Jorge: 0:00

The moment that you are serving the bottom line above all else, you will be taking your eye off the ball, especially in fast moving fields like technology.

Narrator: 0:17

You're listening to Traction Heroes. Digging In to Get Results with Harry Max and Jorge Arango.

Jorge: 0:27

Harry, my friend, how are you doing?

Harry: 0:30

Excellent, Jorge, it's good to see you.

Jorge: 0:32

Well, it's good to see you as well. We have been at this for a year. Can you believe that?

Harry: 0:39

Oh my gosh, that's hard to believe. It's really hard to believe. It has been so much fun. Wow. Man, time is just this magical thing that... it's all right here right now, and then it's a year later. It's incredible.

Jorge: 0:58

It is. I just wanted to mark that little milestone because a year is not that long in the big scheme of things, but hey, doing this for a year, not many podcasts do it. So I am happy to still be talking with you and that we're talking to each other a year later.

Harry: 1:17

Yeah. Nice. it's certainly been a wonderful experience thus far.

Jorge: 1:22

All right, let's hope it continues that way and that today's reading doesn't send it all downhill. Before I do the reading, I'm gonna tell you what the reading is and who it's by, because it's gonna become evident as I read it anyway. This is from an essay by Tim O'Reilly. Tim is the founder of O'Reilly, the publishing house best known for the tech books that they've been publishing for seemingly forever. And he's not just a publisher, he's also an author himself and a thinker. And I've followed his thinking for a long time, and he strikes me as a thoughtful fellow who's very well read and has a pretty expansive background. So, the essay that I'm going to be reading from appeared in a collection of his writing called Tim O'Reilly In a Nutshell. I'll jump right into it."I like to compare business(or life for that matter) to an extended road trip. Say you want to travel America by the back roads. You need gas for your car, food and water for your body. Especially before heading across Death Valley or the Utah Salt Flats, you'd better be darn sure that you have enough gas in your tank. But you certainly don't think of your trip as a tour of gas stations! What's the real purpose behind what you do? Why then do so many companies think that they are just in the business of making money? At O'Reilly, our products aren't just books, conferences, and web sites. They are tools for conveying critical information to people who are changing the world. Our product is also the lives of the people who work for us, the customers who are changed as a result of interacting with us and all the'downstream effects' of what we do. When I started the company, my stated business goal was a simple one:'interesting work for interesting people.' Above all, we want it to be useful. Our financial goals were just to keep afloat while doing something worthwhile."

Harry: 3:56

I love Tim O'Reilly. I had the incredible great fortune of working for O'Reilly for a short period of time. And thank you for bringing that reading. It just reminds me how much I appreciate people, not only Tim O'Reilly, but his partner, Dale Dougherty, who I worked with at a company. I think Dale's retired now. Not only that, it just reminds me of so much of our publisher, Lou Rosenfeld, right? Because when I describe Rosenfeld Media, which is a very similar business to O'Reilly on many levels with perhaps a greater focus on user experience design and design research and service design and whatnot, I describe it as a competitor, quote unquote, to O'Reilly. And in fact, I think Lou's first book was published by O'Reilly, if I'm not mistaken. Back in, what was it, 2003, I think it was, when I closed down Public Mind, my first startup of my own, where I was the founder CEO. I called Dale Dougherty, Tim's partner, who was at O'Reilly at the time, and I said,"Hey man, I'm closing down a startup. I'm thinking about open sourcing the code base." And explained what it was. And he asked me a lot of tough questions and he ultimately recommended that I just license the technology off to the customers that were using it rather than turn it into an open source project. But then when I was done with the conversation, he said,"You should come work with us." And so I joined O'Reilly actually as an employee. Not many people know that because it's not on my LinkedIn profile. And I ended up working very closely with Dale and got deployed to SAP and became the information architect for SDN, this SAP Developer Network, before it existed, working with Shai Agassi's team. And Shai Agassi was a senior level executive at SAP at the time, and I had previously worked with Shai at his former startup, which SAP acquired, Top Tier Software. And so I have this long history with O'Reilly, and it is perhaps one of the best companies I've ever encountered. And Tim was one of the most, thoughtful leaders I've ever encountered. And I have very few regrets in my career history, the choices I've made where I've... places I've gone to, or places I've left. But leaving O'Reilly was a tough call because I got an offer from Dreamworks Animation, and it was a very exciting opportunity and it was a little bit more money. But gosh, the opportunity to go work on Shrek and work with the PDI Dreamworks team just like it was beyond imagination. But ultimately I made the decision because SAP said they wanted to hire me full time and the guy that was leading the project was in Israel. I remember he was a great guy. And he called me at two in the morning to offer me the job. And I thought,"This isn't gonna work." And so I ended up leaving O'Reilly because. That's just how things sh shook out. And I know I've made this all about me, but is to say that I followed Tim O'Reilly from a very early point in my career and then deeply, when I was there, and during the transition into Dreamworks and then afterwards. And I have so much respect for that guy and his perspective. And back to the content of the article, somebody, I don't know who it was, somebody super famous and we talked about this before. It was somebody like Alan Kay or somebody said, you get like 30 IQ points for context. And I, often in interactions with people at the executive level, set context the same way every time. It's largely something I learned at Dreamworks, which was, where did we come from? And what were we either trying to get away from or what were we trying to go toward? Where are we now? How are we oriented? Thinking about the OODA loop, for example, John Boyd's, decision making cycle, observe, orient, decide, act. And where are we going together? So these three things. Where did we come from? Where are we now and where are we going? And then as a footnote, how will we know when we get there or where we want to be going is realizing itself as a path we're going toward. And when you read that, it just brought me back to this whole world of the quality of thinking that people like Lou Rosenfeld, like Tim O'Reilly, like Dale Dougherty, like some of these very senior leaders in the field of publishing and events and workshops, spend their time looking at the macro level view of the world and thinking about what it means to go meta, but not just to go meta from an intellectual point of view, but to go meta in order to get perspective and and to help people. Think about where they are and where they're going. So those were just some thoughts that just screamed into my head when you did that reading. And I'll stop there for a moment.

Jorge: 10:02

Well, he uses this image of the journey that we can, we can pinch and zoom into. But to me, the higher level message here is a question that seems to be a recurring thread for me in our conversations, which is, what is this in service to? We talked a few weeks ago about the highest goal, right? And the main point that I hear Tim making in that passage is, is your business in service to making money or is it in service to something higher? And what is the role of money in that? There's a, quote, this is an alternate quote that I could have read, but it's the same spirit. This is from Walt Disney. and I don't know where this is from. It might be one of those apocryphal things, but it definitely sounds like Walt. He said,"We don't make movies to make money. We make money to make more movies."

Harry: 11:03

Oh yeah. Boy, I wonder where that came from.

Jorge: 11:05

That's a similar sentiment, right? Tim talks about money as the fuel you put in the car. You don't go in the road trip as a tour of gas stations. The gas stations are there to help you get to a particular destination, which he articulated in his passage as the mission statement for his company. That might be a distinction that we make when we analyze an organization: are they working in service of the bottom line or are they working in service of some higher goal? And a healthy bottom line is gonna be the natural consequence of them doing a good job at achieving that goal or striving to achieve that goal, but it's not the ultimate goal of the organization.

Harry: 11:58

Yeah, a hundred percent. The money is an output metric, right? It's a way to know whether, I'm not gonna say you're winning or losing, but it's certainly a way to know whether you're filling up the tank or you're depleting the resources. It's gotta be sustainable or better in order to continue going, which means you've gotta have enough money coming in order to accomplish the things that you're trying to accomplish. But in some ways, it's very much about the difference between leading metrics and lagging metrics. What are the things that you can influence that will directly affect the things that you can only loosely influence? You can loosely influence revenue, but so many things influence revenue. You can influence profit, but so many things, influence profit. The path from your, purpose through your decisions into your actions and from your actions to the results that you generate, and from those results and outputs, whatever the work product is, to the revenue or profitability or whatever it is you make that path, like the better you understand what the inputs are and what you have control over, the more likely you're gonna be able to influence the outputs and the things that you don't have control over. And two, there are two authors that just jump to mind that talk about this explicitly, and one of them is, Annie Duke in her book, what was it called?

Jorge: 13:58

Thinking in Bets?

Harry: 13:59

Yeah, that's what it was, Thinking In Bets. And it is so good. It is such a good book.'cause it clearly spells out how to think about this path from inputs to outputs. And if there's one book on the topic that, I would recommend it would be that one. And if there were a second book, it would be Bungay's book on The Art of Action. Stephen Bungay wrote a book that looks at this explicitly for business rather than just the decision making and the decision making aspect of it, which is really the emphasis of Annie Duke's book. But The Art of Action by Bungay also breaks down this path of how we think about the processes of moving from decisions to actions to outcomes, and what happens when we don't think about it properly.

Jorge: 14:58

I love this idea of thinking about the process somehow, monitoring inputs and the means through which decisions lead to actions that transform those inputs into particular outputs. Where I was thinking about this, and where Tim's quote brought me back to, is intentionally crafting an organizational culture. And I haven't had as close interactions with O'Reilly as you have. I'm co-author of a book published by O'Reilly. I've recorded webinars for them in their campus, and I have been there several times. I've met people there. And I've always liked them as an organization very much. It's always felt like it's a healthy organization.

Harry: 15:55

Yeah.

Jorge: 15:56

And I have to say also it's been many, many years, so it might be that it's changed. worked with them for a long time. But when I did, and having read Tim's essays, I could see the result of his thinking in the culture of that organization and how it manifested. Like, I could see the values that come across in those essays, I could see them enacted in the way that people dealt with me as an author and as a creator and how they dealt with each other. Which is different. Like, I got a different vibe there than I've gotten in different organizations and I can't help but wonder to what degree that culture was intentionally created to be like that. There's a book that came to mind, and again, I read this many years ago and I should have revisited it in preparation for this conversation. But, it's a book called Makers and Takers by Rana Foroohar. And as I recall, that book came out when many Silicon Valley services I'm gonna generalize here many Silicon Valley services were becoming financialized. And there was this influx of people coming in whose primary purpose was to make money from the thing. And that leads to a very different culture than the culture that you get at a place like O'Reilly.

Harry: 17:35

Man, I have so many thoughts. I don't know where to start and I don't want, I don't wanna burn up all of our time here, but I will tell you that I think having a clear purpose and being intentional about manifesting that purpose in an organization is clearly a significant piece of what generates that feeling that you got at O'Reilly. I too, I felt that at O'Reilly, and I think the regret that I might've felt not staying at O'Reilly after I had spent a couple of years at Dreamworks was the psychological experience that I had at Dreamworks, which was exactly the opposite of that, right? It was psychologically unsafe. And what I will tell you is that I've, certainly, as an executive coach and consultant, encountered many companies where I think the founders have the right orientation toward the purpose. They really want to translate it into a culture, but they themselves don't show up psychologically clean. They haven't done the work, so they manifest all sorts of dysfunctional family of origin issues. And those get perpetrated through the organization, sometimes in the form of incentives that are counterproductive for the culture. And your comment about people joining a company when they have more of a financial orientation, motivation, reminds me of when I left Dreamworks and I talked to a number of leaders, including Jim Clark, the founder of the company. Did I say Dreamworks? I meant, excuse me, Silicon Graphics. And I was there for a number of years, and I went to leave the company, and I had a connection to Jim Clark enough that I could set up time and speak with him. And he told me he was leaving the company and, I said,"Why?" And he said,"Well, the sharks moved in." And I said,"What do you mean by that?" And he goes,"At a stage of the company, when it's proven it can be repeatably profitable, and is starting to scale very quickly, and there aren't a lot of controls to prevent bad eggs getting hired, often what happens is the people that get hired are people that are very financially motivated." And some very good people can be financially motivated, but also some people with, perhaps some more with principles that are not as aligned with the culture, the founder's vision, for what the purpose of that trip is gonna be.

Jorge: 20:06

I'm going to put forth a hypothesis that organizations who see money as a means to an end and not the end in itself are going to be able to bring to bear long-term thinking in a way that organizations that are squarely focused on the money won't. Silicon Graphics is no longer around. And I don't think that is a coincidence. I don't know what happened there, but I think that the moment that you are serving the bottom line above all else, you will be taking your eye off the ball, especially in fast moving fields like technology.

Harry: 20:58

I think that's right and I think even with financial firms, because of course, the question is, how could that be true for a financial firm? But I, think that's true. When you run your company more like a Berkshire Hathaway, where the profit is a metric for whether you're winning or losing, not the purpose, you tend to do better. And when it's about the money, I think you end up in a kind of more of a Lehmann situation where you'll make all sorts of decisions that are much more short term focused, that may inadvertently cause you to neglect some of the implications longer term and put the company at risk. So, I think your hypothesis, we could probably back it with data. There's probably some work to be done to prove that out. But as a rule of thumb, I'm in there with you a hundred percent.

Jorge: 21:50

But where I was going with this is that if you are a leader in a position where you can do something about the direction of an organization, at a minimum, it behooves you to be clear on what it is that you expect to get out of it. If you're looking to make movies to make money, or if you're looking to make money to make more movies, that is a big distinction. I'd rather be in a situation where I'm working on the make money to make more movie side rather than on the make movies to make money side. But, but I'm not going to criticize the people who opt the other way. I'm just saying be clear on which one it is that you're putting ahead of the other, because they will lead to very different cultures.

Harry: 22:39

That's right. And I've certainly experienced that directly and firsthand on both sides of that equation. So it's a great reading and I think it's a timely topic and one that I think we should all continue paying attention to, especially at the level of those of us who are in leadership positions who are able to make decisions about how things unfold.

Jorge: 23:02

And especially now where there's so much investment happening in data centers for AI and stuff like that, with these very long payoff periods. Anyway, it's a conversation I wanted to have with you, thank you for entertaining my half-baked ideas.

Harry: 23:20

Thank you so much, Jorge. I really appreciated the conversation, as always.

Narrator: 23:24

Thank you for listening to Traction Heroes with Harry Max and Jorge Arango. Check out the show notes at tractionheroes.com and if you enjoyed the show, please leave us a rating in Apple's podcasts app. Thanks.