Archives for category: Random Thought

First, Klout failed. With that out of the way…

A recently published article by Mohamed A. El-Erian on Bloomberg, What a Middling Uber Rating Might Say About You, caught my attention. Even the snippet is intriguing:

It’s an opportunity to gather useful information for improving personal and professional interactions.

The article describes a woman, a friend of El-Erian, who is worried about her “low” Uber score of “4.5 out of a possible 5.” The story basically a real-life example of the Nosedive episode from Black Mirror.

Mathematically, to me at least, 4.5/5 = 90%, which in the U.S. gets you an academic A-; the second best letter score that you can earn: 90-93 = A-; 94-100 = A. The vast majority of people would really enjoy getting an A-.

El-Erian that proceeds to give advice to help rectify the situation:

If [your score is] below 4.7, ask yourself why, and not just by looking in the mirror. It may be less about how you believe you come across to others and more about how others actually perceive you. So, seek the frank assessment of trusted friends and acquaintances. You may well learn something that is useful for improving a broad range of personal and professional interactions.

In translation: there is something wrong with you, and you’d better find out what it is. And that’s just false.

The article makes mention that the his friend is an international traveler. Perceptions, ratings, and scoring thresholds vary greatly across the globe. Some cultures are additive, some subtractive. Meaning, in some cultures you start with 0 and work your way up; in other cultures you start with 5 (or 100), and work your way down.

The U.S. is a subtractive culture. You start will a full score and points are taken off. However, in additive cultures an average performance will give you an average score. Meaning, that if you do everything that’s expected of you, in a non-exceptional way, you’ll score right in the middle, not at the top. So, if the scale goes from 1-5, as it does with Uber, and you behaved perfectly normal, you’ll probably score a three in an additive culture. So, if you tip and tipping is normal, that’s a “3.”

In my EMBA program, during group projects, we had to score our teammates on a scale from 1-5. I live in a subtractive culture, but come from an additive culture, which I applied in my scoring. So, if your work was perfectly adequate you’d earn a 3 on my scale; if you work was very good you’d earn another point; and if you voluntarily assumed a leadership role in the project you could earn your final point. My average-performing teammates were not pleased…

And let me tell you, if you get 10% wrong on a test in an additive culture, you do NOT earn the equivalent of an A-. You’d barely get a pat on the back.

Back to the article. If a woman—this has to be pointed out, because few cultures treat women fairly—manages to attain and maintain a global Uber score of 4.5, spanning both subtractive and additive cultures, that is an excellent achievement. Yes, ideally gender would not matter. Ideally, and normally, women should also earn equal pay…

So, friend of Mohamed El-Erian, THERE IS NOTHING WRONG WITH YOU. You’re totally crushing it. In fact, you’re probably awesome! That’s the best human rating you can get.

Also, don’t let Silicon Valley ruin your sense of self-worth.

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Tim Cook is receiving a lot of press for asking the board to alter his compensation plan to better match performance (or lack thereof): see here (CNBC), here (CNN), and here (Mercury News).

In “The Fascinating Part of the Changes to Tim Cook’s Restricted Apple Stock”—so far the only journalistic piece I’ve seen that doesn’t just shovel boilerplate—Tim Worstall digs deeper. First he discusses how this model might infuriate fellow CEOs whose only real desire is to have their hand in the corporate till (my words), and how this move by Tim Cook and Apple’s board exhibits real leadership on executive compensation.

Second, he also exposes that Tim Cook isn’t actually exposing himself to too much financial peril, which is the true point of that article, and makes it a fascinating read.

I think that instead of leadership and altruism, a different motivating factor is at work: self-preservation.

Tim Cook knows he’s not Steve Jobs, that he cannot make evolutionary products seem revolutionary, which causes irrational exuberance. That doesn’t mean that at its peak the stock price was inflated. A stock price reflects the total expected future earnings of a company, and with the hype stirred up by Steve Jobs that surrounded Apple’s products and services, those earnings would have seemed likely/possible. But the sheen has worn off.

That doesn’t mean that Apple’s products aren’t any good—they are very good—but they are once more being evaluated on their merits, and there simply is a lot of competition out there.

Given Apple’s precipitous stock decline, and North American boards’ and shareholders’ unwillingness to have a long-term view, Tim Cook would normally have been fired by now. He’s certainly not gaining friends in the investment community (stock price of $1,000, anyone?).

Tim Cook can now be the CEO for the next ten years, not outperform the market but keep his job, and still out-earn all of us in one year what we cannot even earn in a lifetime. Per his comp plan, even if Apple is in the bottom-third of S&P 500 performance, he will still be granted 50% of his RSUs. That means, written into his contract now is that he can be a shitty performer, yet still receive 50% of his bonus compensation. It also means the board cannot really fire him for under-performance since it has agreed to these terms. Very shrewd bargaining indeed.

Tim Cook possibly faced getting fired soon, so instead he bought himself time (literally) and a ten-year revenue stream in the process. Tim Cook is probably a good shepherd, but not necessarily a great leader. He is, however, very wise: he knows when he has enough, and that more isn’t necessarily better. And he certainly knew how to package and sell that. If only he could do that for Apple, not just himself.

What’s really broken in executive compensation is tying it exclusively to shareholder needs, instead of the broader stakeholder needs (triple bottom-line stuff). Stakeholders include employees, customers, suppliers, the environment, etc. With a ten-year CEO runway Tim Cook can now ignore quarterly results. That’s actually very good, because he can focus on the real needs of the company. But he could also have put a real leadership stake in the ground by incorporating the larger universe of needs in his bonus plan, instead of just focusing on his own.

[Lest we forget the point of this blog…lesson to marketers: don’t hoodwink your audience.]

Fact #1: Bankers work on behalf of their clients.

Fact #2: Bankers work on behalf of themselves.

Keeping the above in mind, why are we surprised that the Facebook IPO (NASDAQ: FB) was executed to the benefit of Facebook, the company, and the underwriting banks, rather than the retail investor?

Henry Blodget, CEO/Editor-in-Chief of Business Insider—who in his time put more lipstick on pigs than most of his peers, and is permanently barred by the SEC from working in the securities industry—is positively outraged by the bankers’ behavior. Blodget makes very valid points (article/video), but is he really permitted to be “shocked” by insiders giving themselves an advantage, legal or not?

Next, Paul Graham makes the point that valuations on startups could be going down because of the Facebook IPO and the lack of value it delivers to IPO investors (institutional and retail alike).

Shouldn’t they? I mean, not across the board, but for unproven business models? LinkedIn, in comparison to Facebook, actually has a proven business model: it’s an HR solution.

By definition, the bankers did great. They got Facebook and themselves the most money possible. I agree, in the long-term Facebook should not be underperforming its IPO price—that would be very bad for Facebook (and, of course, investors). But in the short-term, Facebook got the most money for giving up the least.

I am not arguing that deceit is an honorable practice, but I’ll go with this cliché: Fool me once, shame on you; fool me twice, shame on me.

What ought to happen is that more real due diligence is being done. Perhaps less investment, but not fewer investments. Yes, companies once more will have to prove that they can make money, not just aggregate content. Thank you, Facebook, for the lesson.

The lesson to marketers? Deliver value to your stakeholders, not just your shareholders. (I really need to make that an axiom.)

This morning’s SmartBrief on ExecTech newsletter contained an alluring headline: “Why “superstacks” are becoming an IT strategy.” Clicking through to the CRN article revealed less than stellar journalism; luckily the full PDF is available from Accenture for download. (This infographic PDF tells you everything you need to know, so you don’t actually have to read a whole lot.)

A Superstack (pronounced like “Superstar” by Molly Shannon, SNL) is:

…a more extensive and cohesive integration of operating systems, semiconductor chips, devices, applications and end-user services than the industry has traditionally achieved.

Apple is prominently cited as providing just such:

Accenture-Superstack

Accenture Superstack (appropriated w/o permission from Superstack PDF; very sorry)

I remember another company that also offered a Superstack, but they weren’t very marketing savvy, and ultimately lacked strategy, which Apple had in spades (under Jobs). They were called Sun Microsystems.

Sun had:

  • Chipsets
  • an OS (if they’d have open-sourced Solaris sooner Linux would have fared poorly)
  • Server hardware
  • Middleware
  • Virtualization (xVM, Java!)
  • A kick-ass filesystem
  • Grid computing
  • Office applications

And they had the Sun Ray™ Ultra-Thin Client (PDF)—a most cool idea that didn’t go anywhere (and wasn’t portable like an iPhone). So many benefits, so few buyers.

I don’t really miss Sun, but I don’t think of Apple as pioneering (hypocritical comes to mind more readily).

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