Career Journal: M.B.A.s Veer Off Path to Big Finance Jobs
By Dana Mattioli
1312 words
18 November 2008
The Wall Street Journal
D4
English
(Copyright (c) 2008, Dow Jones & Company, Inc.)
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As recruiting season begins on business-school campuses, the collapse of major banks on Wall Street has many soon-to-graduate M.B.A.s rethinking their post-graduate paths. That's especially true for students who had set their sights on a career in investment banking.
A large percentage of business-school grads head to financial careers. At schools like New York University's Stern School of Business and University of Pennsylvania's Wharton School, nearly 50% of graduates head for finance careers, with a good number of them expecting to end up at large investment banks or financial-services firms. Now, students who may have otherwise settled for nothing less than big-name investment banks are seeking smaller, boutique and middle-market investment firms that may offer more job stability. And some students, unwilling to ride out the storm, are giving up or delaying their investment-banking dreams to pursue different careers entirely.
Immediately following the Lehman Brothers collapse and news that Merrill Lynch would be acquired, students at Northwestern University's Kellogg School of Management began re-evaluating their plans, says Roxanne Hori, assistant dean and director of the career management center at Northwestern University's Kellogg School of Management. She says several major investment banks that have recruited on campus during the normal October and November recruiting season in previous years have dropped out completely this year, including Morgan Stanley and Credit Suisse Group. Others, like Citigroup, which recently revealed plans to cut its work force by more than 20,000, have scaled back.
For those whose career paths have been turned upside down, directors of career services at M.B.A. programs say that consulting, private equity and corporate finance positions within traditional manufacturing or technology companies are popular alternative avenues for students who previously planned on pursuing investment banking. "Consulting has been popular on campus this year from the company side and student side," says Pamela Mittman, assistant dean of career services and student activities at NYU's Stern School.
Maryellen Lamb, senior associate director of the University of Pennsylvania's Wharton School, says more finance-oriented M.B.A. students are focusing on function rather than industry. "I've seen a number of students saying to me 'I really want to work in finance but I don't know if I have the stomach for banking, what else can I do?'"
Linkun Li, a second-year M.B.A. student at the University of Connecticut School of Business, recently changed his focus to corporate finance and risk management from investment banking. The 30-year-old said recent market events made him change his career path. "The traditional investment-banking industry was basically wiped out with bankruptcies and mergers, and that posed concerns for me," he says. He plans to pursue these alternate paths for a few years and then try to return to investment banking once the market stabilizes.
Students who are willing to switch focus are a boon to recruiters like Brian Thomson, senior manager of university recruiting for Philips Electronics North America, who have had to compete with investment banks for candidates in previous years. He has seen a dramatic increase in interest from M.B.A. students for jobs in their finance department this year, and in some cases Philips has been the most popular company at M.B.A. information sessions.
In years past Mr. Thomson says it was sometimes a struggle to fill the eight to 10 interview slots he had set for campus visits. But on a recent trip to Kellogg he says his biggest challenge was determining which of the 60 applicants to interview. "There's a big increase in the caliber of the finance students we're seeing this year," he says, adding that the company plans on hiring more M.B.A. students than in previous years. "One door closed . . . [and] now we have all of these students who are essentially free agents."
Consumer-products company Unilever U.S. has also experienced a higher number of applicants at the M.B.A.-level who say they're interested in working in the company's finance department. "We're interviewing people and hearing that they've interned with investment banks and either didn't get an offer, or received an offer and are reluctant to go that path," says Christine Eggensperger, university relations manager for Unilever. She says the increase means a wider range of talent to choose from.
The surge in interest has the attention of Julie Coffman, head of recruiting in North America for Bain & Co., a consulting firm, for different reasons. She says applications at the M.B.A. level have increased 10% to 15%. But, she says, that increase is pushing the company to do a better job vetting in order to determine the motives of applicants.
When talking to the newly interested, she makes sure they're "interested in Bain because of what we offer, not just because other avenues have closed," she says. "We don't want folks to wait out the storm for 12 to 18 months on our watch."
For those still bent on banking, turning to middle-market and small firms will give them "the option to engage in the same sort of activity for a few years, even if these firms don't carry the cachet of some of the Wall Street firms," says Richard Coughlan, senior associate dean and director of the University of Richmond's Robins School of Business. The deals they work on will be smaller or more regional, "but the actual experience [they] gain has similarities to what [they] gain at a bigger bank," he says.
Grant Garcia, a student at the school, says last December he went through recruiting for a summer position on Wall Street, at firms that no longer exist or have merged. Alumni at big New York banks have advised him to ride out the bear market by getting as much regional experience as possible, and to look back to New York in a few years. He's taking their advice and concentrating on smaller banks to find work.
Mr. Garcia and others pursuing this path will find that boutique firms and smaller banks hire only a handful of M.B.A.s each year, compared with the hundreds a big investment bank typically hires. And the influx of interested M.B.A.s is allowing the smaller concerns to be choosier.
Still, smaller investment banks say they are benefiting from a larger talent pool to choose from for positions to open next summer and fall. Peter Kies, head of the investment bank recruiting committee at Robert W. Baird & Co., a middle-market investment bank in Milwaukee, says there has been a 50% increase in interest at the M.B.A. level over last year. Mr. Kies also says that the bank is appealing to students on a national level rather than just at business schools from the Midwest and East Coast.
"We're sort of like kids in a candy store right now in terms of tracking high-quality folks," he says.
Harris Williams & Co., a middle-market M&A investment bank in Richmond, Va., and with locations in Boston, Philadelphia and San Francisco, has seen a 30% to 35% increase in applications from M.B.A. students since last year.
Stevie McFadden, recruiting director or Harris Williams & Co., says this year's class is a much more discerning group with a long-term view. "We're receiving a lot of questions about stability and what we predict our performance will be this year and next year," she says. But "we're in a position to be more selective."
Tuesday, November 18, 2008
Friday, September 19, 2008
Maslow's Hierarchy of Needs
Abraham Maslow - 1940
The Hierarchy of Needs
1. Physiological: Food, water, shelter, sleep
2. Safety: Security, freedom from fear
3. Belonging and Love: Friends, family, spouse, affection, relationships
4. Self-Esteem: Achievement, mastery, recognition, respect
5. Self-Actualization: Pursuit of inner talents, creativity, fulfillment
People are motivated by unsatisfied needs. The lower-level needs must be met before a person is motivated to satisfy a higher need.
Wednesday, September 17, 2008
Jason Zweig - The Intelligent Investor - Why the Obvious Isn't Inevitable
The Intelligent Investor: Why the Obvious Isn't Inevitable
By Jason Zweig
1,194 words
16 September 2008
The Wall Street Journal
If you learn nothing else from the last few harrowing days, you should learn the difference between what is obvious and what is inevitable.
In the heat of the moment, the two perceptions seem identical. It was obvious that investors would panic as they absorbed the news about Bloody Sunday on Wall Street, so it was inevitable that the market would take a slashing. It was obvious that Lehman Brothers had to go bust, so a bankruptcy filing was inevitable. It was obvious that Merrill Lynch could no longer make it on its own, so it was inevitable that a bigger institution like Bank of America would take it over.
But investors -- at least individual investors -- don't actually panic in times like these. Instead, they freeze. In July (the latest month for which final numbers are available), mutual-fund investors pulled out just $2.62 of every $100 they had invested in stock funds. That was less than they took out of bond funds, even though the stock market had just gone through a nauseating summer swoon.
According to researchers at Strategic Insight, who have studied decades' worth of data on how fund investors behave, this inertia is typical. Tim Buckley, who oversees retail investor operations at Vanguard Group, says the giant fund company had only 10% to 15% more phone calls and online inquiries yesterday than on a typical Monday in September. "However much panic there might have been on Wall Street," said Mr. Buckley, "there [was] no panic on Main Street."
Scott Jaffa, a 25-year-old systems administrator in Silver Spring, Md., called yesterday's plunge "as much a test of my psychology as anything else." Because he does not need the money "for another 30 to 40 years,"he asked rhetorically, "why should I worry myself about its performance over a period of days or weeks or even months?"
Mr. Jaffa is already developing what the ancient Stoics and the great Danish philosopher Soren Kierkegaard called ataraxia, or imperturbability. But he knows that ataraxia does not come naturally; it takes work. A year and a half ago, Mr. Jaffa destroyed the online access code for his 401(k) so he could no longer have instant access to his retirement accounts. His goal was to make it "significantly harder" and to require "human interaction" before he could trade on his own emotions. That enabled him to watch Monday's decline without acting on it.
Here, then, is one way the obvious is not inevitable. It may be "obvious" to professional money managers that small investors are the problem in turbulent markets. But it's not individual investors who cause (or even widely participate in) a selling frenzy. It is, instead, the "smart money" that tends to panic. But the differences between obvious and inevitable run much deeper than this, all the way down into the biological bedrock of our minds. The investing brain is bad at some things and good at many others, but above all else, it has a remarkable capacity for fooling itself. What seemed so obvious and inevitable Monday had, less than 24 hours earlier, struck nearly all of us as impossible.Before Sunday, not even most people on Wall Street really believed that Lehman would go bust. The stock finished last week with a market value of $2.5 billion, showing that investors as a group simply did not believe that Lehman would go under.
But by Monday morning, everyone's beliefs had already been retroactively revised; suddenly, Lehman's bankruptcy had been "inevitable." Psychologists call this hindsight bias -- the uncanny feeling that "I knew it all along."
History is full of such instances. The O.J. Simpson verdict, for example, convinced people that they had predicted he would be found innocent (regardless of what they actually said before the jury made its decision). Once Lehman went bust, none of us could remember how surprised we were when we first heard that it might. As Princeton University psychologist Daniel Kahneman says, "Hindsight bias makes surprises vanish." And therein lies its extreme danger for investors. By retroactively fooling us into thinking that we knew how the past would unfold, hindsight bias tricks us into thinking we know how the future will unfold. But if the past took you by surprise, why should you believe you can decipher the future?
The question answers itself. It also points the way toward a sane course of action even as the markets seem to have gone mad.
-- Be a contrarian. The late Sir John Templeton preached that investors should buy at the "point of maximum pessimism," when market sentiment stinks and no one wants to hold anything but cash. Adds Daniel Fuss, vice chairman at money manager Loomis Sayles & Co. in Boston: "It's not a point, it's a period." No one can find the point or moment at which pessimism hits its exact zenith. But it's not hard to identify a period in which pessimism is extreme -- like right now. When I spoke to him yesterday, Mr. Fuss called this market "the best opportunity to buy corporate bonds at phenomenal prices since September 1974." Risk takers might take a look at real-estate-related stocks; extreme risk takers might even consider a small allocation to financial stocks.
-- Take an inventory. "Instead of just saying, 'Everything's going down, everything's going down'," says Gary Schatsky, a financial planner in New York City, "write down on a piece of paper everything you own and everything you owe." Then go through each of your assets and liabilities to see how you might improve your position. In a period when stocks and bonds and mutual funds are not delivering positive short-term returns, you can probably add the most to your net worth by turning your attention to paying down or consolidating your high-cost debt.
-- Take baby steps. If you truly cannot sleep at night, sell off some stocks, or move some of your money to bonds or cash. But do so a little bit at a time, and talk to your tax adviser first in order to maximize the considerable tax benefits you may be able to get out these incremental moves. By the time you get any money moving, the panic may already have passed.
-- Question authority. If the financial world really were coming to an end, nobody would know it -- least of all the pundits who are currently crying doom. In 1929, experts ranging from the legendary trader Jesse Livermore to John D. Rockefeller and Treasury Secretary Andrew Mellon all declared that falling stock prices were nothing to worry about. They were wrong. The lesson is not that it's a mistake to be an optimist in falling markets, but rather that it's a mistake to trust the consensus view of the experts. With the mood on Wall Street now as dark as a mushroom farm, optimists are much more likely than pessimists to be proven right in the end.
---
Saturday, September 13, 2008
The Ostrich Effect
THE INTELLIGENT INVESTOR: Should You Fear the Ostrich Effect?
By Jason Zweig
718 words
13 September 2008
The Wall Street Journal
B1
English
In a stock market that never seems to run out of reasons to go down, you no longer feel like a bull. But that does not necessarily make you a bear. You may, in fact, have become an ostrich.
Chances are, you didn't leap for the letter opener the last time your investment-account statement came in the mail. Nor have you been looking up the value of your portfolio online anywhere near as frequently as you did in the glory days of the summer of 2007. Can you even peg, within a hundred points, where the Dow closed on Friday?
Behavioral economist George Loewenstein of Carnegie Mellon University coined the term "the ostrich effect" to describe the way investors stick their heads in the sand during lousy markets.
"Knowing definitively that something bad has happened is much more painful than suspecting that something bad may have happened," he explains. "If you don't know for sure how your portfolio did, you can always retain the hope that it somehow did better."
In standard economic theory, investors care about their total wealth, not how much they gain or lose from moment to moment. But investors are people, not adding machines. They still want to capture plasure and avoid pain.
Turning yourself into an ostrich doesn't make your losses go away, but it does enable you to pretend they aren't there.
New research by Prof. Loewenstein and his colleague Duane Seppi found that investors in Scandinavia looked up the value of their holdings 50% to 80% less often during bad markets. American investors stuff their heads in the sand, too. Vanguard mutual-fund holders checked their account values far less often in this June's grim market than they did in mid-to-late 2007, when stocks were setting new highs.
Acting like a 200-pound bird with a two-ounce brain isn't all bad. Yes, if it's been six months since you last checked the value of your shares in Fannie Mae or Washington Mutual or Lehman Brothers, then you will feel like a birdbrain when you finally get an update. But such black-hole stocks are rare. If you sell on every bit of bad news, you will never get to profit from the far more common good news.
Experiments by psychologist Paul Andreassen have shown that the more news that investors get on their holdings, the more they trade and the lower the returns they earn. When your head is stuck in the sand, you can't open your mouth to trade.
But becoming completely information-averse isn't a good idea, either. Here are some prudent actions you can take when you would rather act like an ostrich.
-- Look ahead. Use your email or calendar software to send yourself a future reminder. Commit yourself to check the value of your accounts, not today, but one week or one month from now. When that day arrives, rebalance your portfolio, selling a portion of those assets that have gone up and buying a bit of those that have gone down. Also check whether you hold any stocks that you would not buy more of at their latest prices; sell them for a loss that you may use to reduce your taxable income.
-- Use the news. You should not, of course, stop reading this estimable newspaper. For an intelligent investor looking for timely buy ideas, the New Highs and Lows table in the Money & Investing section is alone worth the price of the paper; this Thursday, it offered a bumper crop of 656 new lows.
-- Be contrary. When the headlines are overwhelmingly negative, as they are now, the market tends to feel riskier than it actually is. (The time to worry is when no one seems worried, not when everyone does.) Take a few moments to go back in market history and see how stocks did after other periods of despondency like 2002, 1998, 1991, 1987, 1982, 1974 and so on. If history is any guide, your inclination to act like an ostrich is a strong indication that the market is about to turn into a phoenix.
By Jason Zweig
718 words
13 September 2008
The Wall Street Journal
B1
English
In a stock market that never seems to run out of reasons to go down, you no longer feel like a bull. But that does not necessarily make you a bear. You may, in fact, have become an ostrich.
Chances are, you didn't leap for the letter opener the last time your investment-account statement came in the mail. Nor have you been looking up the value of your portfolio online anywhere near as frequently as you did in the glory days of the summer of 2007. Can you even peg, within a hundred points, where the Dow closed on Friday?
Behavioral economist George Loewenstein of Carnegie Mellon University coined the term "the ostrich effect" to describe the way investors stick their heads in the sand during lousy markets.
"Knowing definitively that something bad has happened is much more painful than suspecting that something bad may have happened," he explains. "If you don't know for sure how your portfolio did, you can always retain the hope that it somehow did better."
In standard economic theory, investors care about their total wealth, not how much they gain or lose from moment to moment. But investors are people, not adding machines. They still want to capture plasure and avoid pain.
Turning yourself into an ostrich doesn't make your losses go away, but it does enable you to pretend they aren't there.
New research by Prof. Loewenstein and his colleague Duane Seppi found that investors in Scandinavia looked up the value of their holdings 50% to 80% less often during bad markets. American investors stuff their heads in the sand, too. Vanguard mutual-fund holders checked their account values far less often in this June's grim market than they did in mid-to-late 2007, when stocks were setting new highs.
Acting like a 200-pound bird with a two-ounce brain isn't all bad. Yes, if it's been six months since you last checked the value of your shares in Fannie Mae or Washington Mutual or Lehman Brothers, then you will feel like a birdbrain when you finally get an update. But such black-hole stocks are rare. If you sell on every bit of bad news, you will never get to profit from the far more common good news.
Experiments by psychologist Paul Andreassen have shown that the more news that investors get on their holdings, the more they trade and the lower the returns they earn. When your head is stuck in the sand, you can't open your mouth to trade.
But becoming completely information-averse isn't a good idea, either. Here are some prudent actions you can take when you would rather act like an ostrich.
-- Look ahead. Use your email or calendar software to send yourself a future reminder. Commit yourself to check the value of your accounts, not today, but one week or one month from now. When that day arrives, rebalance your portfolio, selling a portion of those assets that have gone up and buying a bit of those that have gone down. Also check whether you hold any stocks that you would not buy more of at their latest prices; sell them for a loss that you may use to reduce your taxable income.
-- Use the news. You should not, of course, stop reading this estimable newspaper. For an intelligent investor looking for timely buy ideas, the New Highs and Lows table in the Money & Investing section is alone worth the price of the paper; this Thursday, it offered a bumper crop of 656 new lows.
-- Be contrary. When the headlines are overwhelmingly negative, as they are now, the market tends to feel riskier than it actually is. (The time to worry is when no one seems worried, not when everyone does.) Take a few moments to go back in market history and see how stocks did after other periods of despondency like 2002, 1998, 1991, 1987, 1982, 1974 and so on. If history is any guide, your inclination to act like an ostrich is a strong indication that the market is about to turn into a phoenix.
Friday, August 15, 2008
Motto: Relaxed and Prepared
Problem Solving Strategies
#1. Cite from memory
#2. Draw a figure
#3. Work backwards
#4. Formulate an equivalent problem
#5. Enumerate all cases
#6. Search for a pattern
#7. Bracket the answer - solve the extreme cases
#8. Relate to something you know
#9. Take advantage of symmetry
Sometimes you will be able to use one strategy by itself to answer a question, but imagine what a powerful approach it is when you can combine two or more.
#1. Cite from memory
#2. Draw a figure
#3. Work backwards
#4. Formulate an equivalent problem
#5. Enumerate all cases
#6. Search for a pattern
#7. Bracket the answer - solve the extreme cases
#8. Relate to something you know
#9. Take advantage of symmetry
Sometimes you will be able to use one strategy by itself to answer a question, but imagine what a powerful approach it is when you can combine two or more.
Thursday, August 14, 2008
Lasting Contribution
Use Recognition
You can recognize things that you can’t recall. For example, one Easter morning in Kennesaw, Georgia the water pump on my old car gave out. While I was waiting in the auto repair shop a man came in and said, “I stayed in a hotel last night, but I can’t remember the name. It had a big yellow sign with red letters.” The repair guys gave him a blank stare so I said, “Look in the phone book.” Speaking slowly and louder, he repeated, “I can’t remember the name.” I said, “Recognition is stronger than recall.” He looked in the phone book, looked surprised, thanked me, and went to his hotel.
Mix It Up
When studying a variety of subjects or working on a variety of projects, it is more difficult to do similar things right after each other than dissimilar things. Huh? For example, don’t study English then your foreign language then math then science. Instead, study English, then math, then the foreign language, then science. Don’t work on a report, then a presentation, then the budget, then taxes. Reorganize them so that the sequence goes: words, numbers, words, numbers so that you maximize the differences between topics each time you move to the next one.
I often organize my work into a stack such that I counterbalance words and numbers, computer and paper, reading and phone. Then I set a countdown timer for ten minutes and work my way through the stack, forcing myself to spend at least at least ten minutes working on the unpleasant tasks. Importantly, the time doesn’t have an alarm so that if I am enjoying the work, I am not distracted when time runs out and can keep working.
Appreciate Your Fallibility
Notice how often people distrust their memories, but not their judgment. Psychologists have developed thousands of experiments that demonstrate just how poor we are at making judgments, judgments of any kind – moral, business, even perceptual. You can get people to misjudge the length of a one-inch line by as much as six inches if other people in the room say the line is longer.
So? So several things. First, keep track of your judgments so you can determine the things you are good at judging and the things you aren’t. Second, when you make a decision include ways to get feedback to determine how well the decision worked out. Third, decide an issue early. Then give your decision a time to rest and approach the issue from another angle to see if you come to the same conclusion. Forth, know that you could be wrong and be open to information that will show your fallibility. Although it is not fun to be wrong, it is much worse to persist in being wrong.
Finally, appreciating your fallibility is an important way to cultivate your judgment. And a cultivated judgment is a rare and precious thing indeed.
Watch Your Metaphors
Make yourself aware of underlying metaphors in your communication. Metaphors can be very useful when you use them for elaboration of a topic. For example, we often speak about verbal arguments in terms of war metaphors. (Your claims are indefensible. He attacked every weak point in my argument. He shot down all of my arguments. If you use that strategy, he’ll wipe you out.) Metaphors structure much of our thinking and communication. But the metaphors we use can also limit us in subtle ways. If you always think of arguments in terms of war, you may miss out on the benefits of thinking of the situation differently, perhaps in terms of a game, or a dance.
You can also turn this metaphor-speak to your advantage. When trying to join a new group you can use the same metaphors they use to better “speak their language.”
Test, Retest
People often study as subject until they can get 100% right on a test of their understanding of the subject. While this is a sensible approach, it turns out that about 10% of the correct answers is composed of guesswork, short-term memory, and information not fully learned. The best approach is to study until you get 100%. Then wait a day or two and test again. The second test is a much better measure of your grasp of the material.
Testing is important in another important way, in the sense of getting feedback. This can be as simple as pulling on the door you just locked to make sure it is truly locked to far larger issues. For example, Peter Drucker says that quality isn’t what you put into a thing. Quality is what somebody else gets out of it. Therefore, you can’t answer the question of whether your service is any good. Only your customers can. You don’t get to say whether you are a good leader. Your employees answer that.
Even more generally, good intentions alone are not enough. Get feedback to determine whether you are getting the right results.
Build a Mistake Hierarchy
Magicians provide an excellent example of a ‘mistake hierarchy.’ A good card magician knows that many tricks depend on luck and that luck is a fickle friend. So, you tell the audience you’re going to do a trick. Without telling them what kind of trick, you go for the one-in-a-thousand effect, attempting the most difficult one first. It almost never works, of course, so you glide into a second try, for tricks that work one-in-a-hundred times. When that fails, as it almost always does, slide into the third-level trick, which only works about one time in ten. If all else fails you go for the failsafe effect, which won’t wow the crowd out of their socks, but at least it’s a trick that works.
It is common for people to wish for something big: “I’ll win the lottery. If that doesn’t work, I’ll get promoted at work. If that doesn’t work, I’ll go back to school.” The problem with this approach is that the different plans are not aligned. Your plans should be more like a staged defense: If they breach the wall, we’ll fall back to the keep.
Go for something big and have a backup plan right behind it in case it fails and one behind that and one behind that…
Talk to Yourself
Talking to yourself has several benefits. First, it forces you to process information in a different way. Perhaps you have a picture in your head of what you mean; putting it into words can draw your attention to details that you otherwise might overlook.
Second, talking to yourself helps you to remember things. A simple, “I’m putting the keys on the table near the door,” can help you remember where your keys are. I recently found myself in one city with an airplane ticket home from another city. I found a friendly airline agent who helped me change tickets at not cost. While I was waiting I said to myself, “Her surname is So and So, but she doesn’t look like one. And her first name is the same as that woman’s.” The next day when I was to leave the airline said they wouldn’t honor my ticket, since it was from another city. I explained that Ms. So and So said… It was clear that if I had just said, “Some agent said…” that they wouldn’t have honored the ticket, but because I new the agent’s name, which I had memorized by accident, they honored the ticket.
Third, research on problem solving shows that if you talk out loud when working on a problem, particularly a complex problem, then you solve the problem more quickly. Japanese math classrooms, for example, are very noisy. All of the kids talk out loud while working. In comparison with their American counterparts, these kids score on average 25% higher.
If you can’t remember, try it doing it anyway
You have probably had the experience of not being able to tell somebody a phone number until you dialed it. Or perhaps you have given poor directions to a place you can easily drive to. This happens because we are able to remember procedures and tasks better than specific step-by-step information. The other side of the coin is that you shouldn’t think somebody doesn’t know how to do something, just because she can’t tell you how to do it. For example, a colleague might not be able to explain to you how to do something on the computer. If you have reason to believe that she knows procedurally, you might ask her to show you how she does it.
This explaining-doing gap has large implications in the workplace and in schools. Too often we don’t look at what people can actually do. Instead, we listen to their talk about the subject. I’ve seen tests in schools that favor those who don’t actually know how to do a thing, but who can talk their way through it and I have seen mechanics tests that ask for the words about how to repair cars, but don’t measure actual car repair. If you are assessing others, look at what they can do. If you are being assessed, show people what you can do.
Use Stealth Health
The principle is simple enough: Eat a variety of healthy foods, eat less junk, and exercise more. The question isn’t the principle. The question is How? I use Weber’s Law, which states that you can’t detect a difference in stimuli that is less than 10%. Have somebody lift a 50 and a 51 pound weight and they will have a hard time telling them apart. I use something more like a 1% difference, but I do so with wicked persistence. I begin by eating one, just one, more leaf of lettuce and one, and only one, less spoonful of ice cream. I take just one flight of stairs. When I have grown completely accustomed to this level of change, then I take the next baby step. When if I go nuts and eat a pint of chocolate chip? These things happen, but I know the difference between a blip and a trend. The pint of chocolate chip is a blip. The general trend is toward greater health. This approach has an added benefit in that I haven’t told everybody I’m on a health kick so when they see me down the pint of chocolate chip, I don’t feel embarrassed. I say to myself, tomorrow is another day and I’ll get back on track.
Learn Key Concepts
Efficiency: Getting things done right.
Effectiveness: Getting the right things done.
Capital intensive: Requiring lots of money to accomplish.
Labor intensive: Requiring lots of work to accomplish.
Quality: Not what you put into a thing; what somebody else gets out of it.
Emergency: A time to break the rules, as when you speed to get somebody to the hospital before he dies.
Sunk cost: Money or effort spent. It is to be ignored so that you don’t risk sending good money after bad. Instead focus on opportunity cost.
Opportunity cost: The next best thing you could have done with your time or money. That which you gave up by choosing what you chose.
Marginal analysis: How a small change in one thing can have a large effect in another, as when the difference between winning and losing is only a 0.001 seconds and the difference in payout is $100,000.
Intelligence: Learning from your mistakes.
Wisdom: Learning from the mistakes of others.
Use Your Attitude to Your Advantage
• Believe that you can. When confronted with a seemingly nasty problem or an apparently complex mathematical formula, people often give up without even trying to work on it. Often, however, with just a little effort you can solve such problems. An author wouldn’t put an equation in a book if it were beyond most readers. A surprising number of problems are solvable with a little brainwork. Don’t immediately think that you can’t solve a problem. Set an alarm for 10 minutes and give it a try.
• Give yourself a few loopholes. Dieters, for example, will often say, “I can’t have any sweets.” Then when they have a doughnut for breakfast, they see themselves failures and give up on the diet. Without an occasional loophole, a single incident can destroy your entire program of commitment. This dieters’ wisdom is transferable to the workplace as well. It is important to make safety valves that exact a price for disobedience, but that also permit the occasional mistake. It is equally important to keep exceptions exceptional.
• Be wary of your own good intentions. Many people believe that if they have good intentions, that is enough. They are wrong. Results are what matter. Suppose your child is sick. Which would you rather have, a doctor with the best of intentions, who ends up killing the child, or a greedy jerk who just wants the insurance money, but who cures your child? Measure by results rather than by intentions. Get feedback on your actions. Was the result as good as you intended?
• Adapt a problem-solving orientation. An important step in successful problem-solving is simply to engage the problem as a problem. A somewhat extreme example that illustrates the point is that Nobel Prize winning physicist Richard Feynman used to go to bars, but could never pick up a woman. He said to himself: “This is a problem. Engage problem-solving mode.” So he interviewed ‘experts,’ men who seemed to have no problem meeting women in bars. He learned their secrets and had no problem picking up women in bars.
• Think, then react. A common cause of self-defeating behavior is for people to react to a situation before they fully understand it. The end up voting against things they would vote for, sabotaging their own self interest, and working against their own goals. Make sure you understand what you are reacting to before you react.
Treat the Symptom
There are a surprising number of problems that we can solve by not seeking the deeper cause, but by simply treating the symptom. Take procrastination, for example. In some sense you may be putting off doing something because of some Freudian conflict with your parents, but this can be made irrelevant. Figure out not why you procrastinate, but how. Keep a list: rearrange office supplies, clean the house, surf the internet, so on. Then when you catch yourself doing one of these activities stop and get back to work. That’s it.
Similarly, while you are working, if you find yourself distracted by other things you need to remember or do, write them down in a list. Often, writing them down will purge them temporarily and allow you to focus on what is at hand. Write it and forget it, at least for the moment.
Finally, while poet T.S. Eliot said that we are distracted from distraction by distraction, management guru Peter Drucker said that focus is the key to success. A simple trick to getting back on task once distracted is to take a moment to leave a marker. You are reading something. The phone rings. Place a sticky note next to where you were.
Ease the Load
While it is true that there are many tricks for improving memory, it is also true that there are many ways to avoid needing to rely on your memory.
• Leave written reminders for yourself in places that you pass throughout the day. A sticky note on your desk phone could help you remember to call your child’s doctor. A piece of tape on your watch with a note saying, “Mom” could help you remember to send Mother’s Day flowers. A large note on top of your briefcase could remind you to stop in the mailroom on your way out of work. Take advantage of your own established routines to leave yourself reminders.
• Use a timer with an alarm to remind you of the important things you need to do during the day, such as to make your conference call, finish the laundry, or leave the office in time to make a meeting across town. In the meantime, you will not be preoccupied with checking the clock every couple of minutes – you need only to wait for the alarm.
• When you have a good idea seize the moment and remind yourself. If you think of a good idea for work while watching a TV show at home over the weekend, call your extension and leave a message on your voice mail to help remind you of your insight. Or call your answering machine at home to leave reminders for yourself about things you need to do that evening. Don’t let your inspiration slip away. You will check your voicemail first thing in the morning anyway. Use available technology to remind yourself of brilliant ideas, your child’s soccer game, or just to take out the trash.
• A “memory pocket” is a specific place in your coat, bag, home or office in which ‘reminders to self’ are put. This is where bills that need to be paid, list of calls to make, or supplies to buy may be kept. Once you are accustomed to using this specified location as a place to put reminders, it will become habitual to check this place.
• Your greatest weapon in fighting absentmindedness is order. Create order in your life and reduce absentmindedness by using regular fixed places for all those things you waste time looking for. If you spend time needlessly looking for your car keys, decide once and for all on one place to rest them when you arrive home each day. Put them there consciously until it is just a reflex and you don’t have to think about it.
• Establish a productive work routine. I had a boring class in graduate school that had a huge reading load. I figured that I needed to read an article a day everyday or I’d not pass the class so I made a rule: No breakfast until I’ve read an article. I had some very late breakfasts, but I stuck to the rule and got an A in the class.
• The longer you wait to do something, the more likely you are to forget to do it so as much as possible, do a thing as soon as you think of it.
You can recognize things that you can’t recall. For example, one Easter morning in Kennesaw, Georgia the water pump on my old car gave out. While I was waiting in the auto repair shop a man came in and said, “I stayed in a hotel last night, but I can’t remember the name. It had a big yellow sign with red letters.” The repair guys gave him a blank stare so I said, “Look in the phone book.” Speaking slowly and louder, he repeated, “I can’t remember the name.” I said, “Recognition is stronger than recall.” He looked in the phone book, looked surprised, thanked me, and went to his hotel.
Mix It Up
When studying a variety of subjects or working on a variety of projects, it is more difficult to do similar things right after each other than dissimilar things. Huh? For example, don’t study English then your foreign language then math then science. Instead, study English, then math, then the foreign language, then science. Don’t work on a report, then a presentation, then the budget, then taxes. Reorganize them so that the sequence goes: words, numbers, words, numbers so that you maximize the differences between topics each time you move to the next one.
I often organize my work into a stack such that I counterbalance words and numbers, computer and paper, reading and phone. Then I set a countdown timer for ten minutes and work my way through the stack, forcing myself to spend at least at least ten minutes working on the unpleasant tasks. Importantly, the time doesn’t have an alarm so that if I am enjoying the work, I am not distracted when time runs out and can keep working.
Appreciate Your Fallibility
Notice how often people distrust their memories, but not their judgment. Psychologists have developed thousands of experiments that demonstrate just how poor we are at making judgments, judgments of any kind – moral, business, even perceptual. You can get people to misjudge the length of a one-inch line by as much as six inches if other people in the room say the line is longer.
So? So several things. First, keep track of your judgments so you can determine the things you are good at judging and the things you aren’t. Second, when you make a decision include ways to get feedback to determine how well the decision worked out. Third, decide an issue early. Then give your decision a time to rest and approach the issue from another angle to see if you come to the same conclusion. Forth, know that you could be wrong and be open to information that will show your fallibility. Although it is not fun to be wrong, it is much worse to persist in being wrong.
Finally, appreciating your fallibility is an important way to cultivate your judgment. And a cultivated judgment is a rare and precious thing indeed.
Watch Your Metaphors
Make yourself aware of underlying metaphors in your communication. Metaphors can be very useful when you use them for elaboration of a topic. For example, we often speak about verbal arguments in terms of war metaphors. (Your claims are indefensible. He attacked every weak point in my argument. He shot down all of my arguments. If you use that strategy, he’ll wipe you out.) Metaphors structure much of our thinking and communication. But the metaphors we use can also limit us in subtle ways. If you always think of arguments in terms of war, you may miss out on the benefits of thinking of the situation differently, perhaps in terms of a game, or a dance.
You can also turn this metaphor-speak to your advantage. When trying to join a new group you can use the same metaphors they use to better “speak their language.”
Test, Retest
People often study as subject until they can get 100% right on a test of their understanding of the subject. While this is a sensible approach, it turns out that about 10% of the correct answers is composed of guesswork, short-term memory, and information not fully learned. The best approach is to study until you get 100%. Then wait a day or two and test again. The second test is a much better measure of your grasp of the material.
Testing is important in another important way, in the sense of getting feedback. This can be as simple as pulling on the door you just locked to make sure it is truly locked to far larger issues. For example, Peter Drucker says that quality isn’t what you put into a thing. Quality is what somebody else gets out of it. Therefore, you can’t answer the question of whether your service is any good. Only your customers can. You don’t get to say whether you are a good leader. Your employees answer that.
Even more generally, good intentions alone are not enough. Get feedback to determine whether you are getting the right results.
Build a Mistake Hierarchy
Magicians provide an excellent example of a ‘mistake hierarchy.’ A good card magician knows that many tricks depend on luck and that luck is a fickle friend. So, you tell the audience you’re going to do a trick. Without telling them what kind of trick, you go for the one-in-a-thousand effect, attempting the most difficult one first. It almost never works, of course, so you glide into a second try, for tricks that work one-in-a-hundred times. When that fails, as it almost always does, slide into the third-level trick, which only works about one time in ten. If all else fails you go for the failsafe effect, which won’t wow the crowd out of their socks, but at least it’s a trick that works.
It is common for people to wish for something big: “I’ll win the lottery. If that doesn’t work, I’ll get promoted at work. If that doesn’t work, I’ll go back to school.” The problem with this approach is that the different plans are not aligned. Your plans should be more like a staged defense: If they breach the wall, we’ll fall back to the keep.
Go for something big and have a backup plan right behind it in case it fails and one behind that and one behind that…
Talk to Yourself
Talking to yourself has several benefits. First, it forces you to process information in a different way. Perhaps you have a picture in your head of what you mean; putting it into words can draw your attention to details that you otherwise might overlook.
Second, talking to yourself helps you to remember things. A simple, “I’m putting the keys on the table near the door,” can help you remember where your keys are. I recently found myself in one city with an airplane ticket home from another city. I found a friendly airline agent who helped me change tickets at not cost. While I was waiting I said to myself, “Her surname is So and So, but she doesn’t look like one. And her first name is the same as that woman’s.” The next day when I was to leave the airline said they wouldn’t honor my ticket, since it was from another city. I explained that Ms. So and So said… It was clear that if I had just said, “Some agent said…” that they wouldn’t have honored the ticket, but because I new the agent’s name, which I had memorized by accident, they honored the ticket.
Third, research on problem solving shows that if you talk out loud when working on a problem, particularly a complex problem, then you solve the problem more quickly. Japanese math classrooms, for example, are very noisy. All of the kids talk out loud while working. In comparison with their American counterparts, these kids score on average 25% higher.
If you can’t remember, try it doing it anyway
You have probably had the experience of not being able to tell somebody a phone number until you dialed it. Or perhaps you have given poor directions to a place you can easily drive to. This happens because we are able to remember procedures and tasks better than specific step-by-step information. The other side of the coin is that you shouldn’t think somebody doesn’t know how to do something, just because she can’t tell you how to do it. For example, a colleague might not be able to explain to you how to do something on the computer. If you have reason to believe that she knows procedurally, you might ask her to show you how she does it.
This explaining-doing gap has large implications in the workplace and in schools. Too often we don’t look at what people can actually do. Instead, we listen to their talk about the subject. I’ve seen tests in schools that favor those who don’t actually know how to do a thing, but who can talk their way through it and I have seen mechanics tests that ask for the words about how to repair cars, but don’t measure actual car repair. If you are assessing others, look at what they can do. If you are being assessed, show people what you can do.
Use Stealth Health
The principle is simple enough: Eat a variety of healthy foods, eat less junk, and exercise more. The question isn’t the principle. The question is How? I use Weber’s Law, which states that you can’t detect a difference in stimuli that is less than 10%. Have somebody lift a 50 and a 51 pound weight and they will have a hard time telling them apart. I use something more like a 1% difference, but I do so with wicked persistence. I begin by eating one, just one, more leaf of lettuce and one, and only one, less spoonful of ice cream. I take just one flight of stairs. When I have grown completely accustomed to this level of change, then I take the next baby step. When if I go nuts and eat a pint of chocolate chip? These things happen, but I know the difference between a blip and a trend. The pint of chocolate chip is a blip. The general trend is toward greater health. This approach has an added benefit in that I haven’t told everybody I’m on a health kick so when they see me down the pint of chocolate chip, I don’t feel embarrassed. I say to myself, tomorrow is another day and I’ll get back on track.
Learn Key Concepts
Efficiency: Getting things done right.
Effectiveness: Getting the right things done.
Capital intensive: Requiring lots of money to accomplish.
Labor intensive: Requiring lots of work to accomplish.
Quality: Not what you put into a thing; what somebody else gets out of it.
Emergency: A time to break the rules, as when you speed to get somebody to the hospital before he dies.
Sunk cost: Money or effort spent. It is to be ignored so that you don’t risk sending good money after bad. Instead focus on opportunity cost.
Opportunity cost: The next best thing you could have done with your time or money. That which you gave up by choosing what you chose.
Marginal analysis: How a small change in one thing can have a large effect in another, as when the difference between winning and losing is only a 0.001 seconds and the difference in payout is $100,000.
Intelligence: Learning from your mistakes.
Wisdom: Learning from the mistakes of others.
Use Your Attitude to Your Advantage
• Believe that you can. When confronted with a seemingly nasty problem or an apparently complex mathematical formula, people often give up without even trying to work on it. Often, however, with just a little effort you can solve such problems. An author wouldn’t put an equation in a book if it were beyond most readers. A surprising number of problems are solvable with a little brainwork. Don’t immediately think that you can’t solve a problem. Set an alarm for 10 minutes and give it a try.
• Give yourself a few loopholes. Dieters, for example, will often say, “I can’t have any sweets.” Then when they have a doughnut for breakfast, they see themselves failures and give up on the diet. Without an occasional loophole, a single incident can destroy your entire program of commitment. This dieters’ wisdom is transferable to the workplace as well. It is important to make safety valves that exact a price for disobedience, but that also permit the occasional mistake. It is equally important to keep exceptions exceptional.
• Be wary of your own good intentions. Many people believe that if they have good intentions, that is enough. They are wrong. Results are what matter. Suppose your child is sick. Which would you rather have, a doctor with the best of intentions, who ends up killing the child, or a greedy jerk who just wants the insurance money, but who cures your child? Measure by results rather than by intentions. Get feedback on your actions. Was the result as good as you intended?
• Adapt a problem-solving orientation. An important step in successful problem-solving is simply to engage the problem as a problem. A somewhat extreme example that illustrates the point is that Nobel Prize winning physicist Richard Feynman used to go to bars, but could never pick up a woman. He said to himself: “This is a problem. Engage problem-solving mode.” So he interviewed ‘experts,’ men who seemed to have no problem meeting women in bars. He learned their secrets and had no problem picking up women in bars.
• Think, then react. A common cause of self-defeating behavior is for people to react to a situation before they fully understand it. The end up voting against things they would vote for, sabotaging their own self interest, and working against their own goals. Make sure you understand what you are reacting to before you react.
Treat the Symptom
There are a surprising number of problems that we can solve by not seeking the deeper cause, but by simply treating the symptom. Take procrastination, for example. In some sense you may be putting off doing something because of some Freudian conflict with your parents, but this can be made irrelevant. Figure out not why you procrastinate, but how. Keep a list: rearrange office supplies, clean the house, surf the internet, so on. Then when you catch yourself doing one of these activities stop and get back to work. That’s it.
Similarly, while you are working, if you find yourself distracted by other things you need to remember or do, write them down in a list. Often, writing them down will purge them temporarily and allow you to focus on what is at hand. Write it and forget it, at least for the moment.
Finally, while poet T.S. Eliot said that we are distracted from distraction by distraction, management guru Peter Drucker said that focus is the key to success. A simple trick to getting back on task once distracted is to take a moment to leave a marker. You are reading something. The phone rings. Place a sticky note next to where you were.
Ease the Load
While it is true that there are many tricks for improving memory, it is also true that there are many ways to avoid needing to rely on your memory.
• Leave written reminders for yourself in places that you pass throughout the day. A sticky note on your desk phone could help you remember to call your child’s doctor. A piece of tape on your watch with a note saying, “Mom” could help you remember to send Mother’s Day flowers. A large note on top of your briefcase could remind you to stop in the mailroom on your way out of work. Take advantage of your own established routines to leave yourself reminders.
• Use a timer with an alarm to remind you of the important things you need to do during the day, such as to make your conference call, finish the laundry, or leave the office in time to make a meeting across town. In the meantime, you will not be preoccupied with checking the clock every couple of minutes – you need only to wait for the alarm.
• When you have a good idea seize the moment and remind yourself. If you think of a good idea for work while watching a TV show at home over the weekend, call your extension and leave a message on your voice mail to help remind you of your insight. Or call your answering machine at home to leave reminders for yourself about things you need to do that evening. Don’t let your inspiration slip away. You will check your voicemail first thing in the morning anyway. Use available technology to remind yourself of brilliant ideas, your child’s soccer game, or just to take out the trash.
• A “memory pocket” is a specific place in your coat, bag, home or office in which ‘reminders to self’ are put. This is where bills that need to be paid, list of calls to make, or supplies to buy may be kept. Once you are accustomed to using this specified location as a place to put reminders, it will become habitual to check this place.
• Your greatest weapon in fighting absentmindedness is order. Create order in your life and reduce absentmindedness by using regular fixed places for all those things you waste time looking for. If you spend time needlessly looking for your car keys, decide once and for all on one place to rest them when you arrive home each day. Put them there consciously until it is just a reflex and you don’t have to think about it.
• Establish a productive work routine. I had a boring class in graduate school that had a huge reading load. I figured that I needed to read an article a day everyday or I’d not pass the class so I made a rule: No breakfast until I’ve read an article. I had some very late breakfasts, but I stuck to the rule and got an A in the class.
• The longer you wait to do something, the more likely you are to forget to do it so as much as possible, do a thing as soon as you think of it.
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