for maximum efficiency with minimum effort. Problems can usually be solved with simple, mundane solutions. When good enough gets the job done, go for it.
Quick wins. Momentum fuels motivation. No one likes to be stuck on an endless project. The longer something takes, the less likely it is that you’re going to finish it. Small victories let you celebrate and release good news. Ask: “What can we do in two weeks?”
Don’t be a hero. If you already spent too much time on something that wasn’t worth it, walk away. You can’t get that time back.
Forgoing sleep is a bad idea.
We’re all terrible estimators. Estimates that stretch weeks, months, and years into the future are fantasies. The solution : Break the big thing into smaller things.
Start making smaller todo lists. Prioritize visually. Put the most important thing at the top.
Make tiny decisions by breaking up big decisions. Smaller, attainable goals like that are the best ones to have .
Don’t copy. Copying skips understanding — and understanding is how you grow. When you copy, you never lead, you always follow.
Make you part of your product or service. Zappos sets itself apart by injecting CEO Tony Hsieh’s obsession with customer service into everything it does. Polyface sells the idea that it does things a bigger agribusiness can’t do .
Being the anti – ______ is a great way to differentiate yourself and attract followers. Having an enemy gives you a great story to tell customers, too.
Underdo your competition. Solve the simple problems and leave the hairy, difficult, nasty problems to the competition.
It’s not worth paying much attention to the competition. Focus on competitors too much and you wind up diluting your own vision. Focus on yourself instead.
Say no by default. Use the power of no (to certain customers) to get your priorities straight. Recommend a competitor if you think there’s a better solution out there.
Let your customers outgrow you.
Don’t confuse enthusiasm with priority. The enthusiasm you have for a new idea is not an accurate indicator of its true worth.
To create a product that exceeds expectation, you might need to promise a bit less. Over-promising and under-delivering is like a one-night stand. You don’t want a one-night stand with your customers, you want a long-term relationship.
Being obscure is a great position to be in. When you’re obscure, you can try new things. No one knows you, so it’s no big deal if you mess up.
Build an audience. An audience can be your secret weapon. Every day they come back to see what we have to say. When you build an audience, you don’t have to buy people’s attention — they give it to you. Share information that’s valuable and you’ll slowly but surely build a loyal audience.
Teaching probably isn’t something your competitors are even thinking about. Etsy teaches. Gary Vaynerchuk teaches. Teach and you’ll form a bond you just don’t get from traditional marketing tactics.
Give people a backstage pass and show them how your business works. People love finding out the little secrets of all kinds of businesses.
Don’t be afraid to show your flaws. Imperfections are real and people respond to real.
Press releases are spam. Instead, call someone. Write a personal note.
Forget about the Wall Street Journal. You’re better off focusing on getting your story into a trade publication or picked up by a niche blogger.
Marketing is something everyone in your company is doing 24 / 7 / 365.
The myth of the overnight sensation. Dig deeper and you’ll usually find people who have busted their asses for years. It’s hard, but you have to be patient. Starbucks, Apple, Nike, Amazon, Google, and Snapple all became great brands over time, not because of a big PR push upfront. Start building your audience now.
Never hire anyone to do a job until you’ve tried to do it yourself first.
The right time to hire is when there’s more work than you can handle for a sustained period of time.
Pass on hiring people you don’t need, even if you think that person’s a great catch. Don’t worry about “the one that got away.”
Hire slowly. Hire a ton of people rapidly and a “strangers at a cocktail party” problem where everyone tries to avoid any conflict or drama. No one says, “This idea sucks.”
We all know resumés are a joke. The cover letter is a much better test than a resumé.
There’s surprisingly little difference between a candidate with six months of experience and one with six years. How long someone’s been doing it is overrated. What matters is how well they’ve been doing.
Don’t fall into the trap of thinking you need someone from one of the “best” schools in order to get results.
With a small team, you need people who are going to *do* work, not *delegate* work. Avoid hiring delegators. Delegators love to pull people into meetings ,
Hire managers of one. They don’t need a lot of hand-holding or supervision. They’ve run something on their own or launched some kind of project .
Hire great writers. If you are trying to decide among a few people to fill a position, hire the best writer. Clear writing is a sign of clear thinking .
It’s crazy not to hire the best people just because they live far away. To make sure your remote team stays in touch, have at least a few hours a day of real-time overlap. Meet in person once in a while .
Test out employees. You need to evaluate the work they can do now, not the work they say they did in the past. Hire them for a mini-project.
Own your bad news. When something bad happens, tell your customers.
Getting back to people quickly is probably the most important thing you can do when it comes to customer service.
A good apology accepts responsibility. If you’ve built rapport with customers, they’ll cut you some slack and trust you when you say you’re sorry.
Put everyone on the front lines. Good restaurants sometimes have chefs work out front as waiters for a stretch. Listening to customers is the best way to get in tune with a product’s strengths and weaknesses. The more people you have between your customers ’ words and the people doing the work, the more likely it is that the message will get lost or distorted along the way.
After you introduce a new feature , change a policy , or remove something , knee – jerk reactions will pour in. Ride out that first rocky week. Make sure you don’t foolishly backpedal on a necessary but controversial decision. Let them know you’re listening .
You don’t create a culture. It happens .
Culture is the byproduct of consistent behavior. If you treat customers right, then treating customers right becomes your culture. So don’t worry too much about it. Don’t force it. You can’t install a culture. Like a fine scotch, you’ve got to give it time to develop.
Don’t make up problems you don’t have yet. Most of the things you worry about never happen anyway. Optimize for now and worry about the future later. The ability to change course is one of the big advantages of being small.
Skip the rock stars. The environment has a lot more to do with great work than most people realize. Rockstar environments develop out of trust, autonomy, and responsibility.
When everything constantly needs approval, you create a culture of non-thinkers. Realize that failing to trust your employees is awfully expensive .
Send people home at 5. You shouldn’t expect the job to be someone’s entire life.
Policies are organizational scar tissue. Don’t create a policy because one person did something wrong once. Policies are only meant for situations that come up over and over again.
Talk to customers the way you would to friends. Avoid jargon. Don’t talk about “monetization” or being “transparent;” talk about making money and being honest.
Write to be read, don’t write just to write. Whenever you write something, read it out loud. When you’re writing, think of the person who will read your words.
Four-letter words you should never use in business: need, must, can’t, easy, just, only, and fast. Need: very few things actually need to get done. Can’t: you probably can. Easy: people rarely say something they have to do is easy.
Stop saying ASAP: when everything is high priority, nothing is.
The Big Idea: Invest in data and data science teams. Better data + better data scientists = better models = better business decisions = sustainable competitive advantage.
Chapter 1: Introduction, Data Analytic Thinking
Data mining is the extraction of knowledge from data.
Data science is a set of principles to guide data mining.
Big data means datasets that are too large for traditional data processing systems and require new technologies such as Hadoop, HBase, MongoDB.
We are in Big Data 1.0 still. Big Data 2.0 will be the golden era of data science.
Building a top-notch data science team is nontrivial but can be a tremendous strategic advantage.
Ex: fraud detection, Amazon, Harrah’s casinos.
It’s important for managers and executives to understand basic data science principles to get the most from data science projects and teams.
Just like chemistry is not about test tubes, data science is not about data engineering or data mining.
Chapter 2: Business Problems and Data Science Solutions
There are a few fundamental types of data mining tasks: classification, regression, similarity matching, clustering, association grouping, profiling, link prediction, data reduction, causal modeling.
This book will focus on: classification, regression, similar matching, and clustering
Ex: churn prediction is a classification problem.
Supervised vs unsupervised. Supervised data mining has a specific target. Unsupervised data mining is used to learn and observe patterns in the data but doesn’t have a specific target.
It’s important to appropriately evaluate prediction models.
Your model is not what the data scientists design, it’s what the engineers build.
Data science engineers are software engineers who have expertise in production systems and in data science.
Data mining is closer to R&D than to software engineering.
Invest in pilot studies and throwaway prototypes.
Analytics skills (ability to formulate problems well, to prototype solutions, to make reasonable assumptions) are more important than software engineering skills in a data science team.
Useful skills for a business analyst: statistics, SQL, data warehousing, regression analysis, machine learning.
There is much overlap, but there is a different because understanding the reason for churn, vs predicting which customers to target to reduce future churn.
Ex. Who are the most profitable customers? SQL
Ex. Is there really a difference between the profitable customers and the average customers? Statistics and hypothesis testing.
Ex. But who really are these profitable customers? Can I characterize them? SQL, statistics, automated pattern finding. Classification.
Ex. Will some particular new customer be profitable? How much revenue should I expect this customer to generate? Predictive model. Regression.
Chapter 3: Introduction to Predictive Modeling, From Correlation to Supervised Segmentation
Predictive modeling is supervised segmentation. We have some target quantity we would like to predict.
A classification tree, or decision tree, is a method to classify data instances.
Tree structured models are a very popular data modeling technique and work remarkably well.
Tree structured models are also easy for business users to understand.
Chapter 4: Fitting a Model to Data
Tuning the parameters so that the model fits the data is parameter learning or parametric modeling.
The most common procedure is one you’re already familiar with, linear regression.
Logistic regression applies linear models to class probability estimation, and is one of the most useful data mining techniques.
Nonlinear support vector machines and neural networks fit parameters based on complex, nonlinear functions.
If we increase the complexity, we can fit the data too well, then we are just memorizing the data.
Chapter 5: Overfitting and Its Avoidance
Just because a model fits the data very well, doesn’t mean it is better at predicting. It could just be memorizing the data.
If you torture the data long enough, it will confess.
Fundamental tradeoff between model complexity and overfitting.
Always hold out data to test the model.
A fitting graph shows the difference between accuracy during training and accuracy during testing.
Overfitting is bad because the model picks up spurious correlations that produce incorrect generalizations.
A learning curve is a plot of the generalization performance against the amount of training data.
Chapter 6: Similarity, Neighbors, and Clusters
Similarity between data instances is described as distance between their feature vectors.
Nearest-neighbor methods predict by calculating distance between a new data and neighbors in the training set.
Similarity is used as the basis for the most common methods of unsupervised data mining, clustering.
Hierarchical clustering can provide insights that instruct further data mining.
A cluster centroid can be used as the basis for understanding clusters.
Chapter 7: Decision Analytic Thinking I, What is a Good Model?
Accuracy is too simplistic a metric.
A confusion matrix differentiates between different types of errors (eg. sensitivity vs specificity)
Expected value frameworks are extremely useful in organizing data science thinking and evaluating models.
Chapter 8: Visualizing Model Performance
A profit curve is useful for business user to evaluate classifiers.
A Receiver Operating Characteristics (ROC) graph is useful for evaluating models when class priors or costs/benefits are not known.
Since ROC curves are not intuitive, a cumulative response curve (or lift curve) is most appropriate for some business users.
Chapter 9: Evidence and Probabilities
Bayes rule is used for conditional probabilities which occurs frequently in business problems.
Naive Bayes rule is valuable because it is very efficient, practical to use, and can learn on the fly.
Naive Bayes rule should be avoided when costs/benefits are uses. Best to use when rankings are more important.
Bayes rule are the basis of evidence lifts. Evidence lifts are useful for understanding data like “Facebook Likes as a predictor of High IQ”
Chapter 10: Representting and Mining Text
Term frequency (TFIDF) is a simple and useful data mining technique for text.
Topic layers can also be used to assist with understanding text.
Chapter 11: Decision Analytic Thinking II, Towards Analytical Engineering
Expected value framework is a core approach useful in many data science scenarios.
Chapter 12: Other Data Science Tasks and Techniques
Not discussed in depth in this book: co-occurrence grouping, lift and leverage, market basket analysis, profiling, link predictions, social recommendation, data reduction, latent information, bias vs variance, ensemble models, causal explanations
Chapter 13: Data Science and Business Strategy
Understanding data science concepts leads to awareness of new opportunities.
Understanding the ROI of data science results in increased investment in data and data science teams.
Data science is a sustainable competitive advantage.
A culture of data science is valuable in building a data science team.
A top data scientist is worth many times an average data scientist.
Data science is learned by working with top data scientists, either in industry or academia.
A top data science manager understands the technical principles, understands the business needs, and manages people and projects well.
There is only one reliable predictor of success of a data science research project: prior success.
Top data scientists want to work with other top data scientists. Most want more responsibility. Most want to be part of a fast-growing, successful company.
Consider funding a PhD student for $50k/year.
Consider taking on a data science professor or a top data science consultant as a scientific advisor to guide projects and attract data scientists.
An immature data science team has processes that are ad-hoc.
A medium-maturity data science team employs well-trained data scientists and managers.
A high-maturity data science team focuses on processes as well as projects.
The Big Idea: Clarify your core values and make sure everyone knows them.
1. Excellent customer service
2. Taking care of our people
3. Developing entrepreneurial spirit
4. Respect for all people
5. Building strong relationships
6. Doing the right thing
7. Giving back to our communities
8. Shareholder return
Ch 1: Two Regular Guys
Two Guys discount retail was destroyed by overexpansion.
Bernie started off as a controller for Handy Dan hardware stores.
Ch 2: Origins
There is transactional banking and there is relationship banking.
The vision for Home Depot was created in 1976. There were too many small chains, no national companies, and prices are too high.
Home Depot would buy directly from manufacturers for increased margins and build immense warehouse stores for higher sales volumes.
Ch 3: The Financier
Ross Perot nearly invested $2mm for 70% of Home Depot, which would now be worth $50bn+.
Home Depot found seed capital elsewhere.
Ch 4: The Merchant, Act I
Merchandising is a core competency for Home Depot.
For Home Depot, merchandising is knowing what to buy and how to sell it in the stores.
Ch 5: The First Stores
Atlanta was chosen over Boston, Dallas, and LA, because of demographics and economics.
Home Depot got the cash it needed for inventory because of its relationships with bankers.
The stores were meant to look more like warehouses than showrooms.
Some deep discount sales brought customers into the first stores, which led to word of mouth.
Home Depot lost money in 1979 but quickly turned it around and made a profit in 1980.
Home Depot went public in 1981, which financed expansion into Florida.
Ch 6: The Associates
Take good care of the customer.
Empower associates to make decisions.
Pay people what they are worth.
Hire the best people and pay them more than the competitor.
Offer stock options or a stock purchase program to let all employees be owners.
Do what you can to keep associate turnover low.
Take care of associates and they’ll take care of customers.
Work hard and also work smart. People need a balanced life.
Don’t ask your managers or associates to do anything you wouldn’t do.
Sometimes you need to untrain bad habits that associates pick up at other companies.
Don’t be afraid to hire senior citizens.
Invest time in training and developing people.
Home Depot offers apron badges for key accomplishments.
Ch 7: The Customers
New executives always spend time in the stores.
Associates are expected to walk customers to the product, not just point.
How-To Clinics were developed because Home Depot cared about customers and their projects.
The Home Depot return policy is flexible because they trust the customer.
Associates are expected to be responsible for customer service.
Ch 8: Building the Brand
Low prices are just the beginning.
Home Depot’s size made national advertising finally cost-effective.
Home Depot wanted to become synonymous with home improvement.
Home Depot copied the Wal-mart employee stock ownership plan (ESOP).
Everyday low prices was a better strategy for more consistent sales than occasional sales discounting.
Home Depot spent millions on the 1996 Summer Olympics in Atlanta and became part of the fabric of America.
Ch 9: The Competition
Home Depot is far ahead of Lowe’s.
When you copy somebody and don’t really understand what they’re doing, you’re never going to be as good as the original. That’s Lowe’s problem.
Home Depot can never beat specialty stores and so they will continue to exist.
Core values remain the same but everything else is subject to innovation and disruption.
Retailers can’t ever stay the same. Times change and retailers either adapt or die.
The focus is always on the customer. Home Depot doesn’t need to beat the competition, they need to win the customer.
Ch 10: Growth
Walmart founders always have retained humility, despite their incredible success.
Walmart reached $10bn in sales by concentrating on stores, particularly control of merchandise, distribution, finances, and infrastructure.
Home Depot gets lower prices by paying invoices immediately instead of net 30.
Home Depot makes buying decisions on the local level, instead of centrally.
Vendors generally ship inventory directly to stores, instead of to a distribution center. This saves time and money.
Secure twice the capital you think you need. It gives you the confidence and financial strength to do what’s best for the long-run.
Hire people who are overqualified at first and let them grow with you. Payroll is an investment, not an expense.
In the early days, Home Depot managers worked 12 hours a day, 7 days a week, to open new stores.
It’s not easy being a public company, but without the IPO, Home Depot would still be a chain of four stores in Atlanta.
The board of directors agreed to cap annual growth at 25%, to protect the Home Depot culture from expanding too rapidly.
During expansion, Home Depot learned the importance of planning and then learning when to adjust and improvise.
The 24-hour Home Depot concept was driven by customers.
Home Depot stocks contractor brands for the pros, but they have become popular with the DIY.
Ch 11: The Merchant, Act II
Ch 12: Strategic Partners
Bankers and vendor relationships were key, especially since Home Depot did not use distributors.
Home Depot works with vendors to improve their products.
Eventually, Home Depot developed or bought in-house brands of tools, such as Ridgid.
Ch 13: How We Manage
Humility is key. Accept that they are people smarter than you and hire them.
What works in Atlanta might necessarily work in Maine.
Give your managers firm boundaries at first and then loosen them as they earn your trust.
Some things are the same from store to store. Some things are flexible. Some things are completely dependent on the store.
Hire people who are overqualified and let them grow with the company.
As you scale, keep a close eye on fiscal discipline.
Success depends on teamwork.
Communication is key. Avoid bureaucracy by keeping lines of communication open.
Store walks are great for keeping executives close to the stores.
Employee stock ownership program comes with a 7-year vesting period so it had a chance to build value over time.
Best Practices program is how good ideas spread from one store to the entire chain.
Teach employees core values and you won’t have to micro-manage.
Use 360 feedback to develop people.
Establish team-building programs to establish trust and improve communication.
Never let the cancer of bureaucracy into your organization.
The Big Idea: focus on fundamentals and execution (The Standard of Performance), instead of focusing on the score and on the competition.
Part I: My Standard of Performance
Failure is a part of success. Everyone gets knocked down.
The Standard of Performance is the set of core values, principles, and ideals that define the organization. Implementing the Standard of Performance is more important than any strategies and tactics you might implement.
Bill Walsh wanted the 49ers to be the pinnacle of professionalism in the NFL.
Practices were precise and demanding, never sloppy.
Continuous improvement was more important than victory.
Character, intelligence, work ethic, and fit was more important than raw talent.
The leader’s job is to teach and to encourage everyone else to teach.
Champions behave like champions before they are champions.
If you place a premium on fundamentals and consistent execution, you can perform reliably in big games and in big moments.
Part II: Innovation, Planning, and Common Sense
Innovation is often born out of necessity and resourcefulness.
Always be quick to share credit (and accept blame.)
Contingency planning was one of the 49ers’ secret weapons. Be prepared for anything. Hail Mary’s are not a strategy.
Analyze your vulnerabilities and take action to counter or protect them.
The truth is hidden in the numbers. Follow key metrics more closely then big milestones or wins/losses.
Part III: Fundamentals of Leadership
There are many equally valid leadership styles.
The common trait, however, is an indomitable will to succeed.
Know when to persevere and know when to quit. It’s a delicate balance that requires distinguishing a good plan from a bad plan.
Sweat the small stuff, but only the small stuff that actually matters.
Leaders must be both subject matter experts and delegation experts.
Leaders teach others and show the entire organization how to teach each other.
You don’t need to shout, stomp, and strut to be a good leader. Joe Montana was a quiet but incredibly effective leader.
Treat people like people.
Maintain a positive atmosphere.
Know that humor has its place.
Give no VIP treatment.
Show interest in your people and their families.
Don’t let animosity linger.
Praise is more powerful than blame.
Discipline is based on pride in the profession and attention to details.
Officers must be seen on the front lines during action.
Bill Walsh’s praise was sparse but meaningful.
Employees thrive in an environment where they know exactly what is expected of them.
Don’t mistake activity for achievement. — John Wooden
Being a good listener is the key to good communication.
Don’t let rank, titles, or status impede open communication.
Leadership is about teaching skills, attitudes, and goals to the organization.
Persistence is essential because knowledge is rarely imparted on the first attempt. You must drill over and over.
Part IV: Essentials of a Winning Team
High expectations of your team are the key to winning.
Let your people know they are part of something special.
You are only as good as your people, so hire only the best.
Traits to look for in hires: skills, energy and enthusiasm, ability to spot talent, ability to communicate, loyalty to others.
How to keep people working well together: clear expectations, open communication, flexibility in method (but not core values), alignment with core values.
Be aware that success can breed over-confidence and complacency.
Place a premium on people who exhibit great desire to push themselves. (Ronnie Lott and Roger Craig)
Ego can kill an organization.
Never ignore the front-line (guys in the trenches) because they will generally pave the way to success or failure.
The most powerful way to maximize someone’s potential is to say, “I believe in you.”
There are times to sprint, but success is more like a marathon than a sprint.
You can’t teach work ethic or willpower.
Don’t waste energy on enemies.
Focus on the process, not the prize.
Make your own mentors by seeking out experts and asking questions.
Part V: Looking For Lessons in My Mirror
Jerry Rice and Joe Montana are in the Hall of Fame because of their focus on fundamentals.
The starting point for everything is work ethic.
Teach your team how to teach their team. Build an organization of teachers.
What goes around comes around. Treat people well.
Know how to delegate well.
Eliminate bad hires or toxic people quickly and compassionately.
The best marketing strategy is to build a good product.
Don’t expect quick results. Building a winning organization takes time.