Playbooks + Pattern recognition.(John Chambers)

When I saw that Patrick O’Shaughnessy had posted an interview with John Chambers last week, I rushed to listen. The following quote contains a number of gems which I will continue to mine.

When Chambers uses the term “pattern recognition” and explains the concept, it’s so much more coherent than the latest BI and data science geek speak.

And when Chambers mentions “[seeing] the patterns so accurately… for 40 quarters in a row” the whole concept of “engineering growth” comes to mind, especially regarding the implications of a public company that can successfully and near-perfectly engineer growth over long time horizons. Cisco’s case reminds me of what I learned about Netflix’s growth levers, and Enron’s artificially engineered growth.

John Chambers was the CEO of Cisco from 1995 to 2015 where he helped grow Cisco from $70 million to $40 billion in annual revenue.


Begin quote (via Invest Like The Best)

Pattern recognition defers to the numbers. [It’s] the ability to be able to see the patterns based upon how an order rate went in a given day of any month, in a given week of any month [or] quarter, of a given quarter in a year—and to see the patterns so accurately that for 40 quarters in a row, we not only didn’t miss… we were plus or minus, always at the midpoint or above in the range of the market. [And that’s] even though eighty percent of our business was new every quarter. So we not only hit our year forecast, [but] we hit the quarter forecast, always at the number, usually 2 cents [per share] above…

…it was that pattern recognition that allowed us to spend money during the quarter and be able to develop in ways that others did not. [It was] pattern recognition that [enabled us so that] if there was a problem or an opportunity, we saw it at the very beginning, which we could then adjust appropriately to.

But it wasn’t just at the top, it was all the way empowered down through the various engineering and sales arms. They were able to see the numbers so accurately. [And] they knew what they needed to change and correct ahead of time on it.

So that pattern recognition is so key. The pattern recognition has always been driven by customers… I get an idea about a market transition enabled by a new technology and then I go straight to customers and say, “what do you think?”

[It’s the] pattern recognition amplified by listening to the right customers at the right time, on what they think, either on the issue or the company, [that] allowed us to do 180 acquisitions with the highest track record… in the hi-tech industry… we were a machine on acquiring [companies]…

We ran playbooks on everything that we did, from acquisitions to being [number] one or two in a product category, to how you digitize a country, etc., in terms of direction.

It is that pattern recognition [which is] then put into playbooks that allows [you as a company] to move at a speed that others can not.

A simple issue: Playbooks. Pattern recognition. Then replicating that pattern much like a great sports team… [for example, the] Warriors team that passes 130 times per game, which is more than anybody has ever done in history, and wins 98% of the games when they pass 130 times…

Watching the patterns, then replicate it and playing it through, and being able to tell those stories again of what works and why it’s applicable.”

End quote

One act at a time. (Jonathan Sacks)

News of Rabbi Lord Jonathan Sacks’ passing hit me pretty hard. I had met the man only once, yet through his teachings I felt so close to him. I’ve been reading his book, Lessons in Leadership, once a week for almost a year. I listened to many of his audio classes and interviews, especially enjoying his appearances in secular mediums, like his recent interview with Tim Ferriss.

It’s not difficult to describe why I am so attracted to Rabbi Sacks’ teachings. He was, in my opinion, a great rabbinic leader who made Torah accessible. His ability to dance between biblical sources, academic references, and business lessons was supremely attractive to my modes of thinking, learning, and perceiving the world around me. My worldview was and will continue to be heavily influenced by his work.

Source: rabbisacks.org

I hope that I can play some small part in contributing to Rabbi Sacks’ legacy, which I believe is to embody a fusion of both the Torah of the Jewish people and the wisdom of the world, in thought, speech and action.

The following is a powerful leadership quote from Rabbi Sacks’ essay on this week’s Torah portion, Ḥayei Sara, from his book, Lessons in Leadership:

“Perhaps….the most important point of [parashat Ḥayei Sara] is that large promises—a land, countless children—become real through small beginnings. Leaders begin with an envisioned future, but they also know that there is a long journey between here and there; we can only reach it one act at a time, one day at a time. There is no miraculous shortcut—and if there were, it would not help.”

This quote is apropos to so many current events in the world, as well as past and current events in my own life. And it resonates with me in an especially deep way as it connects to my current work with entrepreneurs on the theme of “growth”.

My name, Etan, in Hebrew is spelled איתן (spelled Alef – yud – tav – nun). Also, איתן was one of Abraham’s names. As I learned from Rabbi Moshe Schlass years ago on the streets of Jerusalem’s old city, the letters of my name represent the beginnings of future tense conjugations of Hebrew words:

  • א (Alef) = I will be…
  • י (Yud) = He/She will be…
  • ת (Tav) = You will be…
  • ן (Nun) = We will be…

Back to the Sacks’ quote and the theme of growth—we don’t know where tomorrow’s blessing will come from. Predictive data models based on past performance can take us only so far when it comes to estimating new revenue, customers, or other metrics we are tracking (and working to get more of) in a business.

The smartest data scientists, economists, and analysts will tell you the sameprediction isn’t perfect. With the current rise of AI, better prediction is becoming cheaper, but it’s still prediction, which is and will always be imperfect. I’m bringing up prediction here because I often see businesses fall into the trap of putting the “prediction work” (aka business intelligence, forecasting, etc.) in the category of “execution”. I believe that “prediction work” should be bucketed as “vision” (and not “execution”).

Great entrepreneurs and investors know that even the best ideas are free, and without execution they are worthless. You don’t know; you can’t know what will happen tomorrow, next month, next year, next decade, etc.

What Sacks is teaching us through the story of Abraham, is that we need both vision and day-to-day action, and further, we need to understand which is which, and which is real at any given moment. We can emphasize maintaining a strong and clear vision, putting the actual work in, embracing uncertainty and obstacles, and be ready to receive blessing whenever it comes.

A point of view spreads. (Jason Fried)

I’ve been following Jason Fried and his unconventional business wisdom for years, via his books like Rework, and Remote: Office Not Required (published 7 years before coronavirus was a thing!). I enjoyed this bit from his recent interview with Kara Swisher, where he talks about what I’ll call mission-driven business-building.

Instead of asking, “what products can we develop to generate profits”, and later trying to incorporate sustainability and mission, Fried takes the reverse approach. He and his team at Basecamp, and now their new ambitious email service Hey.com, give the impression that their values permeate who they are, what they stand for, and everything that they do as a company.

This idea also touches on the rising trend of new open-sourcing models as a distribution method.


I think [you can have a significant impact as an entrepreneur] is… about igniting a bunch of different fires. For example… [at hey.com] we’re going to open-source part of our tool. We put together a list of 40 or 50 services that track people… and are making that available on GitHub [so that] other people can add to that list.

If this feature ends up in 12 other products, wonderful.

We don’t have to dominate the world to have this [feature] spread. [It’s] the same thing with ideas.

As a small company we [at Basecamp] have had a very big impact on the industry. We’re a small company, but we have ideas and a point of view, and that spreads. And other people then pick up that point of view and maybe some adopt it, maybe some change it, maybe some reject it. But it gets spread, and it gets spread in other areas. And then those things happen.

It’s like seeds blowing in the wind… it’s not about one seed. You’ve got to seed ideas. And then the world will go with what is better.

But you have to provide an alternative to [products seeking global domination.

And if our impact is [only] 100,000 customers who are paying us for Hey, or 50,000 businesses that pay us for Hey… but it shines a spotlight on the ideas that have, the concepts that we have, and the point of view that we have… and other things sprout up because of that… that’s how you really change things versus going out and trying to dominate the world.

Enthusiasm is as contagious as a virus

My great aunt Marlene always told me that “enthusiasm is as contagious as a virus”. She would tell me this before job interviews, and other new life starts, complimenting me about how I knew how to “light up a room”. And in every situation that I’ve tested it, that advice has always proven to hold true.

The irony is, I realize now that I never fully internalized what “contagious as a virus” really meant. Growing up, I learned the basics, like covering your mouth when you sneeze to avoid the spread of germs… and I’ve taken my fair share of sick days over the years, having caught contagious viruses over the years. But now with the outbreak of the global pandemic COVID-19 coronavirus, the world (and I) are learning just how contagious some viruses can be, and I’m re-learning just how powerful enthusiasm can be.

Finish strong.

When I first heard this idea, I was attracted to it like a mosquito to blue light. Then it kept coming up again and again. What’s the idea?

Whatever it is that you’re doing, finish strong.


Here’s Josh Waitzkin, author of The Art of Learning: A Journey in the Pursuit of Excellence:

Back in the day I had some fun days skiing with Billy Kidd who was a brilliant Olympic champion many decades ago and he asked me what [I thought to be] the three most important turns of a ski run… Most people will think it’s the middle, where it’s the most intense and most speed, or the beginning to get your rhythm. He talks about the last three turns before you get on the lift, where most people are sloppy and they lift up; their body mechanic relaxes…

The thing is, the last three turns are what you’re going to be internalizing unconsciously on the lift ride up.

It’s [been] true with martial arts training my whole life; always finishing strong; always executing a technique very well… so that the last thing you do, it’s what’s going to burn into you most deeply overnight. Harnessing unconscious learning is a huge part of what I do, and what I train people to do.

Source


And here’s Jim Collins discussing the same concept, as the final story in his bestseller Good to Great: Why Some Companies Make the Leap…and Others Don’t:

The coaching staff of a high school cross-country running team recently got together for dinner after winning its second state championship in two years. The program had been transformed in the previous five years from good (top twenty in the state) to great (consistent contenders for the state championship, on both the boys’ and girls’ teams)…

One of the coaches [explained]… “We don’t work harder than any of the other teams. And what we do is just so simple. Why does it work?”

We run the best at the end. We run the best at the end of workouts. We run the best at the end of races. And we run the best at the end of the season, when it counts the most. Everything is geared towards this simple idea, and the coaching staff knows how to create this effect better than any other team in the state.

Raise your prices.

Here’s a piece of advice from a16z’s Marc Andreesen:


People just literally need to raise prices.

you can get a much higher level of engagement and stickiness and actual use of your product if you charge more.


The good news is that you have all these new founders with many different backgrounds… Many of them have never run companies or sales forces before. And so they have these extremely sophisticated views on things like products and design and engineering, and I think in some cases relatively naive views on how to actually prosecute a campaign to be able to get the world to use your product… 

The temptation we see from many founders is what I call a one-dimensional view of the relationship between price and volume, which is if I price my product cheap, then I sell more of it. Because the assumption is that people just make purchase decisions based on cost and so as you drive down prices you drive up volume. And by the way, a lot of the history of the tech industry, like the chip industry is that [when you] drive down prices you drive up volume.

But a lot of startups really suffer from having that view.

Instead, we encourage companies to adopt what I call the two-dimensional view, which is that there are a couple of advantages of raising prices. 

  1. If you raise prices, you can afford a bigger sales and marketing effort. A lot of companies have prices that are actually too low to be able to mount the kind of sales and marketing campaign required to get people ever actually to buy the product . I call this the “too hungry to eat problem”: I’m not selling enough; but I’m not selling enough because I don’t have the sales and marketing coverage required to actually get the product out there; and I don’t have that because I’m charging too little; and as a consequence I’m not selling any (despite my low prices).
  2. The other really interesting thing is that for a very large number of products, it turns out if you charge higher prices the customers take the product more seriously. They impute more value into it when they’re making their purchase decision and then once they purchase they’ve made a bigger commitment to it. And in particular, anybody selling anything into businesses, businesses will take something that they had to pay a lot of money for a lot more seriously than something they didn’t have to pay much money for. So you can get a much higher level of engagement and stickiness and actual use of your product if you charge more.

Source

Being still is uncomfortable.

Sadie Lincoln, co-founder and CEO of Barre3 talks about why she doesn’t want to grow her business.

I’m actually not focused on growing bigger anymore with the company. We’ve paused franchising for now. We’re just holding. We’re being still. And we’re being uncomfortable and still. Being still is uncomfortable. It’s very analogous to [being] in class, or when you try to meditate… it’s hard.

It’s hard to be still because it’s a real inner mirror thing. You have to check in and see things. So if you look at a company as a person, we’ve decided to meditate for a moment

We started to be courted by a lot of institutional bankers. Pure Barre (a comp) was sold for $121 million… and the story we kept hearing is “who’s gonna be number 2?… and you can be valued at a gazillion dollars”… so we started to entertain a bunch of conversations.

There’s lots of choice out there.

And I kind of feel like I want to be a bit of a rebel

I just want to protect what I have, versus “make it giant” and I want to show the business community that you can do it that way.

There’s not that many people saying that in the business community. The value of not growing. The value of not selling.

Source

The most important people traits

Patrick Collison, the co-founder of Stripe, explains what he’s actively trying to achieve with the culture at Stripe:

…there are a few things that we really prize and try to seek in the people we hire:

First, a kind of rigor and clarity of thought. So many organizations prize smoothness in interactions and try to reduce or minimize the number of ruffled feathers. And they at least inadvertently, if not deliberately, prefer cohesion over correctness, and we really try to identify people who are seeking correctness and who don’t mind being wrong and who are willing to at least contemplate things that seem improbable or surprising if true or really divergent [from] that which is the generally accepted status quo…we look for that combination of openness and rigor.

a determination and competitiveness, and I guess willfulness, in that… doing anything of significance is hard. Anyone who’s tried to do anything that they themselves considered significant knows that very viscerally. And especially for a startup, the default outcome is your relatively near-term non-existence. The default outcome is that you do not survive; and to survive over the medium or, even with more difficulty, over the long term, that is like an unnatural act. And so you need to find people who not just are willing to push against the expected trajectory of non-existence, but people who actually enjoy that, who want that. Because if they’re merely willing to do it but they don’t actually enjoy it, then the work is probably going to be less fulfilling for them over the medium term.

And I really don’t think that is for everyone and I don’t think that’s a bad thing. The cliché, of course, is that startups are extraordinarily hard, and they just are. You want somebody who is at a stage in their life where that’s the kind of challenge they want, where the fact that the particular area in which they’re going to be working is undefined or significantly under-built-out or significantly broken or whatever the case might be, that that’s what they’re looking for.

And then we try to find people who just have… interpersonal warmth and a desire to make others around them better and just a degree of caring for others and a desire to be, nice is kind of an anodyne word, but to be nice to them and to make them better off. We really try to find people who you just actively enjoy spending time with.

You spend such a large fraction of your life inside the walls and under the roof of whatever organization [or] institution you’re working at, and so, given that I really think it’s worth prioritizing this and I think, I of course don’t know for sure, but I think we go to some greater lengths to find these people than other organizations tend to do. There’s other things as well. It almost goes without saying, but we really care a great deal about ethics and integrity and people, but I think so too do a lot of other organizations.

I think the three that really stand out to me are this rigor and clarity of thought, this hunger, appetite, willfulness, determination, and this … warmth and desire to make people around them better off.

Source