First of all Happy Thanksgiving to everyone, if you're reading this I congratulate you on a) not being in a carb induced coma and b) reading on a day of rest.
Thanksgiving is a day when people hang back and relax with family and friends, eat a lot, watch football, and fall asleep. All these things have their place at some point during the day and should be enjoyed thoroughly, but I'd also like to suggest something wholesome and developmental.
I've been looking at the day like this: today we unwind and maybe throw the diet out the window for a day, but its also a great opportunity to reflect and map some stuff out. All the everyday garbage is out of our heads and we can now see the road ahead objectively, and that's a huge advantage that shouldn't go to waste!
To use a crude metaphor, we're both the cast-iron and the metalworker working on it...today's the day to remove yourself from the flame and allow yourself to cool to see what shape has taken form. Make some decisions as to what you want to become and then thrust yourself back into the fire.
Use today to look at how far you've come and what you've done great these last few months. Similarly, look at what you've done not so great. Start to see how both the good and the bad have contributed to your current quality of life. Are you where you want to be? If not, are you on the right path? How do you know? What indicators have you chosen to let you know at this point?
If these are things you haven't considered in the past, its never to late to start! What to you want to do by, let's say, January? Why do you want to do it? What will you have gained from it? How do you think that will make you feel? What are you willing to do (or not do!) everyday to succeed? How do you know you've achieved it? And most importantly...how will this enhance the quality of life for you forever once you've got it? After all, nothing is worth accomplishing if the effects are only temporary or unsustainable.
These types of questions really help to strip back the layers of bologna when we are trying to make a change, but really aren't committing to it. If anything these types of questions can help realize just how unimportant something is to us! A lot of people have weight loss goals but find their only motivation is to look better. That's just the surface! They never considered how they'd feel about themselves, what they'd learn from it, why its important and how their success will enhance their lives beyond the goal itself.
These types of layer-penetrating questions can help us reach deeper levels of desire for success so that we are completely aligned with our goals for transformation. Wishing the best of holiday weekends to you, your families, and your friends!
Thursday, November 25, 2010
Wednesday, November 24, 2010
Why Small and Micro-Cap Companies Are Better For Your Portfolio
I have MSNBC on in the background and they just mentioned that Cisco (CSCO) may now be undervalued due to its recent drop. A quick earnings power calculation using an 8% cost of capital due to their financing mix shows actually that they're pretty fairly valued in my opinion (plus or minus a dollar) which got me thinking about market prices in general.
A lot of investors, especially value investors, like to purchase companies selling for less than what they think they would be sold for. However, the inherent error in this thinking is that it leads one to believe that the market is pricing companies at how much they are truly worth, when its clear that it is pricing companies as a going concern. What does this mean? It means that the market price is only reflective of the expected future earnings power of the companies assets, not its buyout value.
In other words, let's say I have a unique lemonade machine that makes the greatest lemonade ever and I can make $10 a year with it by opening a lemonade stand. Assuming I have a 10% cost of capital (for a lemonade stand, I know this is ridiculous but just to prove a point!), the earnings power of that lemonade stand would be $100 ($10/.10). This $100 would be the reflected market capitalization if my stand was publicly traded. If however, you came along and offered to buy me out, it really wouldn't make sense for me to sell it to you only for a $100.
But that's what it's worth right? Well yes, but its worth that much assuming nothing changes (as a going concern!). However, if you come in and offer to buy, suddenly the perceived value of my stand increases. As the owner I start to think "this is greatest lemonade stand in the world, they'll make a killing...and what about me? The only thing I know how to do is sell lemonade. Where can I find a stand of equal value once I sell? Nowhere! They better pay up then." So we have a small element of reflexivity coming into play here.
In a way, this happens in all acquisitions, that the very premise of an acquisition being proposed ups the perceived value of the entity from a going concern to a total buyout value. This is why when a potential acquisition is announced, the stock price jumps.When a possible acquisition manifests, suddenly book value and intangible asset value get factored in along with earnings power, which puts a premium on the original market price.
The positive outlook one could take from this then is that technically all public companies are undervalued to what they are really worth. The bad side about this is that "buyout" value will not justifiably manifest unless someone comes along to buy the company (it could manifest from market gyrations, but there's no fundamental basis to support this). With this in mind, what do you think the odds are of someone coming along and buying, say, Exxon-Mobil? ZERO!! Its one of the biggest companies in the world, who would even have the money to do so?
Which leads me to my premise that the individual investor has a better shot at having value realized by investing in smaller companies. Not only because smaller companies have a better chance at being acquired (that's a crapshoot, don't start trying to predict that stuff), but because less market participants are paying attention to them. If 10,000 CFA's are watching CSCO and valuing it accordingly so that the market prices it at around $19, what are the odds that all 10,000 CFA's and all the other market participants are wrong?
In the book The Wisdom of Crowds by James Surowiecki, he makes a point about this using the popular game show "Who Wants To Be A Millionaire." He noted that when someone Phoned a Friend, on average they received a correct answer about 65% of the time (actually seems pretty high to me!). Compare that to the Ask The Audience lifeline, which yielded a correct answer about 91% of the time. What does this tell you about market prices? They are usually right when lots of people are looking at them.
However, the less people looking at a company, the more of chance it could be unfairly valued. Perhaps only 100 CFA's looked at a particular small company, and because their priorities lie in getting through a ton of small caps and micro caps to move onto bigger and better projects, they might have overlooked crucial information. And that is where the individual investor's edge comes in. Those who are willing to do their homework and find value where a small amount of people were too rushed or lazy to look will get the payoff when the fundamentally supported value manifests in the price.
Something to think about...
A lot of investors, especially value investors, like to purchase companies selling for less than what they think they would be sold for. However, the inherent error in this thinking is that it leads one to believe that the market is pricing companies at how much they are truly worth, when its clear that it is pricing companies as a going concern. What does this mean? It means that the market price is only reflective of the expected future earnings power of the companies assets, not its buyout value.
In other words, let's say I have a unique lemonade machine that makes the greatest lemonade ever and I can make $10 a year with it by opening a lemonade stand. Assuming I have a 10% cost of capital (for a lemonade stand, I know this is ridiculous but just to prove a point!), the earnings power of that lemonade stand would be $100 ($10/.10). This $100 would be the reflected market capitalization if my stand was publicly traded. If however, you came along and offered to buy me out, it really wouldn't make sense for me to sell it to you only for a $100.
But that's what it's worth right? Well yes, but its worth that much assuming nothing changes (as a going concern!). However, if you come in and offer to buy, suddenly the perceived value of my stand increases. As the owner I start to think "this is greatest lemonade stand in the world, they'll make a killing...and what about me? The only thing I know how to do is sell lemonade. Where can I find a stand of equal value once I sell? Nowhere! They better pay up then." So we have a small element of reflexivity coming into play here.
In a way, this happens in all acquisitions, that the very premise of an acquisition being proposed ups the perceived value of the entity from a going concern to a total buyout value. This is why when a potential acquisition is announced, the stock price jumps.When a possible acquisition manifests, suddenly book value and intangible asset value get factored in along with earnings power, which puts a premium on the original market price.
The positive outlook one could take from this then is that technically all public companies are undervalued to what they are really worth. The bad side about this is that "buyout" value will not justifiably manifest unless someone comes along to buy the company (it could manifest from market gyrations, but there's no fundamental basis to support this). With this in mind, what do you think the odds are of someone coming along and buying, say, Exxon-Mobil? ZERO!! Its one of the biggest companies in the world, who would even have the money to do so?
Which leads me to my premise that the individual investor has a better shot at having value realized by investing in smaller companies. Not only because smaller companies have a better chance at being acquired (that's a crapshoot, don't start trying to predict that stuff), but because less market participants are paying attention to them. If 10,000 CFA's are watching CSCO and valuing it accordingly so that the market prices it at around $19, what are the odds that all 10,000 CFA's and all the other market participants are wrong?
In the book The Wisdom of Crowds by James Surowiecki, he makes a point about this using the popular game show "Who Wants To Be A Millionaire." He noted that when someone Phoned a Friend, on average they received a correct answer about 65% of the time (actually seems pretty high to me!). Compare that to the Ask The Audience lifeline, which yielded a correct answer about 91% of the time. What does this tell you about market prices? They are usually right when lots of people are looking at them.
However, the less people looking at a company, the more of chance it could be unfairly valued. Perhaps only 100 CFA's looked at a particular small company, and because their priorities lie in getting through a ton of small caps and micro caps to move onto bigger and better projects, they might have overlooked crucial information. And that is where the individual investor's edge comes in. Those who are willing to do their homework and find value where a small amount of people were too rushed or lazy to look will get the payoff when the fundamentally supported value manifests in the price.
Something to think about...
Monday, September 27, 2010
Our Most Important Attribute
We all know people who aren't really going anywhere or doing anything. We look at them and we think "why don't they just do this?" or "if they only did that, they'd be all set." For some reason, they just can't seem to get ahead and get out of the rut. Alternatively, we know some people who for some reason just seem to be unstoppable, they're heading straight for the sky on a rocketship. What separates these two types of people?
We think well they must have a good attitude, that's why they're so successful and all those people who are stuck in a rut have a bad attitude about things and that's why they are where they are. The problem with this is that we ignore the reflexivity of the situation: that perhaps the person has a bad attitude because he's in a rut, or the person has a good attitude because he's on the up and up.
So where does each of these situations arise from? I like to think that each person's situation is, at the core, a result of one attribute. This attribute is the most important factor in both business and personal relationships and creates good fortune for you through others consistently into the future. That attribute is integrity.
When we say "integrity," we're talking about the definition of ourselves as a person, how reliable we are to others, and how we go about our lives when nobody is looking. Probably the most important component of these is the reliability factor.
When we think back to the past, we all start out perfectly trusting of others and then at some point we got burned. It hurt us so much that we resolve that we can't trust anybody anymore, we'll just get hurt and we're not going to put ourselves in that position again. But our very nature as humans is to want to trust people (that's how we got burned in the first place!), we just have developed this "shell" along the way to protect ourselves.
Instead of thinking "never trust anybody" and concentrating on the symptom, let's focus on the cause and work on that. When we work on ourselves first from the inside, we have the power to change our world on the outside. If we strive every day to work on our integrity...to do what we say we're going to do, to be there for others when they are relying on us, and to live by our own standards, we are putting things into motion on the outside. People over time will begin to see us as someone they can trust and someone who actually gets things done, and in return they will want to be the same back.
Let's look at an example of how vital integrity is. Let's assign a scale to integrity: if we always do what we say we're going to do, we'll say we have 100% integrity. If we are credible most of the time, we'll say we have 80-90% integrity. If we are credible some of the time we'll say we have 60-70% integrity, and so on and so forth all the way down to 0% integrity.
So let's say we are at work and figuratively speaking, we have a 100% integrity (unlikely as unexpected events do occur and nobody's perfect!). If we say we are going to do something by a certain day and we don't, we have just gone from being credible all of the time to being credible most of the time. Now on the surface that's not too bad, we might say "well nobody's perfect, John. We're still reliable most of the time" and that'd be correct. However, if we look at the scale we've assigned, just from missing that one deadline we've now dropped our credibility 10-20%! That's huge! You tell any investor they just lost 10-20% of their money and they would be fuming. That's because they know that in order to get to their original goal of a proper return, now they will now need to earn back 30-40%! A lot harder to do than just the original 10-20% they needed.
It works the same way in personal relationships. If we show ourselves to be unreliable in any situation, we no longer have to show that we are x reliable, we now need to show that we are 2x reliable. If we let a friend down, we now have to work harder to earn that trust back. Why put the extra workload on ourselves?
The dichotomy of the situation is that in the social world, being unreliable can actually create social value on the surface. Social value in the sense that if we cancel on someone or don't show up, we are inconspicuously communicating "hey I've got options, I'm wanted by people, I'm not always available." However, how long do you think that person is going to put up with that before we just start to look like a jerk?
I remember I used to always be about creating social value. A few years ago I had just started to date this girl, and when I would compliment her, I used always do what's called a takeaway. A takeaway is when you give someone a compliment but you in effect, take it away at the last minute to leave them wanting more. My favorite one I used to use was "don't let that go to your head." So I could say to her "you know, you really know how to hold my attention...but don't let that go to your head." In essence, what this is is a protection mechanism that says in less obvious terms "I think you are this, but don't start taking advantage of me now that you know that because I've got options."
The fact of the matter is that a takeaway works on the surface, it does create social value no matter who you give it to. However, there came a day when I was on the phone with her and I gave her a compliment and did the usual takeaway and I'll never forget what she said to me. She said "you don't need to do that anymore, we're past that now." I was floored, but I learned something valuable. That as relationships begin to deepen, all those little social value mechanisms we use start to lose effectiveness because they now know who we really are.
The point I'm making is this, that if we decide to show who we really are from the beginning, we can create an even bigger impression on someone. That while others may be doing these social value parlor tricks and backflips with us all the time, we remain consistent in our integrity and in our belief of who we are. When the relationship does begin to deepen and the players have to show their cards, your cards are what you have been representing to them all along. This makes such a huge impact on people and inspires a great deal of admiration because they think "wow this person was exactly who I thought they were from the beginning." How often can we think that about the people we meet?
That makes us inspirational because they have just learned something valuable from us through example. And what would you rather people think about you, "hey they are pretty cool" or "wow, they are really an inspiration"?
I think the difference is clear.
We think well they must have a good attitude, that's why they're so successful and all those people who are stuck in a rut have a bad attitude about things and that's why they are where they are. The problem with this is that we ignore the reflexivity of the situation: that perhaps the person has a bad attitude because he's in a rut, or the person has a good attitude because he's on the up and up.
So where does each of these situations arise from? I like to think that each person's situation is, at the core, a result of one attribute. This attribute is the most important factor in both business and personal relationships and creates good fortune for you through others consistently into the future. That attribute is integrity.
When we say "integrity," we're talking about the definition of ourselves as a person, how reliable we are to others, and how we go about our lives when nobody is looking. Probably the most important component of these is the reliability factor.
When we think back to the past, we all start out perfectly trusting of others and then at some point we got burned. It hurt us so much that we resolve that we can't trust anybody anymore, we'll just get hurt and we're not going to put ourselves in that position again. But our very nature as humans is to want to trust people (that's how we got burned in the first place!), we just have developed this "shell" along the way to protect ourselves.
Instead of thinking "never trust anybody" and concentrating on the symptom, let's focus on the cause and work on that. When we work on ourselves first from the inside, we have the power to change our world on the outside. If we strive every day to work on our integrity...to do what we say we're going to do, to be there for others when they are relying on us, and to live by our own standards, we are putting things into motion on the outside. People over time will begin to see us as someone they can trust and someone who actually gets things done, and in return they will want to be the same back.
Let's look at an example of how vital integrity is. Let's assign a scale to integrity: if we always do what we say we're going to do, we'll say we have 100% integrity. If we are credible most of the time, we'll say we have 80-90% integrity. If we are credible some of the time we'll say we have 60-70% integrity, and so on and so forth all the way down to 0% integrity.
So let's say we are at work and figuratively speaking, we have a 100% integrity (unlikely as unexpected events do occur and nobody's perfect!). If we say we are going to do something by a certain day and we don't, we have just gone from being credible all of the time to being credible most of the time. Now on the surface that's not too bad, we might say "well nobody's perfect, John. We're still reliable most of the time" and that'd be correct. However, if we look at the scale we've assigned, just from missing that one deadline we've now dropped our credibility 10-20%! That's huge! You tell any investor they just lost 10-20% of their money and they would be fuming. That's because they know that in order to get to their original goal of a proper return, now they will now need to earn back 30-40%! A lot harder to do than just the original 10-20% they needed.
It works the same way in personal relationships. If we show ourselves to be unreliable in any situation, we no longer have to show that we are x reliable, we now need to show that we are 2x reliable. If we let a friend down, we now have to work harder to earn that trust back. Why put the extra workload on ourselves?
The dichotomy of the situation is that in the social world, being unreliable can actually create social value on the surface. Social value in the sense that if we cancel on someone or don't show up, we are inconspicuously communicating "hey I've got options, I'm wanted by people, I'm not always available." However, how long do you think that person is going to put up with that before we just start to look like a jerk?
I remember I used to always be about creating social value. A few years ago I had just started to date this girl, and when I would compliment her, I used always do what's called a takeaway. A takeaway is when you give someone a compliment but you in effect, take it away at the last minute to leave them wanting more. My favorite one I used to use was "don't let that go to your head." So I could say to her "you know, you really know how to hold my attention...but don't let that go to your head." In essence, what this is is a protection mechanism that says in less obvious terms "I think you are this, but don't start taking advantage of me now that you know that because I've got options."
The fact of the matter is that a takeaway works on the surface, it does create social value no matter who you give it to. However, there came a day when I was on the phone with her and I gave her a compliment and did the usual takeaway and I'll never forget what she said to me. She said "you don't need to do that anymore, we're past that now." I was floored, but I learned something valuable. That as relationships begin to deepen, all those little social value mechanisms we use start to lose effectiveness because they now know who we really are.
The point I'm making is this, that if we decide to show who we really are from the beginning, we can create an even bigger impression on someone. That while others may be doing these social value parlor tricks and backflips with us all the time, we remain consistent in our integrity and in our belief of who we are. When the relationship does begin to deepen and the players have to show their cards, your cards are what you have been representing to them all along. This makes such a huge impact on people and inspires a great deal of admiration because they think "wow this person was exactly who I thought they were from the beginning." How often can we think that about the people we meet?
That makes us inspirational because they have just learned something valuable from us through example. And what would you rather people think about you, "hey they are pretty cool" or "wow, they are really an inspiration"?
I think the difference is clear.
Wednesday, September 15, 2010
Life is Only As Good As The Questions We Ask Ourselves
It hasn't been until now that I've realized the value of a good question. A good question has the power to persuade, direct thought, and change lives. Theories are formed and crushed, sales are made, and relationships are created through asking the right questions. I always knew that questions were how we learned, but I never put together that the questions we ask directly affect the quality of our lives.
If we think about all the great people that have lived throughout time, the very essence of who they are or were is a result of the questions they asked themselves and others. Why was Albert Einstein so much more intelligent than other scientists of his era? Because he asked himself questions that no other scientist bothered to ask. Questions like "if I were traveling at the speed of light and I held up a mirror, would I be able to see my reflection?" He concluded that no, you could not see your reflection, but that's a whole other fascinating discussion! However, this question went on to form the basis for the theory of relativity. The searching for the answers to his own questions made him one of the most brilliant minds to have ever lived and he ended up changing the world forever.
A basic truth of life is that we cannot search for the answers we seek until we first know the correct question to ask. A common question people ask themselves is "what do I want to do with my life." Usually the answer is always the same..."I don't know." That's because that question is too large and it needs to be broken down. Its too large because we haven't analyzed what's important to us. Then and only then will we know how we can do what's most important to us every day to make our lives meaningful.
If we never became better at anything ever again, I can guarantee that if we become very good at asking good penetrating questions, we will never need to be better at anything else. Our lives would be so fulfilled through the enlightenment and knowledge we gain from asking the right questions because it is through asking questions that we become better at anything else.
Also, never underestimate the power of the most simple question in the world: Why? "Why" is such an effective tool for the mind because it forces intellectual penetration. When we ask ourselves "why" about anything, we cannot help but become curious and want to find out, well....why! And don't worry about not being able to find the answers right away, sometimes we have to backtrack to find out how we got somewhere in the first place before we can move forward again. We don't worry about these things and we know the answers will come eventually as long as we persistently and continually make an effort every day to ask a different question.
Hope that helps!
If we think about all the great people that have lived throughout time, the very essence of who they are or were is a result of the questions they asked themselves and others. Why was Albert Einstein so much more intelligent than other scientists of his era? Because he asked himself questions that no other scientist bothered to ask. Questions like "if I were traveling at the speed of light and I held up a mirror, would I be able to see my reflection?" He concluded that no, you could not see your reflection, but that's a whole other fascinating discussion! However, this question went on to form the basis for the theory of relativity. The searching for the answers to his own questions made him one of the most brilliant minds to have ever lived and he ended up changing the world forever.
A basic truth of life is that we cannot search for the answers we seek until we first know the correct question to ask. A common question people ask themselves is "what do I want to do with my life." Usually the answer is always the same..."I don't know." That's because that question is too large and it needs to be broken down. Its too large because we haven't analyzed what's important to us. Then and only then will we know how we can do what's most important to us every day to make our lives meaningful.
If we never became better at anything ever again, I can guarantee that if we become very good at asking good penetrating questions, we will never need to be better at anything else. Our lives would be so fulfilled through the enlightenment and knowledge we gain from asking the right questions because it is through asking questions that we become better at anything else.
Also, never underestimate the power of the most simple question in the world: Why? "Why" is such an effective tool for the mind because it forces intellectual penetration. When we ask ourselves "why" about anything, we cannot help but become curious and want to find out, well....why! And don't worry about not being able to find the answers right away, sometimes we have to backtrack to find out how we got somewhere in the first place before we can move forward again. We don't worry about these things and we know the answers will come eventually as long as we persistently and continually make an effort every day to ask a different question.
Hope that helps!
Wednesday, September 8, 2010
Rehab Hardrock and the Destruction of a Brand
Nightclubs rise, nightclubs fall...just the way of the entertainment industry. And while people are fickle and move on to new things quickly, it doesn't help if your making it easy for them.
I'm planning to go out to Las Vegas in January and have been watching a show on TruTV called Rehab: Party at the Hardrock. I liked watching the show because I love business and its like getting a crash course in everyday operations of a nightclub. Watching how the staff handled things and worked together to reach their fiscal goal was really something unique.
If you've never watched the show, the former general manager (GM), Justin got married and left the show and his position as the GM. When this happened, Matt, the Director of Nightlife at the Hardrock decided to take his spot as the "man in charge" both in the club and on the show. Due to Matt's "Torquemada & the Inquisition" management style, I saw this as a perfect opportunity to discuss both the principles and role of management within a company and why Matt is 100% ineffective as a manager.
Management's role in any business is the same: to lead and direct its employers into one orchestrated effort to make profits. Throughout history, you've had two styles of management: machiavellian and inspirational. Machiavellian management is based on Machiavelli's medieval work "The Prince" in which he says that it is better to rule by fear than by love. Interesting concept, considering Machiavelli by the time of his death was exiled from Italy...
Inspirational leadership works to inspire employee cohesion and morale. This is more of the leadership style that management great Peter Drucker, Steve Jobs, and Jack Welch have used to achieve their success. It is based on the fact that people will do their job better if they love the people, the environment, and the work they are doing. It's sole purpose is to bring out the best in people through communication, incentives, equity, and leadership.
Now that we're briefed on management itself, Rehab's success was based on Justin's leadership (former GM). Justin's management style was strict, yet fair and supportive. The employees worked together, formed friendships, and went above and beyond their call of duty. Rehab's present success is due to its past management action.
Now that Matt's in charge, its a regular occurrence during pre-shift meetings to threaten everybody that they will be fired. How does that style inspire people? Well, it doesn't. We've all had crappy bosses before and if we think back to their management style and how we responded, we pretty much would do just enough so that we wouldn't get fired. Helping other people was just too risky, as if we messed up something helping them, then it was our ass on the line.
The atmosphere this creates is an atmosphere of stress among the employees at Rehab now and the worse part about it is that the employees are pissed off when they deal with the customers who then spread that vibe to other customers. Its a vicious circle, one that starts from the top. There's an old saying that a company in nothing more than the shadow of the one man in charge and it stands true at Rehab.
The worse part about the whole Rehab situation is that most businesses can go on for a long time operating inefficiently simply because the only people who can see it happening is the employees. But they are televising this!!! Every disgusting act of management on Matt's part on how miserable the employees are is filmed and shown on National TV! Talk about destroying a brand! You can't help but feel tension and hatred when you watch the show, which is why I stopped. If you're feeling tense just watching it, how do you think it would feel to be there and have to deal with pissed off bartenders and a very rude staff? Its not their fault, they aren't their behavior, they are a reflection of their leader who is nothing less than inadequate.
In the end it comes down to this whether its a business or a human being, where you are today is a result of your past actions. Where you are tomorrow is a result of today's actions. Rehab's success today is not attributed to Matt's management, its because of Justin's. And I'd be willing to wager that Rehab's success in the future will start to decline to area competition (Wet Republic) unless Matt's management style changes (highly unlikely) or there is a change in management. One thing is for sure, that a great show about a great nightclub business is now nothing more than a celebrity version of Jerry Springer.
I'm planning to go out to Las Vegas in January and have been watching a show on TruTV called Rehab: Party at the Hardrock. I liked watching the show because I love business and its like getting a crash course in everyday operations of a nightclub. Watching how the staff handled things and worked together to reach their fiscal goal was really something unique.
If you've never watched the show, the former general manager (GM), Justin got married and left the show and his position as the GM. When this happened, Matt, the Director of Nightlife at the Hardrock decided to take his spot as the "man in charge" both in the club and on the show. Due to Matt's "Torquemada & the Inquisition" management style, I saw this as a perfect opportunity to discuss both the principles and role of management within a company and why Matt is 100% ineffective as a manager.
Management's role in any business is the same: to lead and direct its employers into one orchestrated effort to make profits. Throughout history, you've had two styles of management: machiavellian and inspirational. Machiavellian management is based on Machiavelli's medieval work "The Prince" in which he says that it is better to rule by fear than by love. Interesting concept, considering Machiavelli by the time of his death was exiled from Italy...
Inspirational leadership works to inspire employee cohesion and morale. This is more of the leadership style that management great Peter Drucker, Steve Jobs, and Jack Welch have used to achieve their success. It is based on the fact that people will do their job better if they love the people, the environment, and the work they are doing. It's sole purpose is to bring out the best in people through communication, incentives, equity, and leadership.
Now that we're briefed on management itself, Rehab's success was based on Justin's leadership (former GM). Justin's management style was strict, yet fair and supportive. The employees worked together, formed friendships, and went above and beyond their call of duty. Rehab's present success is due to its past management action.
Now that Matt's in charge, its a regular occurrence during pre-shift meetings to threaten everybody that they will be fired. How does that style inspire people? Well, it doesn't. We've all had crappy bosses before and if we think back to their management style and how we responded, we pretty much would do just enough so that we wouldn't get fired. Helping other people was just too risky, as if we messed up something helping them, then it was our ass on the line.
The atmosphere this creates is an atmosphere of stress among the employees at Rehab now and the worse part about it is that the employees are pissed off when they deal with the customers who then spread that vibe to other customers. Its a vicious circle, one that starts from the top. There's an old saying that a company in nothing more than the shadow of the one man in charge and it stands true at Rehab.
The worse part about the whole Rehab situation is that most businesses can go on for a long time operating inefficiently simply because the only people who can see it happening is the employees. But they are televising this!!! Every disgusting act of management on Matt's part on how miserable the employees are is filmed and shown on National TV! Talk about destroying a brand! You can't help but feel tension and hatred when you watch the show, which is why I stopped. If you're feeling tense just watching it, how do you think it would feel to be there and have to deal with pissed off bartenders and a very rude staff? Its not their fault, they aren't their behavior, they are a reflection of their leader who is nothing less than inadequate.
In the end it comes down to this whether its a business or a human being, where you are today is a result of your past actions. Where you are tomorrow is a result of today's actions. Rehab's success today is not attributed to Matt's management, its because of Justin's. And I'd be willing to wager that Rehab's success in the future will start to decline to area competition (Wet Republic) unless Matt's management style changes (highly unlikely) or there is a change in management. One thing is for sure, that a great show about a great nightclub business is now nothing more than a celebrity version of Jerry Springer.
Wednesday, August 25, 2010
Why Do We Laugh? The Function Of Laughter
That was funny...that's why you laughed, right? You sure? I was watching the Roast of David Hasselhoff on Comedy Central, and it got me thinking. What exactly is laughter?! Evolutionarily, it must have some sort of function. And after some research and digging through a lot of crackpot theories, I found that it does.
You can go anywhere in the world, visit any culture, no matter what their language or their value system, they have laughter. There is something very important about this enjoyable but elusive little tendency of ours. Turns out that laughter isn't put there just for our enjoyment. Its actually serves a crucial and very important function in our lives.
Humans are tribal by nature, meaning we have a tendency to herd and form cliques (yes high school cliques are completely natural, sorry to disapoint). But the mechanism we use to form the bonds that build tribes is the very feeling we enjoy the most: laughter. Laughter is a way for our minds to both anchor positive feelings about others and to express those feelings externally. This way others can read our social cues about how we feel about them too.
So I started digging a little more and started to think of things like "Ok, well what makes something funny?" Comedians and researchers all over the country have come up with three theories as to what makes things funny, each having tendencies to contradict each other. So for my own sanity, I decided to come up with a new one that incorporates them all, coupled with an interesting piece of science to back it up.
Laughter is actually nothing more than the end result, its actually whats behind the laughter that is interesting. We have these things in our brains called mirror neurons. They are the neurons that allow us to visualize and empathize with people. They are the very reason why laughter as well as depression is infectious: we see some one laughing and we start laughing, we see someone crying and we get teared up. We as humans, use these neurons to empathize and understand people in order to solidify relationships. And these mirror neurons are the very reason why we laugh too.
Take a stand up comic for example. The reason we laugh is because these mirror neurons allow us to empathize or visualize a situation (or a joke) being described. This empathy then causes a building of tension as you listen and picture him in this situation. And for a brief moment you step into the comic's reality. This reality is meant to directly conflict with normal reality. This cognitive dissonance builds further until we become self-aware again. The moment of self-awareness creates surprise (due to how much tension we realize we now have!) which leads to a release of the tension through laughter. Which leads me to two important principles of humor:
1) Laughter is a mechanism for the release of tension and thus pleasurable feelings, (Think of a massage, that release of tension feels good right?), with the external action itself being a social cue to others as to what we are feeling about them.
2) The two required elements in all humor: tension and surprise.
And in case you try to notice all this happening at once, you probably won't, I tried. It all happens in less than a second!
To prove 2) take this for example. You can't tickle yourself, and when I say that I mean you can't tickle yourself to the extent someone else can. This is because when someone else tickles you, the anticipation of them tickling you builds the necessary tension, which is released by surprise when they actually do it! The mind's mechanism for laughter uses the same two ingredients in all cases.
As far as the social mechanism goes, it makes perfect sense. How many times have you found you've liked a person who never makes you laugh, nor who you've never seen laugh? Probably none. Laughter is a genius and enjoyable way that humans solidify relationships. This also explains forced laughter, which is what people do to bad jokes to show the person "hey i liked it! I like you!"
Its also why women always look for a man who can make them laugh. They instinctively know that laughter forms the bond they need to feel closer to him. Guys, how many times have you had girls laughing at stuff you said that wasn't even that funny? Girls, how many times have you found yourself laughing at everything he says? Social bonding at its finest.
I will point out something else I learned through all this is that humor relies on the individual's tension levels, which thus makes it subjective and thus more of an art than a science. What someone may find funny someone else may not because it failed to either raise or release their tension levels. Therefore there is both a values and an intelligence factor in humor.
Intelligence (intelligence being defined as "awareness") affects humor because in order for us to find something funny, we need to be able to visualize it or empathize with the person. If we can't visualize it, we won't find it funny. When someone says "I don't get it," chances are they failed to visualize or empathize with what was said. And it may not be you, it may be them. If someone lacks the awareness (i.e a calculus joke), its going to be harder for them to empathize with your funny calculus joke. They just "won't get it" because they can't visualize it happening. The more intelligence or global awareness of different experiences someone has, the more likely they will have the necessary empathy to understand the humor.
While intelligence affects empathy ability, values affect tension levels. If you crack a joke about a sensitive subject, you'll send tension levels through the roof without proper release caused by surprise. If you crack a racial joke that ends badly, its because the person on the receiving end's tension flew through the roof, but was not released through surprise. Maybe they weren't surprised because they have a personal experience with that particular perspective of reality that didn't end well for them. This leaves them just tense, and thus, feeling outraged.
Hope you found this interesting, its late and I'm going to bed.
You can go anywhere in the world, visit any culture, no matter what their language or their value system, they have laughter. There is something very important about this enjoyable but elusive little tendency of ours. Turns out that laughter isn't put there just for our enjoyment. Its actually serves a crucial and very important function in our lives.
Humans are tribal by nature, meaning we have a tendency to herd and form cliques (yes high school cliques are completely natural, sorry to disapoint). But the mechanism we use to form the bonds that build tribes is the very feeling we enjoy the most: laughter. Laughter is a way for our minds to both anchor positive feelings about others and to express those feelings externally. This way others can read our social cues about how we feel about them too.
So I started digging a little more and started to think of things like "Ok, well what makes something funny?" Comedians and researchers all over the country have come up with three theories as to what makes things funny, each having tendencies to contradict each other. So for my own sanity, I decided to come up with a new one that incorporates them all, coupled with an interesting piece of science to back it up.
Laughter is actually nothing more than the end result, its actually whats behind the laughter that is interesting. We have these things in our brains called mirror neurons. They are the neurons that allow us to visualize and empathize with people. They are the very reason why laughter as well as depression is infectious: we see some one laughing and we start laughing, we see someone crying and we get teared up. We as humans, use these neurons to empathize and understand people in order to solidify relationships. And these mirror neurons are the very reason why we laugh too.
Take a stand up comic for example. The reason we laugh is because these mirror neurons allow us to empathize or visualize a situation (or a joke) being described. This empathy then causes a building of tension as you listen and picture him in this situation. And for a brief moment you step into the comic's reality. This reality is meant to directly conflict with normal reality. This cognitive dissonance builds further until we become self-aware again. The moment of self-awareness creates surprise (due to how much tension we realize we now have!) which leads to a release of the tension through laughter. Which leads me to two important principles of humor:
1) Laughter is a mechanism for the release of tension and thus pleasurable feelings, (Think of a massage, that release of tension feels good right?), with the external action itself being a social cue to others as to what we are feeling about them.
2) The two required elements in all humor: tension and surprise.
And in case you try to notice all this happening at once, you probably won't, I tried. It all happens in less than a second!
To prove 2) take this for example. You can't tickle yourself, and when I say that I mean you can't tickle yourself to the extent someone else can. This is because when someone else tickles you, the anticipation of them tickling you builds the necessary tension, which is released by surprise when they actually do it! The mind's mechanism for laughter uses the same two ingredients in all cases.
As far as the social mechanism goes, it makes perfect sense. How many times have you found you've liked a person who never makes you laugh, nor who you've never seen laugh? Probably none. Laughter is a genius and enjoyable way that humans solidify relationships. This also explains forced laughter, which is what people do to bad jokes to show the person "hey i liked it! I like you!"
Its also why women always look for a man who can make them laugh. They instinctively know that laughter forms the bond they need to feel closer to him. Guys, how many times have you had girls laughing at stuff you said that wasn't even that funny? Girls, how many times have you found yourself laughing at everything he says? Social bonding at its finest.
I will point out something else I learned through all this is that humor relies on the individual's tension levels, which thus makes it subjective and thus more of an art than a science. What someone may find funny someone else may not because it failed to either raise or release their tension levels. Therefore there is both a values and an intelligence factor in humor.
Intelligence (intelligence being defined as "awareness") affects humor because in order for us to find something funny, we need to be able to visualize it or empathize with the person. If we can't visualize it, we won't find it funny. When someone says "I don't get it," chances are they failed to visualize or empathize with what was said. And it may not be you, it may be them. If someone lacks the awareness (i.e a calculus joke), its going to be harder for them to empathize with your funny calculus joke. They just "won't get it" because they can't visualize it happening. The more intelligence or global awareness of different experiences someone has, the more likely they will have the necessary empathy to understand the humor.
While intelligence affects empathy ability, values affect tension levels. If you crack a joke about a sensitive subject, you'll send tension levels through the roof without proper release caused by surprise. If you crack a racial joke that ends badly, its because the person on the receiving end's tension flew through the roof, but was not released through surprise. Maybe they weren't surprised because they have a personal experience with that particular perspective of reality that didn't end well for them. This leaves them just tense, and thus, feeling outraged.
Hope you found this interesting, its late and I'm going to bed.
Friday, July 30, 2010
Being Dynamic In A Dynamic World
There's a lot of bad information and bad advice circulating out there. The problem with bad advice is that it presents itself in the form of good advice by containing a kernel of truth. Its akin to a wolf in sheep's clothing that taught himself how to to say "BAA-AHH-AHH!"
Ever hear the phrase "don't be someone you're not?" Well what I'm about to talk about is really going to fly in the face of "don't be someone you're not." So here we go.
When we say "don't be someone your not," what are we talking about? Identity. Okay, so what is identity? Who are we, right? Well, we are our thoughts, beliefs, values, and actions. All of these come together to form a self perception of what kind of person we are. So essentially what we are saying is don't be someone that doesn't hold the same beliefs and values as you and don't do something that other person would do. But there is an inherent assumption in this, and that assumption is that beliefs and values do not change.
Usually when we see someone acting different and "being someone they're not," it's because some or all of the above factors have changed. What they used to believe they found doesn't hold up all the time or what they valued isn't really what they were after in the first place. These changes in beliefs and values lead to different actions, which in turn, completes the shift of identity.
But what about the creepy people acting all weird and stuff?! They're trying too hard, it just doesn't go, the shoe doesn't fit, or somethings just off. What we are perceiving is a lack of congruence. Essentially, we are seeing a divide in what they are thinking and what they are doing. Its like if someone is gritting their teeth, yelling, and turning red in the face, our social senses tell us they're angry. But what if someone lightly puts their hands on their hips, scowls in disappoint at you and then says, "Oooo I am soooo angry at you?" Incongruity, between what they're saying and what they really are thinking tells us they aren't really that angry.
Okay, now lets get back to those weirdos acting all strange and stuff, so what is this lack of congruence caused from? Why is there a divide between what they're saying and what they're doing? It all boils down to one concept: reference experiences. Case in point, lets take a guy who's very successful with women. Where does the road to his success in the sack start? It starts the very first time he has a crush on a girl, probably around elementary school. This innocent little crush at a very young age will set precedent for the rest of his pubescent years (and possibly longer in some cases!), because if the little girl returns the affection, it will boost his ego and solidify his identity as a young Giacomo Casanova. If he is rejected, he will remember the crushing blow for years to come. Either way the ego registers an experience to reference back to when placed in similar situations in the future.
Fast forward to his next pre-pubescent crush, what is going to happen here? Well if he was successful the first time he'll probably be thinking "well Suzy liked me, so she'll probably too, because I'm the shiz-nit and I got it goin' on!" On the flip side if he was unsuccessful, he will may very well be thinking "I dunno, Suzy turned me down, she's probably too, why would she like YOU? I can't do anything right" Then when he displays his affection, he does something incongruent because there's a divide between what he's saying and what he's thinking. In turn, Suzy thinks he's weird and blows him off.
The interesting thing about this is that it doesn't really matter what happens as a result of the first crush, or the second, or any for that matter. What matters is how it is perceived by the ego and integrated into our identity. The most fundamental law about the ego is that it always wants to be right, even when its wrong. It doesn't care that you can't get a date, it doesn't care that you can't go to the high school prom, and it certainly doesn't care that you are now a forty year old virgin. What it does care about is this: "Hey, at least I was right about being a loser! I always knew it! You can't say I was wrong!"
Is this any way to go through life? Being slaves of our egos? The problem with the ego is this: its static, doesn't wanna change. Comfortable. All Set. Its A-Okay! The mind is a resource-conserving machine and will do anything possible to be efficient and resourceful. Changing neural synapses is a burden and takes effort and energy. The ego is the mind's way of providing resistance towards environmental influence (which can be a good thing!). If every time someone told you something, you believed it...you'd probably be dead in a week. The ego is what protects us and solidifies our identity and ultimately enables us to operate with confidence.
What we must do then is to work around the ego, and the way to do that is with logic. As stubborn as the ego is, its rational. Its a slow process but essentially if we can find things that rattle our beliefs and values, we can create enough cognitive dissonance to influence a change. Remember how the ego is always right? Well its also pattern-finding and likes to assume things. So if we give it reasons why a belief isn't necessarily true, it will take those logical reasons as to why that belief doesn't work and form a new belief that takes into account the new information.
Case in point, lets say you have a personal belief that all Chinese people are short. Okay, well we could say well how short is short? Shorter than who? Than me? I'm pretty tall though. Have I really not met any Chinese people taller than me? What about Yao Ming? He's tall.
So our ego has just received a barrage of contradictory information that flies in the face of what it initially perceived to be reality. It will now make a new belief along the lines of "Okay, Okay, GENERALLY Chinese people are of shorter stature. However, exceptions and genetics play a huge factor in addition to cultural origin." It has taken our old belief plus the new information and created a new all encompassing belief.
So getting back to our little discussion on "don't be someone your not," all we are essentially saying is "don't be dynamic, don't adapt, don't change." But as with all bad advice, there is always a kernel of truth that makes it believable, and that kernel of truth is that you shouldn't be someone that is of different ethical or moral standards than you perceive yourself to be. Case in point, if you consider yourself to be a honest and good person, being a con artist would not be a wise career decision. This is because there is a divide between the ethical standards of a good and honest person and con artist. You can't be an honest con artist and be successful.
What it comes down to is this: don't be afraid to be dynamic and fluid, the only thing constant in life is change and yes, that includes you! Just remember that the mind and body come with complicated software, and sometimes it takes a little bit of time to make a totally congruent change.
Ever hear the phrase "don't be someone you're not?" Well what I'm about to talk about is really going to fly in the face of "don't be someone you're not." So here we go.
When we say "don't be someone your not," what are we talking about? Identity. Okay, so what is identity? Who are we, right? Well, we are our thoughts, beliefs, values, and actions. All of these come together to form a self perception of what kind of person we are. So essentially what we are saying is don't be someone that doesn't hold the same beliefs and values as you and don't do something that other person would do. But there is an inherent assumption in this, and that assumption is that beliefs and values do not change.
Usually when we see someone acting different and "being someone they're not," it's because some or all of the above factors have changed. What they used to believe they found doesn't hold up all the time or what they valued isn't really what they were after in the first place. These changes in beliefs and values lead to different actions, which in turn, completes the shift of identity.
But what about the creepy people acting all weird and stuff?! They're trying too hard, it just doesn't go, the shoe doesn't fit, or somethings just off. What we are perceiving is a lack of congruence. Essentially, we are seeing a divide in what they are thinking and what they are doing. Its like if someone is gritting their teeth, yelling, and turning red in the face, our social senses tell us they're angry. But what if someone lightly puts their hands on their hips, scowls in disappoint at you and then says, "Oooo I am soooo angry at you?" Incongruity, between what they're saying and what they really are thinking tells us they aren't really that angry.
Okay, now lets get back to those weirdos acting all strange and stuff, so what is this lack of congruence caused from? Why is there a divide between what they're saying and what they're doing? It all boils down to one concept: reference experiences. Case in point, lets take a guy who's very successful with women. Where does the road to his success in the sack start? It starts the very first time he has a crush on a girl, probably around elementary school. This innocent little crush at a very young age will set precedent for the rest of his pubescent years (and possibly longer in some cases!), because if the little girl returns the affection, it will boost his ego and solidify his identity as a young Giacomo Casanova. If he is rejected, he will remember the crushing blow for years to come. Either way the ego registers an experience to reference back to when placed in similar situations in the future.
Fast forward to his next pre-pubescent crush, what is going to happen here? Well if he was successful the first time he'll probably be thinking "well Suzy liked me, so she'll probably too, because I'm the shiz-nit and I got it goin' on!" On the flip side if he was unsuccessful, he will may very well be thinking "I dunno, Suzy turned me down, she's probably too, why would she like YOU? I can't do anything right" Then when he displays his affection, he does something incongruent because there's a divide between what he's saying and what he's thinking. In turn, Suzy thinks he's weird and blows him off.
The interesting thing about this is that it doesn't really matter what happens as a result of the first crush, or the second, or any for that matter. What matters is how it is perceived by the ego and integrated into our identity. The most fundamental law about the ego is that it always wants to be right, even when its wrong. It doesn't care that you can't get a date, it doesn't care that you can't go to the high school prom, and it certainly doesn't care that you are now a forty year old virgin. What it does care about is this: "Hey, at least I was right about being a loser! I always knew it! You can't say I was wrong!"
Is this any way to go through life? Being slaves of our egos? The problem with the ego is this: its static, doesn't wanna change. Comfortable. All Set. Its A-Okay! The mind is a resource-conserving machine and will do anything possible to be efficient and resourceful. Changing neural synapses is a burden and takes effort and energy. The ego is the mind's way of providing resistance towards environmental influence (which can be a good thing!). If every time someone told you something, you believed it...you'd probably be dead in a week. The ego is what protects us and solidifies our identity and ultimately enables us to operate with confidence.
What we must do then is to work around the ego, and the way to do that is with logic. As stubborn as the ego is, its rational. Its a slow process but essentially if we can find things that rattle our beliefs and values, we can create enough cognitive dissonance to influence a change. Remember how the ego is always right? Well its also pattern-finding and likes to assume things. So if we give it reasons why a belief isn't necessarily true, it will take those logical reasons as to why that belief doesn't work and form a new belief that takes into account the new information.
Case in point, lets say you have a personal belief that all Chinese people are short. Okay, well we could say well how short is short? Shorter than who? Than me? I'm pretty tall though. Have I really not met any Chinese people taller than me? What about Yao Ming? He's tall.
So our ego has just received a barrage of contradictory information that flies in the face of what it initially perceived to be reality. It will now make a new belief along the lines of "Okay, Okay, GENERALLY Chinese people are of shorter stature. However, exceptions and genetics play a huge factor in addition to cultural origin." It has taken our old belief plus the new information and created a new all encompassing belief.
So getting back to our little discussion on "don't be someone your not," all we are essentially saying is "don't be dynamic, don't adapt, don't change." But as with all bad advice, there is always a kernel of truth that makes it believable, and that kernel of truth is that you shouldn't be someone that is of different ethical or moral standards than you perceive yourself to be. Case in point, if you consider yourself to be a honest and good person, being a con artist would not be a wise career decision. This is because there is a divide between the ethical standards of a good and honest person and con artist. You can't be an honest con artist and be successful.
What it comes down to is this: don't be afraid to be dynamic and fluid, the only thing constant in life is change and yes, that includes you! Just remember that the mind and body come with complicated software, and sometimes it takes a little bit of time to make a totally congruent change.
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