The Challenge Dividend

Bloomberg Tracks His Promises

(this is my 200th post - wow!)

At a time when Washington-watchers debate whether New York City Mayor Michael Bloomberg will enter the 2008 Presidential race, it is an interesting exercise to go back in time to his race for mayor in 2001 and gage how he stuck to the promises he made on that campaign trail. 

Interestingly, Bloomberg is perhaps the first elected official to actually issue a scorecard on how lived up to his campaign promises.  According to the Christian Science Monitor:

"Out of 380 promises made in 2001, Mr. Bloomberg said 80 were complete, 224 were ongoing, or just about to be started; 55 weren't yet begun, and 21 (some of which the mayor admitted turned out to be bad ideas) had experienced 'flip-flops.'"

I believe Bloomberg offers a good example of someone who has embraced Challenge Dividend thinking and is leading to both better government and better potential for winning further public office opportunities.  By publishing this scorecard, he signals that he will fulfill the promises made.  Every politician makes many, wide-ranging promises, and most voters have concluded that they are worthless.  But Bloomberg makes us re-evaluate our doubts. 

He is probably used to living with his promises as a corporate CEO.  The stock market and business partners frown on broken promises, and end up punishing those who violate shareholders trust. 

Time will tell if Bloomberg dives into the 2008 race - here's hoping he has given an idea to our nation's next president.

Mixing Boys and Girls Improves Results

Ahh, back to school time is here again and the parents are doing high-fives.  It's a classic but true cliche - and my household is no different.  We've exhausted all the camps and projects, and the temperature is too hot to kick the kids outside.  But Tuesday in our home is the start of the new school year for my daughters, and everyone is excited.

One extra reason to be excited is a new piece of research that shows a significant increase in the proportion of girls in school leads to a significant improvement in all students' cognitive outcomes.  The paper, by Victor Lavy and Analia Schlosser, titled "Mechanisms and Impacts of Gender Peer Effects at School," is good reason to be a proud father of two daughters (that are adorable, per Grace, reading over my shoulder as I type...).  The Abstract of the paper summarizes the takeaways:

"Our results suggest that an increase in the proportion of girls leads to a significant improvement in students' cognitive outcomes. The estimated effects are of similar magnitude for boys and girls. As important mechanisms, we find that a higher proportion of female peers lowers the level of classroom disruption and violence, improves inter-student and student-teacher relationships as well as students' overall satisfaction in school, and lessens teachers' fatigue. We find, however, no effect on individual behavior of boys or girls, which suggests that the positive peer effects of girls on classroom environment are due mostly to compositional change, namely due to having more girls in the classroom and not due to improved behavior of peers."

So mixing boys and girls improves learning, because girls bring diversity and calm to an all-boy environment.  In a way, this is exactly what I suggested last year in a blog post titled "Women Challenging Men...Great!"  My belief then - which is backed by this research now - is that households and entire nations are better off when there is equality in the number and power of both women and men. 

I believe Western society has improved and advanced because of this trend.  Meanwhile, the Middle East suffers without strong women keeping their husbands in check. 

So when you drop off your daughters at school this month - be extra proud that they are helping make everyone smarter!

(thanks Marginal Revolution for the find)

Follow the Serial Entrepreneur

The theme of this blog is that challenge drive improvement - and the opposite, that lack of challenge leads to lethargy or failure.  Given this theory, I have always believed that the entrepreneur who strikes it rich will tend to relax and work less.  With a bunch of money in the bank there is less incentive or pressure to keep working long hours and dealing with the hassles of a small business.  But for some reason, a certain group of small business owners keeps getting back into the game with just as much - if not more - success.  The Wall Street Journal calls them "Serial Entrepreneurs" or "Serial-Preneurs".

Professor Wayne Stewart of Clemson University surveyed 664 entrepreneurs, finding that 12% had owned and operated three or more businesses.  Professor Stewart found that this core group has three characteristics in common: high propensity for risk, innovation and achievement.  They are also less scared of failure, and more able to recover when they did.

So why do they keep it up?  Why take on the risk of a new venture - and succeed - when one could be sipping tropical drinks or becoming a scratch golfer?  The simple fact is that Serial-Preneurs are not motivated by money or luxury; instead, they are personally challenged by the act of creation. Their challenge lies in the journey itself - not the pot of gold at the end.

One example is Scott Jones, a multi-millionaire by age 30 after selling Boston Technology, a maker of a voicemail system used by countless corporations.  Jones retired and took flying lessons but quickly grew bored - calling this time "the most unhappy years of my life."  So he went back to starting companies, co-founding music service Gracenote, a robotic lawnmower company, and a search engine company that uses human guides.

To be clear, there are other reasons that success in starting businesses may actually be easier the second, third or fourth time around.  Factors include access to investors, a track record of success that engenders trust, and a team of employees that may follow you to the next outpost.

Whatever the reason for their success, the rise of Serial-Preneurs shows one of the bright spots of our country and economy.  Our free markets provide the playing field for business creators to achieve their dream, and we citizens benefit through better products and services - again, and again, and again...

Tracking Your Hiring Batting Average

I know from personal experience that one of the biggest challenges of growing a company is the ability to bring in new employees that perform well and fit culturally.  I probably spend at least half of my time as a company leader dealing with personnel matters - things like interviewing, staff planning, teaching, onboarding and coaching.  Unfortunately, in today's fast-moving economy and for me specifically in the world of client service, new folks must hit the ground running from day one. 

Net, we're constantly looking for ways to get the best talent possible.  So last week I was intrigued to read a question in BusinessWeek's "Ask Jack and Suzy Welch" column:

"My company will double in size over the next year, which means we need to bring on lots of employees (as in hundreds) very quickly. Hiring is hard enough at a normal pace. Any suggestion on getting it right going so fast?"

In answering the question, the Welch's introduce the idea of using a Hiring Batting Average in order to gage interviewers' ability to make the right call on hiring.  It works like this:

• Every job candidate must interview with at least three people besides the hiring manager.
• Each interviewer submits a "Hire" or "Don't Hire" vote, along with other traditional feedback.
• After six months, each new hire is rated on Below, Meeting or Exceeding expectations. 
• HR goes back and compares these results with each interviewer's feedback to calculate a Hiring Batting Average (HBA).
• For example: "a manager named Emily has approved 10 candidates and, six months out, eight of them are performing at or above expectations.  Emily's HBA would be .800."  Emily should be trusted as a great evaluator of talent for the organization.

The HBA becomes a way to actually measure effectiveness of interviewers, and getting a higher score becomes a challenge that helps companies improve.  First, the company is able to uncover who is best at picking talent.  Second, those that score poorly get some feedback that they need to improve - and their managers can coach accordingly.  Third, the score helps motivate interviewers to focus their attention on each candidate - either as a personal motivator to max out the score or a reminder that this is an important part of the job.  The Welches throw in a final benefit: the interviewer has some incentive to check on and help out a new hire that he or she recommended.

Of course the HBA shouldn't be taken too seriously.  One could game the system by making a lot of "no" votes, and the handful of hires that each interviewer may see makes it difficult to get enough input to generate a fair score.  But a little extra effort on an HBA could go a long way.  HR is already tracking similar data, so calculating the score should be a breeze.  And a company could even add further motivation like an extra day of vacation for the best HBA over the course of a year.

In the end, when your company's number one asset is people, steps like an HBA could be the small challenges that lead to huge improvements. 

Olympic Effort to Reduce Pollution in China

With a year to go to the next Olympics, news stories frequently cover the progress in stadium and other infrastructure construction.  Recall that in Athens in 2004, workers were tightening the bolts on buildings as the stadium torch was being lit.  But with a year to go for the 2008 games in Beijing, the screws are tightening on China's ability to clean up its air quality.  China fought to win the games in order to use it as a platform to highlight its arrival on the modern world stage.  But another result of its modernity - severe pollution - threatens to dampen Brand China.

Wired magazine's August issue featured the story of China's herculean effort to reduce pollution in Beijing.  The negatives are starting to pile up as China continues its torrid growth pace and citizens of the world are increasingly concerned about global warming and the environment overall.  Beijing has 15 million people and 2 million cars - and both numbers are growing rapidly.  August is the hottest month and has the least air-clearing wind.  The result: growing fear of health issues.  Some teams will likely stay in South Korea and fly into Beijing at the last minute to avoid as much bad air as possible.  Others will wear face masks.

But China's government continues to use the Olympics as a change driver for Beijing and the surrounding countryside.  It has installed the latest generation of clean-coal plant technology, and shut down the worst factories and power plants. 

Such efforts would be unthinkable during the Cold War years - as Wired reporter Spencer Reiss writes:

"Once upon a time, staging the Olympics in Beijing would have been much easier: Build some big stadiums, fill them with loyal party members, keep the foreign guests well fed, and declare victory. But successful cleanups in other developed cities have raised expectations. China wants to take its place as a world leader, not just the new heavyweight champ of carbon emissions. Scenes of marathoners in gas masks, beamed around the world, would be a PR disaster that no amount of glossy Bird's Nest blimp shots could offset."

By committing to the national stage of the Olympics, China has assumed a massive challenge.  The good news is that even a year before the event, this challenge is driving some short and long-term improvement in China's environment. 

Who would have thought in 1896 or 776 BC that the Olympics would not only offer a challenge for individual athletes, but for national governments as well.

Money Management Camp for Rich Kids

As regular readers know, one of my pet issues is my fear that children who inherit fortunes will fail to learn the life lessons of the Challenge Dividend.  They will tend to squander their money and, as people, end up worse off than if the money was missing.  That's the main reason why Warren Buffett and I are big supporters of the Estate Tax (see prev entries here and here).

This week I discovered more proof of this issue via the story of a "Financial Skills Retreat" aimed at teaching rich kids money management skills.  Last year reporter Robert Frank spent three days at such a camp, which was attended by a range of children of the wealthy.  Most of the parents had come up from the middle class to earn their fortunes, but have grown worried that their kids lack the same discipline and work ethic.  At the camp kids learned how to pay their own credit card bills and how to buy and sell stocks.

The market for such financial skills classes is growing in step with the number of wealthy households.  There are over 1.4 million households worth over $5 million today; and more than $30 trillion will be passed down to the children of millionaires and billionaires between 2002 and 2052, according to a study by the Boston College Social Welfare Research Institute.

At first, reporter Robert Frank worried that such classes were yet another way for rich kids to get an advantage over the rest.  But after three days he became convinced that these kids would pose little threat:

"Today's rich kids may be cash-rich, but many are skills-poor, with little chance of growing their wealth or landing top jobs. Raised in a bubble of privilege and insulated from the competitive pressures of the everyday world, many tend to have low self-confidence, little drive and few of the necessary tools to succeed in today's global economy.

"In the end, I concluded that these kids wouldn't be tomorrow's chief executives and billionaire entrepreneurs. Most would probably drift through life spending their parents' money and hoping it would last. Tomorrow's economic superstars will more likely come from the striving middle class, just as they have for much of American history.

"And all that inherited wealth will wind up going to people who actually earned it -- an encouraging sign for those of us worried about the wealth gap."

Frank's perspective definitely makes me feel less concerned that non-rich children will have less opportunities because of the children of the rich.  However, it makes me more concerned for a generation of kids that "have it all" yet fail to develop into productive and successful individuals.  Many will be cursed by the wealth their parents worked so hard to attain. 

It is a story consistent with what we see in oil-rich states today, and explained by the fact that lack of challenge limits improvement.

Google Driving More Competitive Wireless

There has been an interesting drama playing out over the past two weeks set around an upcoming auction by the federal government for new wireless spectrum.  Just as Google has brought competition and improvement to the Web, it is now fighting to break up monopolies and bring better consumer service to the wireless telephone and data market.  It's just another reason to love Google.

The Federal Communications Commission (FCC) has been gathering industry input as it prepares to auction off the 700 megahertz spectrum for wireless services.  This band of the spectrum is considered "the last beach-front real estate"; and with the growth in consumer demand for wireless, the government expects at least $15 billion when the auction takes place in January 2008.  The large and shrinking group of existing wireless carriers are expected to bid heavily, but new companies to the wireless field are using this auction to drive change at the FCC.

Google in particular has been leading the charge.  It is toying with bidding for spectrum that it can use to offer new services of its own - while avoiding the need to go through AT&T or Verizon.  Google has been holding its billions in cash has bait for the FCC while lobbying for the government organization to amend its rules to increase competition.  Google, along with consumer lobbying groups, wants the government to:

• Allow consumers to connect to the wireless service with any type of software or hardware.  Currently, the wireless carriers only certain devices and programs - of course those that pay them the most.
• Force wireless spectrum holders to sell access to any 3rd party.  This would essentially force them to provide a playing field for competitors.

Two weeks ago the FCC handed Google and consumer groups a partial victory.  It agreed to allow any hardware/software but not to force open access.

Time will tell if Google will enter the market and whether we will see a surge in innovation, but analysts are positive so far.  While the past 10 years has brought relatively little innovation (compare ring tones to how the Internet has improved in the same time), hungry and smart competition from companies like Google should shake up the market.  Their entry will force oligopolies like AT&T and Verizon to improve - or lose.

I also like that the government used its power to license frequencies in a way that is pro-consumer.  First, an open, competitive auction helps ensure that the American people get some payment for the frequency they own.  Second, by establishing rules that encourage a more competitive, more innovative market, the FCC is helping challenge dividend dynamics take hold. 

Forget the iPhone, I'm ready for my Goog-phone.

Linking Car Insurance and Credit Scores

The Marginal Revolution economist blog poses an interesting discussion topic - it seems that some states have outlawed insurance companies' use of credit scores in setting auto coverage rates.  The reasoning is that this is unfair to African-Americans and Hispanics who tend to have worse credit scores and thus pay higher rates.  At first glance this seems to be a fair law - but thinking further leads to interesting issues:

• Insurance companies need ways to predict likelihood of an accident among current and prospective policyholders.  They cannot predict the future or take thorough analysis of each individual, so they look for information short-cuts that allow them to make the best possible guesses.
• There is a proven, significant statistical link between credit scores and accident rates.  This is a "racially blind" statistic. 
• When the government makes this important information off-limits, insurance companies must move to more of an "average" rate in which safe drivers subsidize unsafe drivers.  Prices go up for safer drivers.
• It also begins a slippery slope when other interest groups weigh in on perceived unfairness.  Isn't it "unfair" for all 20-year-olds to be punished with higher rates?  Why is it that single people pay more than married people?

I believe this is a clear example of government getting in the way of challenge dividend effects.  By removing measures that reward good behavior and punish bad behavior there is less incentive for safer drivers.  The racial link has nothing to do with behavior on either credit scores or insurance rates.  The only way this would be possible (and clearly unfair) would be if the rates were set by applicants race - i.e. if you automatically got dinged because of what you put on the "Race" box of the form. 

The real issue we need to fix is the number of people who grow up in poor neighborhoods and without positive role models.  Growing up with these challenges snares too many people - and tends to hit African-Americans and Hispanics harder, which leads to worse driving records and credit scores. 

Instead of hiding the issue under the carpet with feel-good legislation that weakens market effects, our government and we citizens should focus on figuring out how to address the core issue of kids growing up in environments that limit their opportunities throughout life.

Breaking Down Brainstorming

Have you ever been in a meeting where open brainstorming is encouraged and any attempt to kill ideas is denied?  If you're like me, this kind of meeting is infuriating.  Thankfully, I'm not the only jerk out there.  Todd Copilevitz at the Advertising Ourselves to Death blog makes a great point that wide open brainstorming encourages failure.

Todd, like me, is a leader at an interactive advertising agency.  He calls his process "Full-Contact Brainstorming" and makes several good points:

• "Brainstorming is all too often an excuse for a half dozen people to bill time to a job without bringing anything meaningful to the mix. Even worse they want to be coddled for the effort."
• "If you are in a brainstorming meeting, you damn well better bring your A game. That means having at least one kick ass idea. Further, once you toss out your idea there is no back peddling. You are obliged to defend it in the face of all fire until such time as it succeeds or needs to be buried."
• "You're sitting in that room because a client believes you have lots of good ideas that will improve their business. Their career is on the line. Weak ideas are going to get them fired. Half-baked, pie-in-the-sky crap will get them flushed out of a career. If you don't feel the urgency then you have no business  at the table."
• "I can't understate the value of finding someone who can call bullshit to your face and expects you to do the same back for them."
• "A good friend once called it the battle to be the smartest person in the room. I call it a requirement of a successful agency."

Todd's approach is great guidance for those of us trying to wring the next killer idea out of a group of people.  It is also an approach that is completely consistent with The Challenge Dividend theory - by encouraging a challenging atmosphere team members are better prepared, they pressure themselves to create better ideas, and they ensure that on the the cream rises to the top. 

With the marketing landscape undergoing a revolution and both client and agency jobs on the line, there is no time for group hugs and every idea equally weighted.   By looking at each meeting as an opportunity for Challenge Dividend dynamics, we just might crack the code - and improve our thinking skills along the way.

Seinfeld's Productivity Challenge - UPDATED

There is a neat story over at the Lifehacker blog that is getting a ton of buzz.  Jerry Seinfeld reveals his secret to staying productive. 

Seinfeld's personal philosophy is that "the way to be a better comic is to create better jokes and the way to create better jokes is to write every day."  But he needed a way to challenge himself to write every single day, and ended up with a pretty neat approach:

"Get a big wall calendar that has a whole year on one page and hang it on a prominent wall. The next step was to get a big red magic marker.

He said for each day that I do my task of writing, I get to put a big red X over that day. "After a few days you'll have a chain. Just keep at it and the chain will grow longer every day. You'll like seeing that chain, especially when you get a few weeks under your belt. Your only job next is to not break the chain."

"Don't break the chain." He said again for emphasis."

I love the dual use of challenge to drive personal improvement: (1) setting the goal of writing every day; and (2) using a tool to keep the pressure on.  Most self-help programs focus on step one, or setting the commitment.  I like the added focus on making it a daily exercise that combines the pinch of pride in seeing a chain of accomplishment - along with the guilt pressure to keep it going.

I'm already looking for ways to use this in my own life.  And, as you would expect on the Internet, there are already many free or low-cost tools that allow you to set up personal reminders like what Jerry uses.

UPDATE: Thanks to regular reader, Jonathan, for linking to a very cool/easy web-based "Seinfeldian Chain".