Marina Gorbis's Blog, page 1459

Forget GDP — We Need Numbers That Matter for the Questions We Have

No single number has become more central to society in the past 50 years than GDP — Gross Domestic Product. Throughout the world, it has become a proxy for success and for failure. It is a profoundly important indicator. It is also a profoundly flawed one.

This past Friday, the U.S. government released its revised estimate for GDP for the last three months of 2013. That showed growth to be less than was initially reported last month, with the figure falling to 2.4% from 3.2%.

That is a considerable difference, yet such revisions are hardly unusual. The number will be further revised in the coming months, and may be subject to alteration years, even decades later, as final bits of data get assimilated and as methods of assessing the nation’s output change over time. Last July, after years of work, the Bureau of Economic Analysis declared that the U.S. economy was, in fact, hundreds of billions of dollars larger than previously reported because of changes in the way intellectual property and research were counted.

The variability of these numbers should be a hint that they do not capture some sort of absolute reality. They describe this thing we call “the economy,” but the economy is not a physical entity with a set topography. It is itself a product of man-made numbers and statistics, and its contours change and morph. GDP very purposefully excludes whole swaths of human existence, from domestic work to volunteer activities to cash transactions not recorded by the government.

You wouldn’t know that, however, from most popular debates and discussions. While the creators of the national accounts that gave us GDP and Gross National Product understood that these numbers were inventions not intended to measure happiness, well-being, or all aspects of material life, that distinction has inexorably been lost as the number become the primary marker of political success and national greatness.

The limitations of GDP have long been recognized. In 1968, just before his assassination, Robert Kennedy made a passionate plea to stop using GNP (GDP’s older cousin) as an absolute measure of national greatness. As a metric of how much stuff a country makes, it performed its task.  But “it does not allow for the health of our children, the quality of their education, or the joy of their play….It measures everything except that which makes life worthwhile.”

In the more than 45 years since that speech, there has been a steady chorus pointing out the limitations of GDP. The Kingdom of Bhutan was the first — and still the only — country to reject GDP as its primary measure and instead developed a Gross National Happiness index. The United Nations, drawing on the work of Nobel economist Amartya Sen, created a Human Development Index that weighted other factors such as education and life expectancy. In 2008, the president of France, Nicolas Sarkozy, convened a commission to go beyond GDP that recommended a broader “dashboard” of variables to measure the health of a nation.

Academics have also joined the post-GDP party. Innovative economists such as Erik Brynjolfsson of MIT have drawn attention to how the information technologies and services that now contribute substantially to economic dynamism just aren’t adequately captured by GDP. These “free goods of the Internet,” as Brynjolfsson and others have called them, may contribute hundreds of billions to national output but are essentially invisible in our calculations.

And finally there are the endless revisions and tweaking of the number itself. As British economist Diane Coyle has so astutely observed, GDP may often be treated as if it were a natural phenomenon, but it is not. It is an invention, created by all-too human economists and politicians in the crucible of the Great Depression and World War II. It shed light on what had been too mysterious, namely the output of a nation, and it helped the United States and Great Britain fight and win World War II by devoting massive amounts of domestic industry to making machines of war without unduly imperiling domestic economic life.

The largest problem with GDP, however, is not its limitations (however considerable they are) but the maximalist use of it by economists, politicians, and the general public who use it as a stand-in for national success. That is not the fault of the indicator. It is the fault of those who demand that it carry more weight than it can or should bear.

Few if any businesses will see their forward strategy meaningfully determined by GDP. Even large industrial companies such as Caterpillar and GE will find pockets of strength even when GDP is weak, and they will encounter issues even when it is strong. The traditional relationship between GDP and interest rates, inflation, and now employment has clearly broken down. A factory today might employ 500 people and 20 robots and add substantially to GDP, whereas the same factory 40 years ago would have employed thousands. Basing future plans based on those 20th century patterns is likely to be a grave mistake.

It would be an even bigger mistake for disruptive companies such as Amazon or Google. GDP might be weak, and overall advertising spending contracting with it, yet Google can still see massive growth as it disrupts a traditional industry. The same goes for Amazon, which can thrive even if GDP and consumer spending sag as long as that spending shifts away from malls and toward the mailbox.

In short, we are all becoming less dependent on this number called GDP. In an age of big data, companies have a wealth of information at their fingertips. That information — about customers and their behavior, about what clients need and where — matters far more than broad-brush national numbers like GDP.

It’s not that we need new national indicators. We need numbers that matter for the questions we have. No one will win a Nobel Prize for such bespoke indicators, but we will all prosper by using GDP less and using the other numbers around us more.

Established Companies, Get Ready for the Collaborative Economy

As more and more startups like Airbnb, Etsy and Kickstarter crowd into the space of the collaborative economy, big brands are starting to get in on the action, too.  Staples sells products developed on Quirky; Avis has acquired Zipcar; Walgreens has partnered with TaskRabbit for delivery.

And those ventures are likely to be just the beginning, given how many people are already participating in the collaborative economy, and how much that’s likely to grow over the next year. There are now 113 million sharers in the US, the UK and Canada: 40% of the adult population. Those figures come from a survey of 90,112 people that we conducted for Sharing is the New Buying, a just-released report that I co-authored with Jeremiah Owyang of Crowd Companies and my Vision Critical colleague Andrew Grenville.

While the most established and widespread form of sharing consists of buying and selling pre-owned goods on sites like eBay and Craigslist, our survey revealed that a quarter of the population is now using the most recent generation of sharing services. These include peer-to-peer transportation and housing services like Uber and Airbnb, crowdfunding services like Kickstarter, product rental services like Rent the Runway, custom craft shops like Etsy, and task sites such as elance and Taskrabbit. Participation in every one of these emergent categories is poised to double within the next year.

No wonder big brands want in on the action: the growth of the collaborative economy promises to disrupt the conventional marketplace, as customers buy from one another — instead of from them.

But for those companies, engaging with this nascent market must go beyond latching onto a few hot collaborative startups by buying them or partnering with them. Established companies must grasp the core drivers behind this new economy, and understand how those drivers fit into their already established models. These core drivers are:

Less buying, more sharing. Big brands need to stop measuring success in terms of units sold, and think in terms of units used. The collaborative economy is shifting us from a consumerist economy to one in which people buy less because they’re sharing more. Instead of five families buying five cars, five families can share the equivalent of one car (using a combination of loaner vehicles and transportation-on-demand), reducing the overall number of products purchased. (Not incidentally, this also reduces the environmental footprint of all that car manufacturing.)

Companies that have traditionally relied on selling goods need to think about offering those goods on an access model, too – for example, as Daimler AG has done by providing by-the-minute car sharing through Car2Go. And those that offer services need to think about further offering their customers access to products well outside their traditional spheres, as with Westin’s partnership with New Balance to offer fitness gear rental for their guests.

Less consuming, more producing. The emergence of the collaborative economy is closely tied to the growth of the maker movement, in which individuals can become producers and sellers thanks to technologies that support small-scale production (like 3D printing) as well as those that facilitate peer-to-peer distribution (like online marketplaces).  As we found in our survey, on some kinds of sharing sites, such as those that share professional services or pre-owned goods, more than half of participants have been sellers or providers (and not just buyers and consumers) at some point in the past year.

To succeed in the collaborative economy, companies will need to integrate crowd-produced goods into their supply chain, as West Elm has done with Etsy. In fact, our data suggests that attracting small-scale producers and sellers is one area where any player could still find a competitive edge: while 79% of buyers are “very” or “extremely” satisfied with the value they got from their latest sharing transaction, only 60% of sellers were as satisfied with their earnings.

Less working, more freelancing. As a number of observers have pointed out, one effect of the collaborative economy may be to increase self-employment in place of full-time employment.  This means that companies will have new ways to source labor, but at a social cost: some argue that the ability to outsource via elance and TaskRabbit gives companies a (lower-wage) alternative to creating full-time positions. Meanwhile businesses that depend on skilled labor means that they’re not only competing with other employers to hire the best workers — they’re competing with the increasingly viable option of web-enabled self-employment.

Rather than engaging in a race to the bottom (on wages) or a fight to the top (competing for skilled labor), these companies would do well to focus on offering new value-added services enabled by the collaborative economy, as Home Depot did by partnering with Uber for Christmas Tree delivery.

Less regulation, more risk. One challenge that has bedeviled sharing startups is the emergence of regulatory efforts aimed at limiting sharing activity — or tapping it for tax revenue. Partly in response to pleas from established players like taxi and hotel companies, municipal governments have tried to corral the Wild West of sharing.

Yet the involvement of bigger companies in the sharing economy itself could instead strengthen the hand of those who would preserve currently low levels of regulation. Either way, unless big companies want to see their breakfast eaten by collaborative startups that profit by flying under the regulatory radar, they will need to tune into their customers with co-innovation initiatives that help them understand how they can play in this space, too.

The competitive pressures of the collaborative economy – and the ever-growing list of companies rising to meet them — attest to the urgency and inevitability of the entrance of big brands into this space.  It’s a disruption that big companies must not only address, but accelerate, unless they want to stand by and watch while their own business models and revenue streams are disrupted instead.

The U.S. Immigration Debate Isn’t Left vs. Right

I sometimes find it hard to believe that America’s current immigration systems weren’t designed by our enemies. More liberal policies and streamlined procedures would bring technical talent and entrepreneurial energy at a time when we clearly need them. Yet these reforms remain out of reach.

Overwhelmingly, the best and brightest in the world still want to come here to study, work, and start companies; a worldwide 2012 Gallup poll revealed that the US “holds the undisputed title as the world’s most desired destination for potential migrants.”

We make it overwhelmingly difficult for them, however. As Darrell West of the Brookings Institution summarized, “For many immigrants, it is virtually impossible for them to afford the fees, handle the paperwork, and navigate a complex bureaucratic process…. American immigration is a 19th century process in a 21st century world.”

We’ve made some small progress recently but a recent bipartisan attempt at comprehensive reform, which includes such great ideas as a separate ‘startup visa’ category to foster entrepreneurship, is languishing in the house after passing the Senate last year.

There’s a belief in some quarters that this reform will hurt low-wage American workers (who are already hurting enough) by exposing them to more competition from immigrants and thus lowering their job prospects and wages. But the evidence is mounting that this threat is at worst pretty small, and most likely nonexistent. As the American Enterprise Institute (among many others) has found, immigrants tend to take different jobs than natives, and so are not rivals.

I spoke recently at two events in California organized by FWD.us, a tech industry advocacy group that has to date been squarely focused on immigration (FWD.us covered my travel expenses, but did not pay me anything). At the events themselves, and at the meals and other gatherings around them, the accents varied greatly but the stories didn’t. They were all about enthusiasm and love for America, a deep desire to build a life and make contributions here, and intense frustration at how hard it was to do this.

My favorite quote from the trip was from a very successful (US-born) technologist who said that immigration reform was “not about the right vs. the left; it’s about smart vs. dumb.”

Which side are you on?

Meet the Fastest Rising Senior Executive in the Fortune 100

Jill Hazelbaker has advanced faster than any other senior executive in the Fortune 100, according to research in the March issue of HBR—and she’s the youngest leader in that exclusive data set. She cut her teeth in electoral politics, quickly developing the skills and confidence there to thrive at a high-octane company like Google, where she’s now director of communications, internal communications, and government relations for Europe, the Middle East and Africa. In this brief interview with HBR, Hazelbaker attributes much of her career success to mentoring from “some real greats,” relentless preparation, and a willingness to pick up and move for the right growth opportunities.

HBR: What experiences have had the greatest impact on your career trajectory?

John McCain took a big chance on me when he named me as his national communications director at a pretty pivotal moment in his primary campaign. We were dropping like a rock in the polls, running out of money, and at that point a number of my friends had left the campaign. When McCain offered me the job, I doubled down. I also grew quite a bit working for Mike Bloomberg in his final campaign for New York mayor, alongside Hillary Clinton’s former communications director, Howard Wolfson—in no other world would Howard and I have come together on a campaign but for Mike Bloomberg. There I learned real lessons about understanding other people’s perspectives. I’ve had the chance to work for, and with, some real greats, from McCain to Bloomberg to Eric Schmidt at Google. Early in my career, an adviser to Rudy Giuliani gave me some great advice: “Act like a sponge and soak it all up.” That always stuck with me.

What obstacles have you had to overcome on your way up?

Well, I moved 10 times in 10 years. I’ve become a very skilled packer. You know, politics can be a bit lonely at times. My friends were living out their twenties in New York and LA and San Francisco, and I was packing up for the next race in the swing states. I had a lot of fun, and certainly it was the right decision for my career, but personally, it wasn’t always the easy decision.

You’ve advanced very quickly. Why do you think that is?

I think life generally rewards risk takers, and I’ve always been willing to take risks and move for the right opportunities. Fearlessness is important, too. There’s only so much training you can do before you go for a live interview on TV or give advice to a politician. I think the best way to learn is to just go for it. I’ve always been confident—confidence is different from arrogance—and I’ve always felt like I could do anything that I put my mind to. Work ethic matters a lot, too. I learned that from my parents early, early on. They modeled that behavior for me, and it certainly stuck with me.

How has your youth helped or hurt you along the way?

I don’t really think of it as a “young” or “old” thing. People are simply more or less experienced. As a manager of people who are my peers, I’ve always tried to remember that. And at this point in my career, I’m fortunate to have had a lot diverse experiences. Certainly there were times, especially in politics, when I was aware that I was the youngest person in the room by a long shot. I remember once during the ’08 Campaign, when I was tapped to give a “state of the race” update to then–Vice President Cheney and a number of the major donors and party big wigs who were in this long, wood-paneled room. And I was not only the youngest person in the room, but the youngest person by about 25 years. So of course, in those moments, you can be intimidated. But I’ve learned to conquer fear by working harder and being relentlessly prepared. When I’ve done my homework and researched my arguments, I’ve stayed confident. And when I’ve had setbacks, I’ve learned from them and moved on. You just have to keep going.

Have your experiences differed markedly from those of your male colleagues?

I don’t think so. At every step in my career, I have had really fantastic role models. In my first job in politics, I worked for a wonderful, strong woman who taught me so much about how to conduct myself in a professional environment. And the same thing goes for when I worked for Bloomberg, and now for Google. A great female executive at Google is my mentor and my boss. I think it’s really important for women to have other great women to turn to when the sea gets rough.

Were there any key “crossroads” moments in your career, when you could have seen yourself taking a different path?

Well, sure. I could have stayed in politics, which was interesting and exciting to me. After the McCain campaign, I briefly thought about running for office myself. Thank goodness I had the foresight to recognize that was probably not a great idea for me at the time. Public service is really important, but you need real life experience in order to contribute in a meaningful way. The Google experience—the Google opportunity—was a real curveball. Working in tech was not something I had previously considered. It’s been a great ride, and a profound learning experience.

Thriving at the Top

An HBR Insight Center




If President Obama Can Get Home for Dinner, Why Can’t You?
To Get Honest Feedback, Leaders Need to Ask
Don’t End Your Career With Regrets in Your Personal Life
What Does Success Mean to You?

Provocative Cadillac, Rescuing the Brand from Bland

Cadillac’s new spot Poolside is exploding. It shows a guy walking through his beautiful home musing on American virtues, values, and accomplishments. It debuted during the Superbowl and played again Sunday night during the Oscars.

Naturally, the world went ballistic. These days, in our ideologically conflicted moment, we can’t say anything about the American experiment with provoking supporters, denigrators, and a great storm of controversy.

Poolside is a celebration of hard work, risk taking, and American exceptionalism. For good measure, it goes after the French, those lazy so-and-sos who linger in cafés and take August off. Our hero (played by Neal McDonough) scorns these continental layabouts and counts up American accomplishments, including the trip to the moon. “Got a car up there. And we left the keys in it. You know why? Because we’re the only ones going back.”

Some said, “Bravo! Finally someone prepared to give voice to the things that made this country great.” Others said that this ad is an evocation of the ugly American, materialist America, and the dreadful 1%.

The marketing question is simple. Why is this ad going where angels fear to tread? Surely Cadillac and Rogue, the agency, knew that they were going to stir things up, that Poolside was going to go all cannon ball.

But of course they knew. And that’s the point. Cadillac was one of the great brands of the 1950s and then it fell so far some thought it would never return to glory. To make matters worse, boomers decided they had to buy European. You know, to show how cosmopolitan they were. German competitors said, “thank you very much,” and set about winning hearts, minds, and wallets. For many consumers, Detroit became virtually invisible.

And there is a second, deeper problem. Marketing in America got smaller and risk adverse. Brands started to get distinctly Ned Flanders. Nice and pleasant was the order of the day. Even claims like “we build excitement” were made in a not very exciting way. Brands were trying so hard to please everyone they struggled to interest anyone.

Yes, it’s not very American. Yes, it looks like a failure of nerve. But, no, I am not evoking the spirit of Poolside. The problem with nervous marketing is purely technical. What the marketing community has been slow to grasp is that nice is not a place of safety. Appealing a little bit to everyone turns out to be a really dangerous place to be. If we want a powerful brand, we are going to have to pay for it with risk. We have to start offending, irritating, and antagonizing some people.

Look, not everyone is a target. The Subaru set is never going to buy a Cadillac. So Cadillac can offend these people with impunity. (And, boy, did Cadillac offend them.) Can offend them and probably should. Some antagonism has no downside. Some segments will never like us. In fact we rather like it when they don’t.

When he constructed Running Fence, the artist Christo said that everyone who took exception to his intrusion on the California landscape was now an artist — his artist. When Rogue and Cadillac created Poolside, they turned all those naysayers into instruments of the brand. Does it matter that they now hate Cadillac? Not even a little. Their outrage makes them servants of the brand. They help rescue the brand from bland.

I am not saying I endorse the Poolside point of view. I am saying that a provocative position, any provocative position, is good for business. It lets the brand breathe. It makes the brand vivid and interesting. And it’s not the case that provocation can come only from the Right. Subaru has lots of opportunities to provoke and irritate. (And their work for the TV show Being Human is plenty provocative.)

The point is that every brand must calculate a trade-off. If we want passion and engagement, we are obliged to up the provocation. Not everyone is going to love us. But then these days there’s no chance everyone is going to love us. The new trade-off says, for some to love us, others must hate us. Or at least find us incredibly irritating. It’s the American way.

High-Status People Perform Poorly After Being Humbled

When high-status people suffer a humbling loss, their performance tends to decline dramatically, because they’ve become dependent on their rank to maintain a positive view of themselves, say Jennifer Carson Marr of Georgia Institute of Technology and Stefan Thau of London Business School. For example, a study of Major League baseball players shows that in the 58% of salary arbitrations where players lost, the higher a player’s status, the greater the fall-off in performance the following year. If you’re a high-status person, sometimes the best way to cope with a work-related humiliation is to get a job with a new employer where you feel respected, say the researchers, whose study appears in the Academy of Management Journal.

Book Publishing’s Big Data Future

The publishing industry is not one of the overachievers in terms of its use of big data. And since my book on big data—Big Data @ Work—is out, I thought it might be fun to speculate on what big data will do to the business of publishing books. The goal of any publisher is to get its content bought and read. In the past, publishers could know only if their books and magazines were bought, and knowing even that was problematic. With the advent of Nielsen’s Bookscan in 2001, publishers could begin to receive point of sale data from physical bookstores.

Of course, physical bookstores, both chains and independents, have been on the decline for more than a decade, and overall sales by such bookstores haven’t risen during that time (according to Morris Rosenthal of Foner Books, a book sales numbers expert). We’ve seen the huge rise of Amazon, Apple, Google, and e-books during this period. If you include these online channels, book sales overall have done quite well.

In my book I talk about “disadvantaged” industries with big data, and one category is industries—like automobile manufacturers and consumer products companies—that have an intermediary between them and their customer. Publishers are in the same boat, but the boat is changing. What publishing industry statistics suggest is that while book publishers have always had intermediaries between them and their customers, their intermediaries have now become much more data-oriented. Amazon and Google are two of the most data-driven companies around, and Apple is becoming more so all the time.

The good news is that with online books, you can learn much more about what people are reading—as a recent Wall Street Journal article describes. The bad news for publishers is that they’re not the ones who are doing the learning. It’s Apple, Amazon, Google, and to a lesser degree, Barnes & Noble with its fading Nook e-reader.

The publishing world is full of lore about what sells and what gets read, but precious little of the lore is informed by data and analysis. These intermediaries can now do the analysis and know—not speculate—just what people want to read and whether they are engaging with the content or not. Judging by Amazon’s lackluster results thus far for its own publishing imprint (George Packer has a great article in the New Yorker about this and other Amazon issues), they haven’t yet internalized and acted on this information. But they will.

That will leave traditional publishers in the cold unless they can somehow establish a direct channel to the customer (as HBR has—you are reading through it now), and through it gather their own big data. The primary goal should be not to sell content, but to extract information and build loyalty. Firms in other industries with intermediaries are establishing such channels; Procter & Gamble has its eStore, Ford Motor has Ford Direct , Coca-Cola has My Coke Rewards. Just as P&G is stuck with WalMart, publishers can’t afford to alienate a big channel like Amazon, but they can work hard to establish or maintain direct ties to their customers.

This will also mean required changes in the kinds of people who work for publishing companies, which have rarely been known for attracting big data types. It will mean that editing and editorial decision-making will have to become data-driven. Social media will have to be mined for sentiment along with content clickstream data. Publishers will have to compile insights on what really works, combining data analytics with knowledge management. In short, some dramatic change is necessary for publishers to succeed.

I love books (or should I say, “long-form content”), and my own in particular. I hope that all this happens at my publisher and others. The good news is that publishers have several books on big data, including mine, that they can peruse. And they can probably get them at a discount!

If President Obama Can Get Home for Dinner, Why Can’t You?

No matter how challenging a C-suite job may be, it is surely dwarfed by the pressures of the U.S. presidency. No matter how many vacations they take or how much they exercise, presidents seem to visibly age faster than other people; among the White House staff, there’s frequent talk of burnout leading to turnover. In her 2012 book “The Obamas,” New York Times correspondent Jodi Kantor offers an unusually detailed account of how the Obamas tried to maintain a sense of balance even as they moved to Washington. They’ve maintained the same loyal network of friends, stuck to disciplined diet and exercise regimens, eschewed the Washington social scene to spend time with their children, and kept a raised eyebrow at some of the pomp and privilege that comes with the presidency. HBR asked Kantor what C-suite executives might learn from how the First Couple deals with one of the world’s most stressful jobs. Excerpts:

Your book contains rich detail on how hard the Obamas worked to preserve a sense of normalcy when they moved to the White House. Why was that so important to them?

I started covering the Obamas in 2007, so I watched their transformation. They very quickly went from being the sort of parents who dropped their kids off at school to being president and first lady. Their change in status was so extreme — normally in politics and in business, people rise slowly and pay their dues. When they got to Washington, they really tried to preserve as sense of normalcy, but that’s almost impossible in the White House, which is a combination museum, office, residence, and secure military compound. In the business world, even the most public CEO still has a place he or she can retreat to that’s out of the public eye. That’s not true for a president.

Today more executives avoid relocating their families when they change jobs, so we’re seeing more commuter marriages. In your book you note that until he moved to the White House, Obama had never lived full-time with his family.

That’s true — he’d commuted to Springfield and Washington as a state senator and U.S. senator, while the family stayed in Chicago. In fact, one of the most surprising things I found out while reporting the book was that Michelle Obama initially considered not moving to the White House in 2009 — she considered having their daughters finish out the school year in Chicago. To me that’s a story that shows both how naïve and how wise Michelle Obama was about the presidency. On the one hand, it was naïve to think the country would have accepted a commuter first lady. At the same time, it showed that even though Mrs. Obama was new to politics and to Washington, she instinctively knew that living in the White House was not going to be easy, and the demands on her family (including her children) were going to be enormous. While the business world does have the concept of the “corporate spouse” who may play an important role in social events, it’s still really unusual for a CEO’s children to become involved — they’re generally off the hook.

In 2012, Sheryl Sandberg told a reporter she leaves her office every day at 5:30 pm to get home for dinner with her family, and it started a big debate over how executives set limits on their workdays. What did you observe about how Obama sets limits?

One of the details in my book that people react most strongly to is that the president has a strict 6:30 time for dinner with his family, and it’s pretty much inviolate. He’s willing to miss dinner twice a week, but that’s it. That’s very unusual for a president. It limits his fundraising trips to the West Coast. It limits his outreach to Congress. I’m not suggesting that he’s remiss for not doing those things—I’m only noting it’s an unusual approach. For CEOs, I think it raises the interesting question of how far you’re willing to go [in setting boundaries]. Especially in light of CEOs’ outsized pay packages, is it okay to say ‘If it’s after 6:30 pm, I can’t do that?’

Sheryl Sandberg also says that choosing the right spouse is the single most important career decision someone can make. Do you see Michelle as unusually vital to Barack Obama’s career?

I don’t think Barack Obama would be president without Michelle, for both practical and psychological reasons. The practical reason is that he was a newcomer to Chicago who needed to become not just a politician, but a black politician in a new city. He had an unusual background and no roots there. Michelle Obama provided those roots when they married. From a psychological perspective, Mrs. Obama always had a very elevated sense of who her husband was. She talked about how he was not like other politicians, and that influenced his own self-image.

You provide vivid descriptions of the First Lady gently teasing the president, of “puncturing” the pomp around him. Why is this dynamic important?

One of the dilemmas of being the spouse of someone who has a ton of responsibility—whether it’s a president or a CEO—is knowing when you support and console, and when you speak truth to power. When your spouse comes home, you don’t want to say ‘I really think you could have handled that meeting differently.’ But on the other hand, you can have tremendous influence and arguably a moral duty to use it, to prevent or fix problems where you can. We have a whole literature about presidential marriages—we know a lot about the Adams, the Roosevelts, the Clintons—but I’ve never seen research into CEO marriages, and how spouses influence CEO decision-making. That could be a fascinating area for research.

Last year was especially difficult for the Obama administration. When things aren’t going well, do you have the sense that the president puts in longer hours, or is he able to maintain a sense of balance and perspective?

It’s really hard to tell. Aides are constantly trying to present an image of the president as cool and unruffled by what’s going on around him. At the same time, there is a sense that he works incredibly hard—for instance, he’s known to pull all-nighters, especially when writing big speeches. The bigger question for me isn’t the workload but how presidents deal with the psychological pressure. The decisions they make are just so monumental, particularly during times of war and economic struggle. So many of us worry about having an outsized degree of anxiety about jobs where the stakes are relatively low; what  can learn from people who’ve served in really high office?

Thriving at the Top

An HBR Insight Center




To Get Honest Feedback, Leaders Need to Ask
Don’t End Your Career With Regrets in Your Personal Life
What Does Success Mean to You?
Understand the Sacrifices Before Launching a Start-Up

Hire Slow, Fire Fast

A lot of start-ups hire fast and fire slow. A bias for speed combined with the pressure for high growth drives many leaders to be quick to hire (“We need to fill this role now!”) but slow to remove underperforming employees because they’re busy and would rather put off the awkward, hard conversations. It can lead to what Guy Kawasaki, when he was still at Apple, called “the bozo explosion.”

This dynamic led one Silicon Valley company through a season of undisciplined growth leading up to a massive lay-off. It was the organizational equivalent of open heart surgery: instead of having the daily discipline required to maintain a lean and entrepreneurial team, leaders waited until the organizational arteries were blocked and major systems were failing before putting the whole company into trauma through massive, corrective surgery.

Contrast that behavior with that of a 700-person company with more than a billion dollars of annual revenue. That’s a staggering 1.4 million dollars of revenue per employee — a ratio that has been achieved carefully, by design.

I recently worked with the CEO and her top 35 executives. They want to scale while maintaining their lean and entrepreneurial edge. As I introduced the idea of “hire slow, fire fast,” I thought it might seem a bit provocative. But no sooner had I mentioned the idea, than the CEO interrupted enthusiastically. She said, “We have had that idea for a decade!” She pointed to one of the other leaders in the room and said he had learned it from his father, who had run a thriving company through the Great Depression. The principle has been key to the company’s success.

In a time of massive youth unemployment around the world, the principle of “hire slow, fire fast” may seem insensitive. However, for three reasons I would argue this approach is more compassionate than the alternatives.

First, it doesn’t serve the world to create bloated, bureaucratic companies that will slowly die. We need healthy, growing companies capable of sticking around for the long run.

Second, it isn’t compassionate to keep one person — but make their whole team struggle as a result. We need teams in which everyone can trust each other to do a great job. If “hire slow, fire fast” sounds harsh or mercurial, consider how harsh it is to allow a whole team to be held hostage by someone who should not have been hired in the first place. And while we’re on the subject, lacking courage is not the same as having compassion.

Third, trying to force someone to be something they are not is neither sustainable nor humane. It doesn’t serve people to keep them in the wrong role, giving them the same negative feedback week after week, month after month, year after year. Their one wild and precious life, to use Mary Oliver’s term, is worth more than that. Of course, if the right role can be found within the company it should be. But when someone is truly a bad fit, reassigning them is not the answer. This just moves the problem to a different part of the building.

To “hire slow, fire fast,” start by being absurdly selective in who you hire. Mark Adams, the Managing Director at Vitsoe, the worldwide licensee of Dieter Ram’s furniture collection, approaches hiring with incredible selectivity. What he wants to discover is who is a natural fit. In addition to multiple interviews, he and his team have prospective employees come and work with them for a day. No commitment has been made on either side; it’s just a chance for each side to see each other as naturally as possible.

For instance, recently they had a prospective employee help with a shelf installation. He knew how to do the job. But at the end of the day, he threw his tools into a box instead of carefully putting them away. When they shared the experience with the CEO, everyone agreed this was clearly a reason not to make the hire.

That might strike you as so pedantic you’d rather not work for such a company: but that is the point. Your criteria for selection should be so extreme many people would rather not work for you. You’re trying to attract the right select few, not the masses. Mark believes it is better to be shorthanded than to hire the wrong person.

To make this approach work, you also have to fire humanely. This may seem like a contradiction in terms, but by “firing” I don’t mean the traditional, disgusting practice of marching people to the door in humiliation. It doesn’t mean taking people we have worked with and suddenly throwing them out as if they are criminals. We can do this in a humane way.

When one leader in Silicon Valley realized she had made a hiring mistake, she could have tried to hide her error and tried to force the fit through endless rounds of feedback and a painful performance improvement plan. But that’s difficult in a case like this, where the problem is a basic personality clash: the employee was simply more aggressive than the company culture and it felt abrasive to everyone on the team. So instead, after just two weeks of seeing the effect the new hire was having on her team, she took her aside and said, “I don’t think this is a great cultural fit for us. Let’s not try to force this. You are talented and capable but this just isn’t the right fit.” It went so well the whole team, including the person who’d just been fired, went out together for drinks that night. The company then provided career coaching for free to help her find a better fit elsewhere.

If we “hire slow, fire fast” we can increase what Reed Hastings, CEO of Netflix, has called the “talent density” of our organizations. It is not easy. It takes having hard conversations. It takes leadership. Still, if we can do it then, ultimately, people, teams and organizations win.

Rising Home Equity Funds a Rising Birth Rate, but Only for Homeowners

A $10,000 increase in average home prices leads to a 5% increase in fertility rates among homeowners but a 2.4% decrease among nonowners, an effect that is substantially larger than the impact of jobless-rate fluctuations, say Lisa J. Dettling of the U.S. Federal Reserve Board and Melissa S. Kearney of the University of Maryland. When house prices rise, homeowning couples apparently use some of their increased housing wealth to “fund” their childbearing goals; but for nonowners, rising prices are one more barrier to having children.