Outliers

The Book of the Week is “Outliers” by Malcolm Gladwell, published in 2008. This short, repetitive yet fascinating ebook is a hodgepodge of commentaries on human nature.

The author argues that extremely successful people in specific areas of expertise, such as professional sports, computer programming, music, science and lawyering “…are invariably the beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies…” that give them a helping hand with regard to pursuing their passions. He also touches on a few peripheral topics, such as cultures of honor, plane crashes, rice paddies, education and slavery, all of which involve complex systems of teamwork and communication.

Outliers take advantage of the chances they get over the course of about a decade, or 10,000 hours, in which they hone their abilities in one area that, at the time, happens to become valued by society.  An outlier is what some business commentators refer to as a “hedgehog” rather than a “fox.” The former becomes an expert in one or two areas–  the outlier mystique; the latter gains some experience in many areas– useful in times of crisis, but never conducive to outlier status.

Gladwell names real-life examples of various celebrities, mostly Americans, explaining why their incredible achievements were attained with assistance from fate. He writes that stories about outliers are often exaggerated, failing to mention the set of lucky circumstances that led to success.

For example, the nurturing of talent of young Canadian ice hockey players is based on a biased selection process. Players are grouped in leagues by their playing abilities within age ranges determined by their birthdates. The ones who are older, even by a few months, have a statistically significant advantage in terms of size and strength. Thus, it so happens that a large percentage of players are born in January, February or March. These lucky ones are provided with a superior experience, whose success feeds on itself, called “accumulative advantage.”

The maximally successful achiever is one who is both book-smart and street-smart, as was J. Robert Oppenheimer, project manager of the atomic bomb. According to Gladwell, street-smart consists of attitudes and skills instilled by one’s family. If one happens to be born into a wealthy, nurturing family, one is much more likely to become an outlier.

Read the book to learn: 1) which countries’ students are best at math and why; 2) the reason there is an achievement gap between high-income and low-income American elementary schoolers; and 3) other interesting findings.

Inviting Disaster

The Book of the Week is “Inviting Disaster” by James R. Chiles, published in 2002. This is an ebook that describes the causes of fatal mechanical failures in aviation and industry.

Human error is always a factor. There is never just one cause. “A disaster occurs through a combination of poor maintenance, bad communication, and shortcuts.” Taking shortcuts such as omitting the testing of newly manufactured machine parts leads to improper, unsafe modification by end users.

In the stages leading up to a catastrophe, when workers realize they are in trouble, most react with intense concentration, anger at the malfunctioning equipment, fear and even panic.

Hypervigilance is a form of extreme panic with trembling hands, hyperventilation and heart palpitations; the mind blanks on what one was taught in training, and perception narrows. Often this causes people to take a course of action with the best of intentions– that makes conditions worse.

Architectural engineers must make sure buildings are designed to withstand the natural disasters that typically hit the areas where they are located. About every sixteen years, Manhattan gets hit by a hurricane that might cause, say, a particular building to collapse. That was why, shortly after it was built in 1978, the Citicorp Building had to be structurally modified at great expense. However, many deaths were likely prevented.

A common chain of events precipitates disasters in third world countries. A light manufacturing plant might be erected in a lower-class residential area. As time passes, however, the owner might want to begin making hazardous products.

Certain conditions prevail:  There is a dearth of laws governing environmental impact; the local economy would suffer if the plant couldn’t expand; the local residents enjoy living there. Over time, people become sloppy about safety.

Before lots of accidents, internal memos warning of an unsafe situation go unheeded. “The bureaucratic solution is to let the memo sit in the inbox for a while– then send it back for more explanation.” It is easier than making trouble, and in the short term, economically advantageous.

One way companies such as Boeing are checking themselves from making the same mistake twice is by continually adding to a knowledge base– confidential archives of troubleshooting reports that are actually read by designers.

Read the book to learn about other ways deadly mishaps could have been, and can be avoided.

Opium Fiend

The Book of the Week is “Opium Fiend” by Steven Martin, published in 2012. This ebook is the personal account of an opium lover living in Bangkok in the last two decades.

The San Diego-raised author, who supported his opium habit through freelance travel writing, also had a passion for collecting antique opium paraphernalia. He considered opium smoking an art form, and its equipment, works of art.

In the mid-1800’s, there were two wars between China and Britain over the lucrative trading of the drug. When China lost, she “…grew ever more addicted, corrupt, and ungovernable. To this day, China and many Chinese around the world view opium as a dastardly British trick that kept their country poor and backward long after the British opium trade had ceased.”

In the 19th-century, Christian missionaries in China produced public outcry against use of opium when they wrote of the drug’s horrible effects from addiction. Meanwhile, bigoted white Americans, seeing opium usage among blacks and Asians, were appalled that the drug  “…encouraged the mingling of different classes and races!” These days, very few people are addicted to opium due to strict drug laws, and because it is expensive and hard to find.

An opium user actually receives a high from the vapors produced from a pipe and an oil lamp with a chimney. So as to preserve the drug’s alkaloid chemical composition, the oil used is camellia, vegetable, peanut or coconut oil, rather than kerosene or alcohol.

Read the book to learn of the way the author fooled himself into thinking he was enjoying his opium-centered life, and how he beat his addiction.

The Other Side of Me

The Book of the Week is “The Other Side of Me” by Sidney Sheldon, published in 2005. This ebook is Sheldon’s autobiography.

Born Sidney Schechtel in 1917, Sheldon showed a talent for writing at an early age. However, during the Depression, he was forced to work day and night at a series of dead-end, soul-killing jobs, such as courier in a gear factory and coat-check clerk at a hotel. Sheldon was unafraid to approach strangers, and at that time, low-skilled jobs could be obtained in a simple five-minute conversation.

One day, he went to a Chicago radio station to inquire about an amateur talent contest sponsored by a band leader, and by chance, was asked to be the show’s announcer. It was then that he changed his last name to Sheldon, thinking it sounded more show business-y. His excessive talking caused the show to go fifteen seconds overtime, so he was not asked back, but from that experience, he thought he wanted to become a radio announcer.

On another day, he wrote a song with the help of his family’s spinet piano. He went to a hotel to try to sell the song. “In that year, 1936, the major hotels in the country had orchestras in their ballrooms that broadcast [on radio] coast to coast.” He was introduced to a manager at a big-name music publisher who directed him to another hotel with a better-known band leader. Perhaps naively, he never signed a written contract. His song was played and aired, but was never published. He therefore never received a penny in royalties.

Sheldon encountered many more episodes similar to the above, in which he was at the mercy of powerful people who made arbitrary decisions on the use of his creative works– Broadway musicals, screenplays and TV scripts and novels. Read the book to learn more about his bipolar disorder that had a hand in his self-doubt and despair, baseless optimism and persistence, missed opportunities, failures and successes.

How the Mighty Fall – Bonus Post

A short ebook, “How the Mighty Fall” by Jim Collins, published in 2010, presents an analysis of big, public, reputable American companies that have gone out of business, or made a major fumble but recovered.

The author and his colleague conducted extensive, comprehensive research on the reasons, across a range of dimensions. Collins writes, “We learn more by examining why a great company fell into mediocrity” than the opposite.

So as to avoid bias in how he viewed a company after its failure or recovery, Collins pored over documents in chronological order (thus remaining unaware of how a company ultimately fared until he reached the information in due time), starting well before the crisis.

Companies do need continual creative re-invention. However, “companies that change constantly but without any consistent rationale will collapse just as surely as those that change not at all.”

Collins developed a theory that there are five stages companies go through when heading for bankruptcy. The author provides examples in the histories of real-life businesses when they were being led by particular CEOs.

The difference between Wal-Mart and Ames (a competing department store chain that disappeared in 2002) is that in the late 1980’s, the former had a humble CEO who was always eager to learn. Unlike his narrow-minded peers, he met with Brazilian investors to find out about their retail culture. “Wal-Mart does not exist for the aggrandizement of its leaders.”

Collins’ data indicated a counterintuitive notion: many companies that fell were actually not resting on their laurels. They fell not because they failed to take bold action, but because they exceeded the limits of their resources in doing so. This blogger remembers Woolworth as one of those.

Another point the author conveys is that businesses that delivered cumulative returns to investors in the long term as opposed to focusing on unsustainable short-term growth to put on a show for Wall Street, became great businesses.

The author contends that another element of success is staffing a company with “the right people who accept responsibility” rather than building a bureaucratic hierarchy whose bureaucracy breeds more bureaucracy. The former bestows individual credit and blame.

Read the book to learn:

  • the stages of decline;
  • warning signs;
  • different ways management reacts to them;
  • why IBM was able to right itself by the late 1990’s from its low in 1993, while HP’s pain, starting in the late 1990’s, persisted much longer;
  • why Texas Instruments got its mojo back but Motorola did not; and
  • much more.

I’d Like to Apologize

The Book of the Week is “I’d Like to Apologize to Every Teacher I Ever Had” by Tony Danza (yes, the famous actor), published in 2012. This ebook is a personal account of Danza’s bout with trying out the profession of teaching. He taught one tenth grade English class at an inner-city Philadelphia school that allowed his trial by fire to be recorded for a reality show on the Arts and Entertainment cable channel.

This was during the 2009-2010 academic year. Danza experienced the range of extreme emotions and encountered the range of difficult issues common to modern American teachers. He does a good job impressing upon the reader how hard it is to be a high school teacher. These days, teachers have numerous pressures thrust upon them. One quote sums up the current situation: “Teachers and administrators are always worried about being fired. One complaint from a child or parent can be the end of a career.”

Danza felt he had to make learning fun because students are growing up in a society immersed in entertainment. He felt he had to go easy on disciplining students. Many of the ones he taught live in single-parent households, are the victims of abuse, abandonment, poor parenting, etc. If he did not choose his battles wisely, they might fail to see the connection between education and success in life and quit school altogether.

In addition, if teachers take students to task for minor infractions, such as wearing hoodies, using electronic devices, and even cheating– rather than fighting– “The only recourse is to… involve the dean’s office… lose precious class time…” In other words, going through all the trouble to punish problem students cheats the other students out of an education.

He saw that the teaching profession has changed for the worse significantly since he was in grade school. He noted that some parents fail to take an interest in their kids’ education, or else blame the teacher when their kids fail to do schoolwork, or are a discipline problem. One of Danza’s lessons involved a discussion of celebrities– numerous Americans are poorly educated, but are rich and famous anyway; one reason many teenagers do not see the value of education.

At every opportunity, Danza tried to teach life lessons about morals, the golden rule and empathy. The kids were less than thrilled when the school principal decided to go with them on a class field trip. Danza told the class “Make the best of a baaaaad situation.”

Danza encountered some conflicts with the reality-show crew because he was truly dedicated to teaching his kids. The producer wanted to entertain the show’s viewers.

Read the book to learn more about the above and other issues, plus standardized testing, the fate of the reality show, and whether Danza decided to return to teach the following year.

King of Capital

The Book of the Week is “King of Capital” by David Carey and John E. Morris, published in 2012.  This ebook recounts the history of leveraged buyout (“LBO” or  “private equity”) firms, mostly Blackstone Group, from the 1980’s through the first decade of the 21st century. This ebook attempts to debunk the stereotype of greedy Wall Streeters.

Back in the 1980’s, one kind of transaction or “deal” the LBO firm did, was buy out companies that were publicly traded, taking them private. It risked only a tiny amount of its own money to take ownership and take over the management, usually 5-15% of the total price. The role of the firm was to arrange financing. The management of the company (client) being bought out, was the party risking the most, and doing the buying out– borrowing a large percentage of the purchase price (leveraging) — in essence, “robbing Peter to pay Paul” with the monies raised by the LBO firm from various financial institutions.

This was where “junk bonds” came in– very risky debt instruments that carried extremely high interest rates, as much as 19%. The reason for the risk and high return, was that, in the event that the client went bankrupt, bank loans were repaid to creditors first, and if there was any money left, then much later, the junk bonds would be repaid.

According to Carey and Morris, the goal of LBO firms that were “corporate raiders” was to capitalize on the hidden value of a target’s assets that was not being reflected in its stock price. The value was there but the directors and officers of the target were too busy looting their company by throwing lavish parties at their mansions and on their yachts, and zipping around in their corporate jets.

The raiders had no interest in owning the target, but wanted to make it leaner and meaner by firing the greedy CEO’s. Then they would cash out at a profit of several times their initial investment. Over time, the targets developed strategies, such as the “poison pill” to counter the raiders. Unfortunately, “For all their talk of overhauling badly run companies, the raiders seldom demonstrated much aptitude for improving companies.” Pox on both the houses of the raiders and targets.

Buyout firms that were not corporate raiders truly wanted to own the target. “…buyout investors look for companies that produce enough cash to cover the interest on the debt needed to buy them and which also are likely to increase in value.” A major part of the job of LBO firms is to identify possible deals through extensive financial research, and then decide whether to invest in the ones predicted to succeed.

The year 1981 was a great year for LBO’s because interest rates peaked, there was an economic downturn, and stocks were down. In the autumn of 1985, two partners, Steve Schwarzman and Pete Peterson started Blackstone Group. Schwarzman said that his partnership would not be able to compete with the older, more experienced LBO firms, unless it “…brought efficiencies to a company by way of cost improvements or revenue synergies.”

The early 2000’s became a rerun of the 1980’s as financial institutions took on excessive debt loads. Fall of 2008 saw the U.S. Treasury Department and the Federal Reserve Bank raise funds to try to bail out Lehman Brothers, Merrill Lynch and AIG by calling on private equity firms like Blackstone Group to help.

Read the book to learn more about the redistribution of wealth among the wealthy over the course of three decades, and the turnover, and victories and defeats of the partners at Blackstone Group.

Just Plain Dick

The Book of the Week is “Just Plain Dick: Richard Nixon’s Checkers Speech and the ‘Rocking Socking’ Election of 1952” by Kevin Mattson, published in 2012. This ebook details the 1952 U.S. presidential election in which vice presidential candidate Nixon became more the center of attention than presidential candidate Dwight Eisenhower.

The dirt that generated bad publicity for a candidate in that election was of a slush fund of Nixon’s. When the news broke in September 1952 about Nixon’s alleged campaign finance impropriety, there was lots of hand-wringing among Eisenhower and his advisors as to whether Nixon should be dropped from the ticket.

The nature of the new medium of television– a visual, collective, simultaneous experience for a large audience– was a game-changer. It allowed Nixon to deliver directly to the American people, what turned out to be the perfect message in a way that repaired his reputation and ultimately helped him and his superior win the election.

Nixon’s emotional appeal persuaded his audience that he was a member of the middle class– not an elitist. Mention of his wife’s cloth coat and his dog struck just the right tone. To top off his speech, he skillfully initiated crowd sourcing by inviting voters to contact the Republican Party to express their opinion on whether he should withdraw from the race.

Read the book to learn the details of this memorable, fascinating episode in American political history.

Deals on the Green

The Book of the Week is “Deals on the Green” by David Rynecki, published in 2007. This ebook discusses how golf fuels business deals among the super-rich.

The author contends that the personality traits golfers need for success in golf and business include: friendliness, “imagination, tenacity, multitasking, guts, passion, and compassion…” The very act of playing golf is a major ingredient for success at many big-name companies, including GE, McGraw-Hill, J.M. Smucker, Tyson Foods, McDonald’s, Goodrich, Estee Lauder, Morgan Stanley and Johnson & Johnson. Businesspeople observe how others play the game– an indication of their character– to determine whether to do business with them.

The people who build a golf course include architects, landscapers and marketers. Many country clubs are exclusive, invitation-only kinds of places. The way “nobodies” can play on the golf courses at such clubs is to participate in fundraising events or volunteer to do menial work at them (and write big donation checks). Most of the major manufacturers of American golf equipment are located in Carlsbad, CA.

Etiquette dictates that any talk of business on the golf course should take place between the fifth and the fifteenth holes. There should be casual conversation, not an aggressive pitch.

Read the book to learn the names of people, places and equipment related to golf, and “…what really goes on when the titans of industry and finance get together” on the golf course.

Thank You For Arguing

The Book of the Week is “Thank You For Arguing” by Jay Heinrichs, published in 2007. This is a book on debating. The author teases apart the differences between arguing and fighting, and logic and rhetoric.

There are three kinds of persuasive language:  blame, values and choice. Each is of a different tense. Blame is past tense. Values depict the present. Choice talks about the future. The author advises the reader to switch tenses if an argument gets heated. The future, though, is the tense most likely to bring about peace.

People in a courtroom recount past events that involve blame. However, to get their points across, lovers and politicians should try to stick to the present and future. Two useful questions to ask when a problem crops up are, “What should we do about it?” and “How can we keep it from happening again?”

Values, which involve morals, are undebatable. The author says, “Argument’s Rule Number One:  Never debate the undebatable. Instead, focus on your goals… If you want your audience to make a choice, focus on the future.” Also, “When you argue emotionally, speak simply. People in the middle of a strong emotion rarely use elaborate speech.”

One more tip:  When one is deciding on an issue to argue, the most persuasive issue will be the broadest one. For instance, in launching a protest against consolidating two departments in a workplace, one should seize upon the issue of productivity, rather than fairness.

The author sadly concludes that universities used to teach rhetoric, but stopped doing so in the 1800’s when “…academia forgot what the liberal arts were for: to train an elite for leadership.”

Read the book to learn more debating techniques.