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Why Africa (& the world) should reject Gladwell’s “Outliers”

/in /by

Victimology doesn’t work.

I read Malcolm Gladwell’s book”Outliers” while in the poorest part of the poorest country on earth. Gladwell’s theory of success will not help Africa, or you. It’s actually dangerous to those who CHOOSE to live a life of significance.

Circumstances don’t make me who I am. How I respond to them does.

Gladwell disagrees. He says circumstances are largely to blame (or credit) for who I am.

Never has a book engendered such a reaction from me to make me review it. I don’t review books. I use them to change who I am, or discard them as interesting (entertaining, but not transformational) or not interesting. I loved Gladwell’s Tipping Point and use it regularly in my work and life.

But Outliers is not just “interesting”. For those who choose to embrace it, it could be a transformational compendium of victimology that gives excuse after excuse for not choosing to live a life of significance.

If it was by an obscure author it could be ignored. But because Gladwell has laid such a great foundational reputation with his other works, people have bought into this without critiquing it. Many people loved it and recommended it to me, which is how I read all my books. I was very disappointed by what I read. I hope you are, too.

Which 90/10 Rule Do You Live By?
My belief is that 90% of life is what you make happen and 10% is what happens to you. And you have two possible responses to the 10%: 1) Fascinating! How’d that happen? Let’s make lemonade! and 2) I’m a victim of my circumstances, background, legacy, great grandmother, the Duke of Wellington, Atilla the Hun or some outside dark force that rules over me.

Gladwell apparently believes 90% of life is what happens to you and 10% is what you make happen. And for the 90% that happens to you, he subscribes to ONLY response #2 – you’re a victim. Poor babies. You should lay down and die. Give up. It’s understandable. You had an ancestor 300 years ago that made a bad decision or was unlucky, or you were living in poverty, and you’re never going to live it down.

And if you’re successful, Gladwell says you also didn’t have nearly as much to do with it as you think. It’s luck, circumstance, legacy, the Duke of Wellington, Attila the Hun and a thousand other things outside you that nearly pushed you unwillingly over the edge of success. You nearly had no choice but to live the life of Riley.

I say CHOICE is 90% of the formula for success. Gladwell says CIRCUMSTANCE is…50%? 90%?. I say a difficult background makes you even more successful if you CHOOSE to respond to it well. You’ll be stronger than most. Gladwell says hardship makes it very unlikely you can succeed – it’s almost not your choice at all. In Gladwell’s world, hardship and a lousy background aren’t sources of fertile ground for building a unique and wonderfully powerfully story for you. They’re something to get over, if you can. Good luck with that.

Lies, Damnable Lies, and Statistics
Disraeli said there are three kinds of lies: “Lies, damnable lies, and statistics.” Here are some of Gladwells:

1) He cites Roseto, PA as “proof” that where you are FROM has more to do with success (health, lower crime, suicide, etc.) than your choices. Then he ignores the research that shows the reason the town was so healthy was exactly because of their 1) choice to live in close knit relationships, 2) choice to be spiritual, 3) choice to live by fundamentally sound values, 4) choice to respect elders, etc. Even the town they came FROM in Italy and others from that town that didn’t CHOOSE to live like the Rosetans didn’t have the same health and crime. The Rosetan’s CHOICES made them who they were, not where they are from.

2) He cites Canadian Junior Hockey stats showing 40% of the 10 yr. old all-stars were born Jan-Mar, 30% April-June, and only 10% Oct.-Dec. The age cutoff is Jan 1 so those kids born early in the year are playing against younger kids and get chosen to go through to the all-stars, even though they’re not better, just older (therefore appear better when chosen as all-stars). He wants a separate league for the poor babies born June-Dec. Get over it.

I won the city batting championship three years in a row in Pony League w/ a left-handed batting average of .555 and an on-base % of .695. I could draw a walk as easy as getting a hit. As the youngest and smallest tenth grader at high school baseball tryouts I was cut without swinging a bat. The uninformed coach lined us up by height and cut the bottom five in the first five minutes of practice. He was looking for football players for the fall. I was easily the fastest center fielder and the best hitter there (and a prized left-hander), and when I filled out to 6’ 1″+ a few years later it turned out I might have been a pro prospect. Wah, wah, wah. Life is not fair. Michael Jordan was cut from ninth grade basketball. He CHOSE to not give up. I CHOSE to give up and do something else. It’s about choice.

Apparently pro hockey players agree. The 40% born in Jan-Mar in kid hockey is reduced to 31% in the pros, and the 10% Oct-Dec. is doubled to 20%, just five percentage points below “fair”. An awful lot of those poor babies who didn’t make the All Star teams first time around CHOSE to not give up. Life isn’t fair, nor should it be. We would lose all our drive to succeed. Gladwell didn’t show us the pro stats. Because they demonstrate that circumstances don’t make me who I am. How I respond, does. Choice.

3) To debunk the ridiculously over-worked role of talent, Gladwell says it takes 10,000 hours to succeed – that at the highest level, work is more important than talent. I couldn’t agree more, except that having correctly correlated success more with hard work (choice) than with talent, this debunks most of the rest of his victimology as well. I have a choice to succeed. Working my tail off is the biggest part of that, and that is a choice.

4) He also correctly debunks the role of “genius” by showing many smart people don’t make it. I couldn’t agree more, but the reason isn’t because of their background. It’s because of their choices. He actually gives the smartest man in the world a pass for giving up on getting published because his background obviously was too difficult to over come. Poor baby. It took me 19 years to finish college, but I’ve started and run seven businesses. I’m not smart, I’m just relentless. Choice.

Gladwell goes on to talk in the same terms about legacy, heritage, deep ties to people you never met in the old country a hundred years ago that allow you to live a life of significance or keep you from experiencing it. But he gives almost no time to the most important characteristics of success: personal vision, personal choice, and personal commitment to get there no matter what. Burn the bridges, sink the ships, shred the parachutes, I’m all in. This is nothing more than background noise in the book, which he only recognizes as an annoying fact but not as the source of success.

My best lesson from all of college came from one of the Women’s Studies Courses I took. The female professor asked the one other guy in the 200 person class to come up front, gave him a toy gun and told him to hold her up. At first it was comical, but she kept belittling him and instructing him until he held the gun to her head and screamed at her, “Give me your f-ing money or I’ll blow your f-ing head off!” She congratulated him for eventually becoming convincing, and asked him to sit down.

Then she asked us a stunningly simple question, “At what point did I become a victim?” Her answer – “I never was.” And she said, “And at what point would I have become a victim? Only when I gave him control of my mind or he took control of me physically.”

She went on to say that the problem with victimology is that it gives us a pass from taking charge of our lives, and allows us to blame our circumstances for forming who we are. I never forgot that lesson from 30 years ago. Those who read Gladwell’s book should use it as a filter as they read.

As I road on the back of a motorcycle through the bush for 8 hrs in the middle of the rainy night, then spent 10 hrs with the Chief, and 10 hrs back last night without sleep (four flats, a blown gear box), my African friends on that trip were incredibly resilient. There wasn’t a victim among them. Together we plan to build a first world country on the backs of these incredible people. If they read Gladwell’s book and embrace it, they don’t have a chance.

Circumstances don’t make me who I am. How I respond to them, does.

Don’t be a victim. Chose to live a life of significance. It’s 90% choice and 10% what happens to you (and you have a choice how to respond to that 10%).

Choice.

Successful business owners respond quite differently.

/in /by

He who makes the rules wins.

On the way from the Charleston airport to speak at a conference last Thursday evening. I engaged our cabbie in conversation, which of course always gets around to food. I asked what seafood he liked since he lived on the coast, and his first response was “I don’t eat shrimp.”

I found his response in the negative to be interesting so I pursued it. He told me his cousin worked on a shrimp boat in the early 60’s and had drowned, and that he had never been able to get over it. So now he doesn’t eat shrimp because it reminds him of his cousin drowning over 40 years ago.

I empathize with his loss but I don’t understand letting that circumstance rule his entire life even in one small aspect like eating shrimp. I lost a cousin at the age of 41 from a massive heart attack as he went out the door for a run, but I would never think to stop running or exercising because of my loss.

The moral of this story?

Circumstances don’t make me who I am. How I respond to them does.

I met a woman once who was a quadriplegic from birth who always introduces herself by saying, “I have the gift of cerebral palsy.” As someone who has every right to claim true victim status, she is a bright light in a world full of self-made victims.

How are you responding to the circumstances in your business? If you decide you’re not a victim and respond accordingly you’ll enjoy life and business a whole lot more.

Is it Harder to Start and Run a Business Than 30 Years Ago?

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Almost everyone decrying the demise of entrepreneurship in America is blaming either Walmart or rising health care costs for making it more difficult to start a business. But the biggest obstacle is a long-term shift in American culture and society that has little to do with big box businesses or heart attacks.

In a recent article titled “Are we Becoming Less Entrepreneurial?” Scott Shane cited 30-year trends going back to 1977 that fewer people are starting new businesses over that time. Other research conflicts with that to some degree, but virtually everyone seems to think that it’s harder to start and run a business these days.

As with most things, there is rarely an easy one-line answer. I see at least four factors that someone running a small business has to fight through these days:

  1. Long-term cultural shifts in the way we view life and opportunity
  2. The constantly increasing costs of running a small business due to government controls and regulations and other factors (such as health care)
  3. Pro-active resistance and disincentive by the SBA to start true small businesses.
  4. Pro-active support and incentive to mid and large-sized businesses by the congress and SBA that create artificial competition for small business.

The overwhelming uphill struggle is against #1, cultural shifts. Numbers two through four added together don’t come close to the problems number one presents.

Entrepreneurship is not declining because of Walmart. He who makes the rules wins. If you play by Walmart’s rules, you will lose, but millions of small businesses are figuring out they can build businesses around rules that Walmart can’t touch and are doing fabulously.

Nor is health care the reason. It doesn’t help, but it is only one in a pile of factors in the decline Shane cites. People who claim they aren’t going into business for themselves because of health care risks wouldn’t go into business anyway. They are risk adverse and if health care wasn’t an obstacle they would find another one as an excuse. Health care wasn’t any better for someone 75-100 years ago but people started businesses.

Also, the SBA has spent 50 years proudly killing people’s dreams by showing them empirically that their dream doesn’t work as an Excel spreadsheet. It doesn’t take a genius to know this – almost no small business makes financial sense out of the box, which is why they go through 5-7 iterations before they find the pot of gold. That’s what entrepreneurialism is all about, and the SBA’s SCORE advisors – mostly middle managers from large corporations who never started anything – are hell-bent on keeping you from the joy of that journey. They would much rather have you sit in a cubicle than give wings to that once in a lifetime longing you have.

Government regulations and a burdensome tax code are also factors. Regulations are never put in place in response to small business abuses and yet small business has the same regulations and tax code as the biggest businesses. That’s why Goldman Sachs was able to make $2 billion last year and not pay a cent in tax while most small businesses will pay a significant percentage of their revenue in tax.

But all of these are just bumps in the road compared to the cultural shifts that are undermining entrepreneurialism in America. In the last 50 years we have undergone a dramatic shift toward an entitlement society. Only 1% of entrepreneurs come from the upper class while fully 27% come from the lower class. Being soft and avoiding the struggle has not made us better. When we receive things without working hard for them we gain a sense of entitlement that leads to dependency that results in a full-blown sense of victimization when the handout I’ve been used to is no longer there.

None of that helps us start new businesses. Way too often I hear from business owners that conditions around them are keeping them from succeeding. This is a mindset of victimization – it’s not my fault, it’s the world around me.

Circumstances don’t make me who I am. How I respond to them does.

Relearn the joy of the struggle and shed your sense of dependency, entitlement and victimization. It’s a deadening mindset and will keep you from getting where you want to go.

He who makes the rules wins. If you decide you can’t make any of the rules (victim), you lose.

Being a business owner isn’t any harder than it was 30 years ago, it’s just harder to convince people they don’t have to lose.

Our prices determine our market – you are not a victim.

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Don’t kid yourself. The market doesn’t determine our prices; our prices determine our market. It’s our fault, not theirs.

There are two reasons people react to your pricing:

  1. Your prices are too high. That almost never happens. Stop thinking you’re the one exception.
  2. Your prices are too low. This is almost always the problem. When your prices are too low, you attract people who are price-shopping, and worse yet, bottom feeders, and both will spend all their energy beating you up because your prices are too high.

Everyone wants value, not everyone is willing to pay for it! There are only three kinds of buying questions:

  1. Price Buyers – How much?
  2. Value Buyers – Can you do it?
  3. Relationship Buyers – Who do I like best?

If you set low prices, you are selling to price buyers and will always hear “Your prices are too high”. If you set value-based prices and are building relationships, you’re going to make a good profit, which will let you serve your clients even better.

Pricing Mechanics – Step by Step

How not to do it – history, fear, feeling, my experience, dreams, hunger, client situation/pocket book, convenience, subjective “analysis”, or “because it’s easy for me to do” (craftperson pricing).

How to do it –

  1. Cost+ – This is the worst way to price, but absolutely essential as a starting place for knowing how to actually set your prices. You must know your costs. If you don’t you’ve got no baseline for pricing anything. You need to know your costs by each individual product/service.
  2. Markup+ – Desired profit = needed markup/margin (50% markup equals 33% margin – don’t confuse the two). Once you know your costs, add a basic profit. This is just the start.
  3. Your Differentiator – what makes you different than the next guy? If you have something, you can price in that difference. If you don’t, you’re a commodity. Don’t be a commodity.
  4. Expertise+ – are you the best in your world? If so, you can demand a premium. If not you’re a commodity.
  5. Client perception (market demand)+ – convenience, coolness, etc. No one runs to catch a stopped train. Get your train moving – get your clients chasing you.
  6. Scarcity/Competition+ – is what you do unique or is the market flooded? If your unique, you can price that in. If not, you’re a commodity.
  7. Hazardous Duty Pay+ – turn low profit, high maintenance clients into high profit, high maint., or fire them. The cost of low profit, high maintenance clients is untenable.
  8. How busy are you?+ – the 95% occupancy rule. If you are more full than 95%, raise prices. (90% manufact.)
  9. Time/complexity+ – are they asking something out of the ordinary? Don’t give ordinary pricing!
  10. History – are you stuck with past pricing? Use #1-9 + new clients to get out of it. Be courageous – raise prices!

Summary

Move from Cost-Plus to Value-Based Pricing if at all possible! Pricing to VALUE – the ultimate objective! In short, stop pricing based on what you think you’re worth and start pricing based on what the market will bear. You’ll make a lot more money and people will whine a lot less about your pricing. Be brave, you’re almost certainly not charging enough.

No Extra Charge:

The Ten Most Common Pricing Mistakes, by Per Sjofors, Managing Partner, Atenga, Inc.
Here is a list of ten of the most common mistakes companies make when pricing their products and services.

  1. Basing your prices on costs, not customers’ perceptions of value
  2. Basing your prices on “the marketplace”
  3. Attempting to achieve the same profit margin across different product lines
  4. Failing to segment their customers
  5. Holding prices at the same level for too long, ignoring changes in costs, competitive environment and in customers’ preferences
  6. Incentivizing your salespeople on revenue generated, rather than on profits
  7. Changing prices without forecasting competitors’ reactions
  8. Using insufficient resources to manage your pricing practices
  9. Failing to establish internal procedures to optimize prices
  10. Spending a disproportionate amount of time serving your least profitable customers