Ying Mingshan, Labour Camps and Anchee Min

“My time in jail only strengthened my resolve to succeed”

-Yin Mingshan

During days of Mao Zedong, many Chinese who were suspected of having “rightist views” were either executed or were sent to labour camps for reformation (having rightist views was equivalent to having a horrible  disease or committing heinous crime)

One such person who landed up in labour camp was young 20 years old student Yin Mingshan. It was alleged that he had capitalist views, which was never verified. Yin landed up in jail and then labour camp without even knowing what his crime was. Labour camp was meant for “correcting his views”. After 20 years in labour camp he was released, because communist party of China realised that they had made mistake, however there was no formal apology or compensation.

At 40 years of age and with his labour camp background, Yin found it difficult to get employment. He started earning by selling books, then he shifted to selling of bike spare parts. Later he started manufacturing bikes and cars under the brand Lifan. Today Lifan Group has turnover in billions and Yin is a billionaire.

“It’s difficult to negotiate with Indian companies…The talks proceed at such a slow pace and your country is still not as open as ours to foreign investment…Your (India’s) roads are slow, your negotiations are slow, everything is slow except for your dances.”

Yin Mingshan in The Hindu

Yin also tried to start business in India. But he did not find Indian environment favourable for business. It was communist party that threw him in jail, but today he is great supporter of communist party and his greatest inspiration is Mao Zedong.

“I’m thrilled that I raised a kid who went to Stanford and this is the miracle that would never happen in China.”

-Anchee Min in The Telegraph

Another person who too landed up in labour camp at age of 17 years was lady called Anchee Min. After spending time in labour camp, she took “leap of faith” and landed up in US. Initially she had difficult time in US, but she overcame difficulties and today is a famous author and is proud of fact that her daughter is Stanford graduate.

 

 

 

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Random Walk, Gambler’s Fallacy and Gambler’s Ruin

Burton Malkiel has written a book called “A Random Walk Down Wall Street” in which he proposes that in efficient market past trend of share prices cannot be used to predict future price. There is no connection between two.

The share price movement is like walk of a drunk fellow, it is random, hence cannot be used to predict future. Like drunkard’s random walk, stocks take a random and unpredictable path.

But there are others who feel that past trends can be used to predict future.

“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

-Burton Malkiel

Random Walk can also be used to explain Gambler’s Fallacy or Monte Carlo Fallacy.

The gambler’s fallacy is when an individual erroneously believes that the onset of a certain random event is less likely to happen following an event or a series of events ex. if you get 25 heads in a row by flip of coin, than in 26th attempt chances of getting tail is very high. But this is not correct every time you flip coin chances of getting head or tail are 50%. What happened in past has does not influence current event.

Gambler should be aware of not just gambler’s fallacy but also Gambler’s Ruin.

Suppose there are two gamblers and both are betting Rs.100. Chances of winning for each gambler is 50%. Now if one gambler has Rs.200 to bet while other can bet only Rs.100, then chances of winning for second gambler are lower. Now suppose first gambler has not just Rs.200, but say 1000 or 10000 or 100000… while second gambler still as Rs.100, then chances of second gambler winning will keep going down, finally it will zero. In other words, if you have finite wealth and other person has infinite wealth, then you will eventually lose all your wealth if you keep gambling.

 

James Citrin, Executive Intelligence and Marissa Mayer

James Citrin, a senior official at executive search firm Spencer Stuart talks about hiring process for a CEO level position in one of organisations. James was part of interview panel.

The Chairman of the company asked each candidate one question-” How do you assess the state of our industry and our company’s position within it?”

James found that successful candidates and unsuccessful candidates answered question differently. Unsuccessful candidates gave confused response, while successful candidates did following things

  1. Explained the key competitive dynamics in the industry, i.e. what is driving change, who is winning and who is losing.
  2. Clearly describe what company should do to thrive- top priorities, strategies, acquisitions, organisation architecture etc.

James was give task of finding CEO for Yahoo. After interviewing lot of candidates, Yahoo board felt that Marissa Mayer from Google was ideal candidate. Objections that she was stagnating (in fact demoted) in Google and she had no experience of having responsibility for balance sheet were brushed aside. The members were impressed with her presentation – industry analysis, what she would do to make Yahoo a success, how she would overcome her shortcoming etc., the very qualities James had talked about related to successful candidates.

“I took a computer-science course to fill a prerequisite at Stanford, and I realized that every day was a new problem, and every day you got to think about how to solve something new, how to reason through something new, how to develop an algorithm to solve for something you hadn’t worked on before.”

-Marissa Mayer

All stakeholders- customers, employees and board members had high expectations from her, but she failed in her task. Soon stakeholders had doubts about her decision making and people management skills. Finally, a company which was once valued at $ 125 billion was sold for $ 5 billion to Verizon. Mayer was failure at Yahoo.

Why did this happen. One of the reasons could be lack of what is called as Executive Intelligence.

“Executive intelligence is the ability to digest, often with the help of others, large amounts of information in order to form important decisions…Personality is not a differentiator of star talent. It is an individual’s facility for clear thinking or intelligence that largely determines their leadership success.”

-Justin Menkes in HBR

Justin Menkes has done lot of research on Executive Intelligence. Executive intelligence consists of getting tasks done, your relations with others and evaluating self.

Getting tasks done consist of -abilities to properly define a problem, identify the highest-priority issues, and assess both what is known and what needs to be known in order to render a sound decision.

Relating to other consisting of – the abilities to recognize underlying agendas, understand multiple perspectives, and anticipate likely emotional reactions.

Evaluating self consists of- the abilities to identify one’s own mistakes, encourage and seek out constructive criticism, and adjust one’s own behaviour.

While Marissa had high IQ, she lacked executive intelligence.

William Ouchi, Temp staffing and Yoshiko Shinohara

William Ouchi, a management graduate from Stanford University is well known for his Theory Z. He felt that life time employment given by Japanese companies to its workers encouraged them to become loyal to organisation and come thereby resulted in high level of quality and productivity. This book was written during 80s when Japanese economy was booming.

William’s book Theory Z become best seller and Theory Z was included in syllabus of management schools all over the world.

While William was praising Japanese concept of lifetime employment in US, in Japan a lady  had come up with idea of supplying temp staff to Japanese companies. Supplying temp staff in country that took pride in lifetime employment was nothing short of blasphemy.

“Lifetime employment was the norm in Japan, and temping by private companies was banned, so I was often summoned by the Ministry of Labor.”

Yoshiko Shinohara in HBR

The lady, Yoshiko Shinohara, unlike Ouchi was not even a college graduate. She got her first job in 1953, at Mitsubishi Heavy Industries Ltd., she later went to Australia in 1971 and joined a local marketing firm as a secretary. She moved back to Japan and started a staffing agency called TempStaff. TempStaff was started in her one bedroom flat in Tokyo with desk and telephone.

“The first several years were really hard…Everything was definitely tough back then. I didn’t know what to do.”

Yoshiko Shinohara in The Japan Times

She first started by supplying typists and secretaries who were fluent in English to Japanese and foreign companies. At that time activity of supplying temp staff was not considered legal, Yoshiko could have landed in jail. But she along with other temp staffing agencies lobbied hard and law allowing temp staffing was passed.

“I used to say to myself: “I wonder what it’s like in jail. How big are the rooms? Is there a toilet or a window?””

Yoshiko Shinohara in HBR

Initially her organisation has only women staff, but she found that women were risk averse, they were more interested in operations than seeking business. So, she took next revolutionary step, she started hiring men, and this improved sales.

So in 1988, I said, “How about if we put some men in here?” The managers said, “No, thank you, we don’t need any of those creatures.” But we did need them. A branch happened to hire a man as a part-timer, and wow, did sales increase! That was the turning point.

Yoshiko Shinohara in HBR

After 90s Japanese economy started stagnating, this was good news for TempStaff. Their business grew and company continues to grow. Today Yoshiko is a billionaire.

Yoshiko does not hesitate to take bold decisions, she left her husband because she didn’t see any future with him.

Negotiations, Women and BATNA

“Men ask, Women don’t ask”

-Linda Babcock

Sometime back a research was done on sample group consisting of both genders. The participants were told that they would be observed playing a word game and that they would be paid between $3 and $10 for playing. After each subject completed the task, an experimenter thanked the participant and said, “Here’s $3. Is $3 OK?” For the men, it was not OK, and they said so. Their requests for more money exceeded the women’s by nine to one.

Linda Babcock who is professor of Economics at Carnegie Mellon University feels that women are more reluctant to negotiate than men. She traces this to their upbringing and social norms.

“Women often are socialized from an early age not to promote their own interests and to focus instead on the needs of others. The messages girls receive—from parents, teachers, other children, the media, and society in general—can be so powerful that when they grow up they may not realize that they’ve internalized this behaviour, or they may realize it but not understand how it affects their willingness to negotiate. Women tend to assume that they will be recognized and rewarded for working hard and doing a good job. Unlike men, they haven’t been taught that they can ask for more”

-Linda Babcock.

She has written a book – Why Women Don’t Ask, in which she urges women to negotiate and get what they are worth, they should not settle for less. By not negotiating they are compromising on their future earnings and this financial loss is big.

“When a better offer comes along, women may take it and quit rather than using it as a negotiating tool.”

-Linda Babcock

Fisher and Ury have come up with few ideas on how to negotiate. They coined the term BATNA, short form of Best Alternative To a Negotiated Agreement.

A person’s BATNA refers to what they can fall back on if negotiation proves unsuccessful ex. you are negotiating for salary of 75 lakhs, you already have an offer of Rs. 60 lakhs from another organisation, then if negotiation with current party fails, you will take offer of Rs.60 lakhs, so your BATNA is Rs. 60 lakhs. What if you have no offer in hand? Then BATNA here is wait for some time till you get another offer.

If you BATNA is stronger then you can negotiate harder.

Fisher and Ury have designed a simple process for determining your BATNA-

  1. Develop a list of actions you might conceivably take if no agreement is reached
  2. Improve some of the more promising ideas and convert them into practical options
  3. Select, tentatively, the one option that seems best.

While negotiating you may have certain salary amount in mind, if offered less then you will walk away. This walk way amount is called as reservation price. Similarly, the employer too will have certain amount in mind, if you ask for more she will call off negotiations. That amount is reservation price for employer. Between two reservation prices there is scope for reaching a settlement. This zone, which allows scope for negotiations is called ZOPA or Zone Of Possible Agreement.

If you have good understanding of your and other party’s BATNA, Reservation Price and ZOPA, you can always negotiate a good deal.

 

Negotiations, Terrorism and Game Theory

“To be successful negotiators must engage in hard bargaining; they must “start high, concede slowly, exaggerate the value of concessions, minimize the benefits of the other’s concessions, conceal information, argue forcefully on behalf of principles that imply favorable settlements, make commitments to accept only highly favorable agreements, and be willing to outwait the other fellow.”

-Lax and Sebenius

David Lax and James Sebenius are experts in area of negotiations. They have written two books on this subject-  Manager as Negotiator and 3 D Negotiation.

They propose that negotiation has cooperative and competitive elements and these elements are in conflict.

Negotiators face a dilemma in deciding whether to pursue a cooperative or a competitive strategy.

In cooperative or value-creating mode negotiators work primarily to increase the available resources, to find joint gains or “win-win” solutions, so that all the parties benefit. They share information, communicate clearly, maintain a cooperative attitude and focus on developing common interests.

In the competitive or value-claiming view negotiators work primarily to claim the largest share of the disputed goods.

“Player cooperate when they know that their current actions can affect future payoffs, when they believe that a defection now will lead to sufficient defection by their opponent to make the initial move undesirable.”

-Lax and Sebenius

The conflict between cooperative value-creating strategies and competitive value- claiming strategies results in what is called as Negotiator’s Dilemma.

Lax and Sebenius apply game theory to negotiator’s dilemma

If both parties cooperate they will both have good outcomes i.e. payoff for both will be high. If one cooperates while the other competes the cooperative party will get a poor payoff, while the competitive party will get a very high payoff. If both parties compete they both will get a mediocre payoff.

Thus, both parties are better off if they both cooperate.

Lax and Sebenius have come with concept of 3-D negotiations. What has been described above i.e. competitive or cooperative bargaining or “table tactics” is just one element of bargaining. There are two other dimensions of bargaining.

The second dimension of bargaining is deal design i.e. systematically unlock economic and noneconomic value by creatively structuring agreements

Then there is third dimension- setup. Before going for bargaining sessions, the negotiators should ensure that right parties have been approached, in the right sequence, to address the right interests, under the right expectations, and facing the right consequences of walking away if there is no deal.

Dr. Todd Sandler has applied principles of negotiation and game theory to governments and terrorists.

Terrorists fare better than governments because governments due to political compulsions are unable to conduct cooperative bargaining and effectively eliminate terrorism. Terrorists take advantage of inability of governments to negotiate effectively amongst themselves, this prevents a united front against terrorists ex. India, Pakistan and China have suffered from attacks by terrorists, but they are unable to negotiate effectively, which in turn helps terrorism to flourish.

The diagram below shows that only when governments cooperate, they can win fight with terrorists. Worst situation is when both parties take no action.

Carol Dweck, Fixed Mindset and Narcissistic CEOs

“We were stars—precocious stars,” wrote Stephen Glass, “and that was what mattered.” The public understands them as cheats, and cheat they did. But I understand them as talented young people—desperate young people—who succumbed to the pressures of the fixed mindset.”

-Carol Dweck

Carol Dweck is a psychologist who teaches at Stanford University. She has done an interesting research on how people react to difficult situations, some work hard and overcome difficult situation and succeed in life, while others give up. She wrote a book on this- Mindset.

She concluded that some people have fixed mindset i.e. they feel that intelligence is fixed – you are either born intelligent or average, this will not change in your lifespan. While others have growth mindset, they feel that with hardwork and practice they can keep increasing their intelligence.

Those with fixed mindset have tendency to look smart, avoid negative feedback and feel threatened by success of others.

Carol Dweck gives examples from field of sports, business, journalism etc.

People with fixed mindset believe that they are smart and others are not so smart. So, they try hard to maintain their image of smart person, their biggest fear is of failure i.e. what will happen if they are seen as failure. They always want to succeed in life.

Stephen Glass was working as journalist with magazine The New Republic, he was one of the rising stars. He wrote interesting article on hacker who was demanding gifts from a company. It was found that story was fake, later it was found that many other articles of his were fake. Stephen Glass committed journalistic fraud just to maintain his image of being a smart person. A movie was made on him called “Shattered Glass”.

 

Similarly, another journalist Janet Cooke wrote story of 8 years old drug addict Jimmy for The Washington Post. She won Pulitzer Prize for this story in 1981. But it was found to be fake, no such child existed.

“It was unfair that she won the Pulitzer prize, but also unfair that she didn’t win the Nobel Prize in Literature”.

-Gabriel García Márquez on Janet Cooke

Many narcissistic CEOs too suffer from fixed mindset. The believe that they are smart and try hard to maintain that impression. To maintain their image, they hate to be seen as failure, they find someone else to blame. In fixed mind world, they are superior and rest are inferior. Since others are perceived as inferior they don’t believe in coaching or developing others. They always take more credit than they deserve. They are always afraid of success of others and hate any constructive criticism.

Lee Iacocca left Ford Motors to join Chrysler. He did great job of turnaround of company. But success combined with fixed mindset stopped him from learning. He stopped listening to others. He sacked people whose ideas were different from his. After some time, Chrysler again became bankrupt.

 “Iacocca lived the fixed mindset. Although he started out loving the car business and having breakthrough ideas, his need to prove his superiority started to dominate, eventually killing his enjoyment and stifling his creativity. As time went on and he became less and less responsive to challenges from competitors, he resorted to the key weapons of the fixed mindset—blame, excuses, and the stifling of critics and rivals. “

-Carol Dweck

Alfred Dunlap was another CEO with fixed mindset. His specialisation was to turnaround loss making companies, his methods included closing of units, firing people, accounting frauds to make company look profitable. One such company was Sunbeam, where he fired hundreds of employees, showed inflated sales, while unsold inventory was stored in warehouses. He was called “Chainsaw Al” due to way he downsized.

Yet another talented CEO with fixed mindset was Jeffery Skilling. As CEO of Enron he committed lot of accounting frauds to show that Enron was successful company. He was arrested for committing frauds and Enron was declared bankrupt.

Carol Dweck also gives examples of CEOs with growth mindset.

Jack Welch is one such CEO with growth mindset. He made GE one of the largest and most profitable company. He also spent lot of time and efforts on developing leaders. For wrong decisions, he blamed himself and not others.

IBM was organisation ruled by leaders with fixed mindset. They had strong sense of entitlement. To save the company an outsider was appointed as CEO. Louis Gerstner came from finance industry and had no experience of IT. But using his growth mindset, he took challenge of turning around IBM. He talks about his challenges in his book – Who Says Elephants Can’t Dance. He managed to make IBM profitable company.

Like IBM, Xerox too was facing lot of problems, it had become a debt-ridden company. Anne Mulcahy who was Xerox veteran was made CEO. She used her growth mindset to turnaround the company.

“Becoming CEO was not on my radar screen when I signed on to HR. It came into focus later, a convergence of several unpredictable circumstances, and after I had done a couple of other jobs at the company. And then I was in the right place at the right time.”

-Anne Mulachy