The car door closed and they were alone. As the old man backed down the driveway, the younger man spoke. “Thanks for doing this with me Poobah.”
“It’s what Poobahs are for, Sunshine.”
Nothing else was said until they were on the highway. A billboard announced “Starbucks 12 miles ahead.”
The younger man turned off the radio.
“Why do you call me Sunshine?”
“Because you’re very bright and you give me a warm glow.” The old man looked at him. “Is there something else you would like me to call you?”
The younger man said nothing as minutes passed.
“Starbucks. Next Exit.”
The young man said, “Let’s grab a cup of coffee. It’s going to be a long drive.” Then he smiled. “And by the way, you’re buying.”
“I’m buying? I thought you were making a small fortune.”
The smile disappeared as if the old man had blown out its candle. “I am making a small fortune, Poobah. The problem is that I started with a large one.”
A few minutes later the old man handed a twenty to the server at the window and she handed him two Ventis in return. He passed one over to the younger man and put the other in his cup holder. The server was holding out his change. The old man looked at her and said, “No. That’s for you,” then gave her a smile and a nod as he pulled away.
“I’ve watched you do that my whole life and I’ve never understood it.”
“What do you mean?”
“You always over-tip. Always. Even when you get lousy service. Why? Why do you reward incompetence?”
“Ah. You think the tip is about them.”
“Of course the tip is about them. Who else would it be about?”
“The tip is about me, Sunshine.”
“You give a stranger at a window ten bucks just to prove you’re rich? Hell, she knew you were rich when she saw the car.”
“I surprised her with something she didn’t expect. It makes me feel good to know she’s having a better day right now than she was having 5 minutes ago.”
“Does it make you feel ten dollars good?”
“You’re nuts, Poobah.”
“Always have been.”
Sunshine nested his empty cup inside Poobah’s empty cup.
“Sunshine, you said you were making a small fortune from a large one. I take it you’re talking about the money from the investors?”
The young man nodded.
“Sunshine, tell me what you know about unifying principles.”
“Cells, evolution, genes and homeostasis?”
“Not biology. Business.”
“I don’t follow.”
“Unifying principles bring all the facets of a business into alignment.”
“Diamonds have facets, Poobah. Businesses have departments and divisions.”
“Businesses that sparkle have facets.”
The younger man gave a sigh of resignation. “Okay. Give me an example.”
“George Eastman organized the Eastman Dry Plate Company in 1881 under four unifying principles:
1.Keep the price of the product low so the customer will find more uses for it
2. Always sell by demonstration.
3. Be the first to embrace new technologies.
4. Listen to what the customer tells you.
Any time there was a decision to be made, the CEO would choose the solution that best aligned with those four unifying principles. In 1976, Eastman Kodak sold 90% of all the camera film and 85% of all the cameras in America. By 1988 they had more than 145,000 employees worldwide and in 1996 they had 16 billion dollars in annual revenues and a valuation of 31 billion.”
“And in 2012 they went bankrupt, Poobah. I hate to be the one to tell you, but Kodak went broke. Dead and gone. Times have changed.”
“Kodak went broke when they abandoned the unifying principles that gave the company it’s vision and purpose and strength.”
“You’re talking philosophy, Poobah. I’m talking bankruptcy. I’m talking facts.”
The old man smiled. “Okay, Sunshine, here’s a fact. Principle number 3 was, ‘Be the first to embrace new technologies.’”
“You’re saying Kodak should have pioneered digital photography.”
“No, I’m saying their own unifying principles say they should have pioneered digital photography. Kodak went broke because they decided they were in the camera film business. They quit listening to the customer.”
“The internet changed everything.”
“Not as much as you think.”
“Poobah, I understand that you’re trying to help and I love you for that, but things aren’t like they used to be when you were my age or even when Mom was my age. Business today is all about metrics, numbers, outcomes.”
The old man looked at him a long moment, then back at the road ahead. “Outcomes and numbers and metrics are generated by actions. Behavior.”
“The customer’s actions and behavior. Yes.”
“But the customer’s actions can be altered by our own actions.”
“I have good people, Poobah. They know what they’re doing.”
“They’re doing what they believe is right.”
“They know what they’re doing.”
“Every action is an expression of a belief. This is true whether you are a customer or an employee or a CEO.
“You’re saying we need better marketing to change what our customers believe about us.”
The old man shook his head. “I’m not talking about marketing. I’m talking about making choices and taking action.”
“Things are different today, Poobah. Things have changed.”
“Some things never change.”
“No one believes that but you.”
“Bezos believes it, too.”
“Jeff Bezos of Amazon?”
“I’ll tell you about Bezos after I tell you about the four people you meet on the ocean of life.”
“Can we skip the ocean of life and go straight to Jeff Bezos?”
“No. It’s a long drive. We have time to talk about both.”
The young man reclined his seat, crossed his arms and closed his eyes as the older man continued.
“There are only four people on the ocean of life and you meet them over and over again. The first person you meet is drifting. The winds and waves of circumstance push the drifter this way and that way and the drifter just ‘goes with the flow.’ You know you’ve met a drifter when they say, “Whatever. It’s all good.”
His eyes still closed, Sunshine smiled and said, “You sounded just like Bobby Marino when you said that.”
“The second person you meet is surfing. Surfers seem to be having a good time, but they never really get anywhere unless it’s by accident. The surfer is just looking for a wave to ride. ‘The next big thing.’”
“Am I to understand that the wind and the waves represent our circumstances and the surfer is an opportunist that’s looking for a wave to ride?”
The young man’s eyes popped open. “So what’s wrong with that?”
“The surfer isn’t focused on a destination. He’s just trying to stay on top of the wave.”
“But if he’s skillful, he can ride that wave all the way to the end.”
“The danger isn’t that he’ll fall off, Sunshine. The danger is that he’s riding a wave to nowhere.”
“You’re talking philosophy again.”
“The third person you meet on the ocean of life is drowning.”
The young man closed his eyes again and settled back into his seat. His words were softer now. “That’s how I feel.”
“I know, Sunshine. But you’re not a drowner.”
The younger man turned his head toward the window. The old man continued.
“Each of us, if we’re healthy and normal, might need to be rescued two or three times in our life by someone who loves us. It might be financial rescue or emotional rescue or chemical or relational, but we’ll need someone to reach down and grab us and pull us back to where we can breathe. That’s normal. We need rescuing because we’re human.”
Sunshine shifted in his seat.
The old man went on, “But this third person is a professional drowner. You’ve met them. They whine and cry, ‘It’s just been the worst week of my life. I don’t know what I’m going to do.’ So you help them. You get them back on their feet. Then, when you see them again and ask how it’s going, they say, ‘It’s just been the worst week of my life. I don’t know what I’m going to do.’”
“Uncle Todd. Rick the postman. Mom’s friend, Sharon.”
“Like I said, we’ve all met them.”
“So who is the fourth person?”
“The fourth person you meet on the ocean of life is the one that you and I want to be.”
“They usually succeed sooner or later, but success is an outcome. The reason they succeed is because they’re navigating.”
“A navigator uses numbers, Poobah. Metrics. Graphs. Pie charts.”
The old man sighed. “We look at the numbers to see where we are. Numbers show us the outcomes of all the decisions we’ve made so far. But they don’t tell us where to go.”
“So how does the navigator navigate?”
“A navigator is guided through the darkness by something that isn’t connected to the wind and waves. The North Star has been a guiding light for thousands of years because it’s the only star in our sky that doesn’t move.”
“Are you sure about that?”
“The southern hemisphere has the Southern Cross.”
“So you’re talking about the northern hemisphere.”
“I’m talking about where you and I live.”
“The North Star, Polaris, is located directly above the axis of the earth. Every other star in the sky and the earth itself revolve around that guiding light. It is a unifying principle, a non-negotiable standard.”
“Great story, Poobah. Now tell me about Bezos at Amazon.”
“We’ll let Bezos speak for himself. Google ‘The 20 Smartest Things Jeff Bezos Has Ever Said.’”
A moment later the younger man said, “Here it is. The Motley Fool. Morgan Housel.”
“That’s the one. Now look at number 6 on that list.”
The younger man began to read out loud. “I very frequently get the question: ‘What’s going to change in the next 10 years?’ but I almost never get the question, ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ or ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.”
The younger man looked up from his phone and out the windshield.
“Sunshine, do you believe that if you take the right actions, the correct results will follow?”
“Why do I feel like you’re sneaking up on me?”
“To change a person’s actions you must first change their beliefs. I’m not sneaking up on you, Sunshine. I am, however, trying to change your beliefs. But I’m doing it openly. There is no sneaking. Now Google, ‘Bezos letter to shareholders. 2010′”
A moment later, the younger man began reading, “In a letter to shareholders in 2010…” His voice drifted into silence then returned to full volume moments later. “‘Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual ﬁnancial results or debating projected ﬁnancial outputs. To be clear, we take these ﬁnancial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize ﬁnancial outputs over time.’”
The old man smiled as he asked, “What did Bezos say was the most effective way to maximize financial outputs over time?”
The younger man looked at his cell phone, “‘We believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize ﬁnancial outputs over time.’”
The old man said, “I wonder what he means by controllable inputs?”
The younger man said, “I’m entirely certain you already know and I’m pretty sure you’re about to tell me.”
“As I said, you’re a very bright boy.”
“Sunshine, do you remember the four unifying principles of George Eastman?”
“I remember one was, ‘Keep the price of the product low so the customer will find more uses for it,’ and another one was, ‘Listen to what the customer tells you.’”
“Jeff Bezos brought those ideas into sharp focus when he said, ‘When things get complicated, we simplify by saying ‘what’s best for the customer?’ And then we take it as an article of faith that if we do that, it’ll work out in the long term.’”
“He actually said ‘an article of faith?’ Those are his words, not yours?”
“His words. Not mine.”
“That blows my mind a little.”
“Sunshine, every company begins with the customer in mind, but then management begins thinking in terms of divisions and departments and before you know what’s happening the company is spending a lot of energy managing internal struggles and battles because the divisions have been given conflicting goals.”
“And unifying principles solve all that?”
“They do if everyone in the company has those principles baked into every action they take.”
“My company has a mission statement.”
“‘We want to provide a pleasant working environment for our employees, deliver exceptional service to our customers, make a fair and honest profit and deliver a healthy return-on-investment to our investors.’”
“Oh! You’ve read it!”
“No, that’s just what they all say.”
“I wasn’t trying to hurt you, Sunshine.”
“So how are unifying principles different than mission statements?”
“A mission statement is propaganda. Unifying principles are an operating system.”
“Look at you, Poobah. ‘An operating system.’ You used a contemporary metaphor.”
The old man smiled. “Sunshine, if you truly make the customer the center and the beginning of every initiative, you can hardwire that mentality into your company culture. Mission statements and slogans don’t change what people believe, because most people aren’t listening to what you say. They’re watching to see what you do.”
After a silence, the younger man spoke. “I Googled ‘unifying principles, Amazon,’ and ‘unifying principles, Jeff Bezos,’ and neither search came back with anything that looks like what you’re saying.”
“Jeff Bezos doesn’t refer to his deepest beliefs as ‘unifying principles,’ that’s just what I call them. But if you listen to what Jeff is always saying and watch what Jeff is always doing, it’s easy to see that Amazon.com was built on four stone pillars.”
The young man spoke quietly, “To change a person’s actions, you must first change their beliefs.”
The old man said, “These are the four stone pillars of Amazon.
ONE. Customer Centricity.
TWO. Continuous Optimization.
THREE. Culture of Innovation.
FOUR. Corporate Agility.
These are the essence of the Amazon brand.”
“But Amazon isn’t a brand, Poobah. It’s a distribution channel.”
“Amazon is most certainly a brand.”
“I think we may have two different ideas about branding.”
“Google what Bezos has to say about it.”
The young man spoke a few seconds later, “Bezos says, ‘Your brand is what other people say about you when you’re not in the room.’”
“A brand isn’t what you say about yourself, Sunshine. Your brand is built on your actions. Your performance. And the performance of your products.”
“It’s easy to wow the customer when you don’t have to make a profit. Amazon has never made a profit, Poobah.”
“That’s a popular myth but it’s not true. Amazon became profitable in the 4th quarter of 2001 when they reported a net income of $5 million. In 2003, net revenue grew to $5.26 billion and they had a $35 million net profit. In 2015 they became the fastest company to ever reach $100 billion in annual sales and they also happened to generate $8 billion in free cash flow after all the bills were paid and all the investments were made. Fifty percent of all e-commerce went through Amazon that year and the percentage is going up.”
“Why do you know so much about Amazon’s finances?”
“I bought my Amazon stock back when it was $10 a share after falling from its previous price of more than $100.”
“How did you know it was the right thing to do?”
“When short-term thinkers start selling their stocks in companies with long-term vision, that’s when your Poobah buys stock.”
“Why does everyone say Amazon isn’t profitable?”
“Because TLB’s always have to justify their short-term thinking.”
“Twitchy Little Bastards. Marshmallow eaters.”
The younger man’s face exploded into a smile. He looked down and shook his head. “You’re nuts, Poobah.”
“Always have been.”
“I can see that you’re dying to tell me about the marshmallow eaters, so go ahead. We’ve got time.”
The old man raised an eyebrow. “I’m not dying to tell you anything. If you want to know, you’re going to have to say, ‘Please, kind Sir, tell me about the marshmallow eaters.’”
“Please, kind Sir, tell me about the marshmallow eaters.”
“It’s good to see you smile, Sunshine.”
“Back in the late 1960s, a couple of psychologists at Stanford conducted an experiment on a bunch of 4 and 5 year-old kids.”
“They experimented on kids?”
“About 600 of them.”
“They couldn’t get away with that today.”
“It was harmless. They took each kid into a room and put a marshmallow on the table beside them and said, ‘You can eat this marshmallow if you want, but if it’s still here when I come back, I’ll give you a second marshmallow and then you’ll have two marshmallows to eat.”
“They were testing the kid’s patience.”
“The experiment was supposed to be about instant gratification versus deferred gratification.”
“So how did it turn out?”
“Most of the kids ate the marshmallow.”
“How long was it before the adult came back with the second marshmallow?”
“About 15 minutes.”
“I’m not sure what I would have done.”
“You’re not a marshmallow eater, Sunshine. You’ve just been trying to make a bunch of marshmallow eaters happy.”
“I’m not sure I see the point of the story.”
“That’s because it’s not over.”
“Please, kind Sir, finish the story about the marshmallow eaters.”
“So they had the names of all these kids and video footage of each one sitting next to a marshmallow until the kid finally gave in and ate it. But that’s not the interesting part.”
“Please, kind Sir, tell me the interesting part.”
“Several years later, they decided to track these kids down to see how each of them turned out.”
“The longer the kid was able to wait before eating the marshmallow, the higher they scored on the SAT in high school.”
“You’re making that up.”
“I promise you I’m not. They also had lower levels of substance abuse, lower likelihood of obesity, better responses to stress, better social skills and higher scores in a wide range of behaviors that psychologists call ‘executive function.’”
“The ant looks to the future but the grasshopper doesn’t. That’s why the grasshopper dies in the winter.”
“I’m surprised you’re familiar with that story.”
“I didn’t think anyone told it any more.”
“It was a bedtime story when I was little.”
The old man smiled. “Did I tell you there was one kid who waited the whole fifteen minutes and never ate the marshmallow?”
“Just one kid?”
“You made that up, right?”
“Only the part about Zuckerberg. The rest is completely true. You were asking me why people claim Amazon isn’t profitable. Have you figured it out yet?”
“Let’s see. It sounds like you’re saying people trash-talk Bezos and claim Amazon isn’t profitable because they’re ‘Twitchy Little Bastard Marshmallow-Eating Grasshoppers’ who have no stomach for delayed gratification.”
“Forget the TLB’s, Sunshine. They’re mosquitoes.”
“Mosquitoes are hard to ignore.”
Warren Buffet ignored mosquitoes. So did Steve Jobs, Mark Zuckerberg, Howard Schultz, Julius Rosenwald. Jeff Bezos plowed Amazon’s profits into R & D because he was unwilling to make Kodak’s mistake.”
“So if Jeff Bezos had been CEO of Kodak, we’d all be carrying cell phones filled with Kodak technology right now?”
“Badda-boom. I think you might be right.”
“Kodak was a technology innovator for nearly 100 years before they began to think of themselves as a camera film company. ”
“Just how much does Bezos spend on R & D?”
“I remember one year – I think it was 2013 – when Bezos was pouring money into Amazon Web Services and refining the Kindle and expanding his robotics in the warehouses and investigating deliveries by drone, he spent nearly as much on R & D as Google and Apple combined.”
“You can’t mean that.”
“I do mean that. Bezos spent $15.4 billion. Google spent $9.8 and Apple spent $6.6.”
“They were the 3 big spenders?”
“More or less. IBM spent $9.7 billion. Alibaba spent $8.9. Lilly Pharmaceuticals spent $4.7. FaceBook spent $3.7. I can’t remember more than that.”
“I’m blown away that you can remember all those numbers. I never thought of you as a numbers guy.”
“I pay attention to the numbers that matter.”
“You’re saying R & D numbers matter?”
“I’m saying innovation matters. Experiments matter. Thinking ahead matters. Companies who think ahead and experiment are the ones who innovate. These are the brands that continue to impress us.
“I’m beginning to see why you say a brand is built on actions more than words.”
“Again, that’s why I call you Sunshine.”
“Do you believe that any tech company can brand like Amazon?”
“It has nothing to do with tech. Even a lemonade stand can brand like Amazon. If you don’t eat the marshmallow, you can build anything you want on those four pillars.”
What were they again? I’m going to write them down.
The old man smiled. “Customer Centricity. Continuous Optimization. Culture of Innovation. Corporate Agility.”
“Give me the deep dive on those.”
“Happy to, Sunshine.”
“Turn around and go back to that Starbuck’s, Poobah. They’ve got Wi-Fi and I want to use my laptop.”
The old man took the next exit, looped under the overpass and headed back the way they had come. “Do you want me to start the deep dive now or wait for your scuba tanks?”
The younger man never looked up from his cell phone. “I’d like to show you the information I’m looking at and I can’t do that while you’re driving.”
“I’m going to stop at Walgreen’s before we go to Starbuck’s.”
“Are you taking medicine?”
“No, Sunshine, you are.” He smiled. “And frankly, you’re doing it rather well.”
The old man walked out of Walgreen’s, opened the car door and tossed a bag of jumbo marshmallows into the lap of the younger man who pretended not to notice. The old man smiled as he closed the car door. Putting the car into reverse, he said, “The first of the four pillars is customer centricity. Bezos says, ‘If you’re truly obsessed about your customers, it will cover a lot of your other mistakes.’”
The younger man looked up from his cell phone. “But Jeff Bezos didn’t invent customer centricity, Poobah. Sam Walton was customer centric before Jeff Bezos was even born.”
“And Cornelius Vanderbilt was customer centric before Sam Walton’s grandfather was born.”
“Talk to me about that.”
“Vanderbilt noticed that all the little boats hauling passengers and freight between Staten Island and Manhattan were making their customers wait until they had a full load before they would make the trip across New York Bay. So he borrowed a hundred dollars from his Mom to buy a little boat, then he posted a schedule of his departure and arrival times on both sides of the river. Vanderbilt stuck to that schedule no matter whether he was carrying one passenger or a boatload of freight and people. It didn’t take long before Vanderbilt had everyone on board.”
“Is he the one they called ‘Commodore’ Vanderbilt?”
“They started calling him ‘Commodore’ when he began hauling passengers and freight up and down the east coast on steamships. Commodore Vanderbilt made his name and his fortune by leaving on time, arriving on time, and not losing your luggage.”
“Isn’t that how Herb Kelleher built Southwest Airlines?”
“You read his book?”
“Didn’t know he had one.”
“It’s called Nuts. Vanderbilt and Kelleher were the same guy. They just had different haircuts. ”
“I thought the Vanderbilt fortune was built on railroads.”
“No, the Vanderbilt fortune was built on customer centricity.”
“But didn’t he buy a bunch of railroads?”
“Sure. When all the railroads were going broke, Vanderbilt spotted their problem, bought several of them with his steamship money, and then did what he always did.”
“Leave on time, arrive on time, and don’t lose the customer’s luggage?”
“Badda-boom. Same guy with a different haircut.”
“By the way,” said the old man, “when Vanderbilt died in 1877, he was worth a hundred million dollars. That was a lot of money back then.”
“It’s a lot of money now, Poobah.”
Minutes passed as the old man drove. The car was silent as the younger man’s fingers flickered across the screen of his cell phone. The old man spoke, “A little while ago you said, ‘Sam Walton was customer centric before Jeff Bezos was even born.’ How did you know that?”
“When you were in Walgreen’s I read where Sam Walton said, ‘There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.’”
“Were you able to identify Sam’s unifying principles?”
“That was easy. He called them his Ten Commandments.”
“Read them to me.”
“Sam Walton’s 10 Commandments:
1. Commit to your business.
2. Share your profits with your associates and treat them like your partners.
3. Energize your colleagues.
4. Communicate everything you possibly can to your partners.
5. Appreciate everything your associates do for the business.
6. Celebrate your success.
7. Listen to everyone in your company.
8. Exceed your customers’ expectations.
9. Control your expenses better than your competition.
10. Blaze your own path.”
“Has the company remained true to those principles since Ol’ Sam passed away?”
“Well, Poobah, it looks to me like they’re all about #1 and #9, but everything else has sort of fallen by the wayside.”
“And now you know why I don’t own any Wal-Mart stock.”
“But they’re still America’s largest retailer.”
“Before them, Sears was America’s largest retailer. And as long as Sears remained committed to the principles of Julius Rosenwald, they were the financial juggernaut of America. But Rosenwald died in 1932. And battleships like Sears and Wal-Mart can coast for only so long before they start to sag and creak and groan.”
“What made Rosenwald special?”
“Rosenwald was quick to help when he saw good people struggling.”
“So he was a lot like Sam Walton.”
“Same guy, different haircut. Except one was a Protestant from Oklahoma and the other was a Jew from Chicago.”
“Sam Walton was Jewish?”
“A person might think so by the way he treated his people. When Sam Walton was alive, Wal-Mart was customer centric and Sam’s Ten Commandments about partnering with your employees could almost have been taken from the Talmud.”
“Tell me more about Rosenwald.”
“Google ‘Julius Rosenwald’. Look for the reference that comes up from the Sears Archives.”
“Julius Rosenwald was born, blah, blah, blah…” The younger man went silent, then spoke again. “Rosenwald insisted that the company’s primary goal must be responsibility to the customer. He established the ‘satisfaction guaranteed or your money back’ pledge and conducted his business dealings by the creed ‘Sell honest merchandise for less money and more people will buy.’ Under Rosenwald’s direction, the business positioned itself as a direct extension of the farmer’s eyes, ears and wallet, making purchasing decisions in the best interests of the farmer. After Rosenwald stepped down as Sears president in 1924, he devoted most of his time to philanthropy. Over the course of his life, he donated millions of dollars to public schools, colleges and universities, museums, Jewish charities and black institutions. Of all his philanthropic efforts, Rosenwald was most famous for the more than 5,000 ‘Rosenwald schools’ he established throughout the South for poor, rural black youth, and the 4,000 libraries he added to existing schools. The network of new public schools subsequently employed more than 14,000 teachers. In 1927, Rosenwald received a special gold medal for Distinguished Achievement in Race Relations for his contributions to the education of black youth.”
“That was Julius Rosenwald, Sunshine. He cared about his customers. He cared about his suppliers. He cared about helping people so much that he occasionally had to borrow money to pay his own living expenses.”
“Why did he have to do that?”
“He would literally give everything he had. You see, Rosenwald was so spectacularly wealthy that he was often worried that his children would never experience the joy of pushing, working, struggling to reach a goal. And he was a huge promoter of the YMCA back in the days when it was a major force for helping lift people from difficult circumstances.”
“The Young Men’s Christian Association? Are you sure this guy was Jewish?”
“Jews have always been like that, Sunshine. Have you ever looked at the percentage of Nobel Prizes that are awarded to Jews?”
“I’ve always wondered why so many of your friends are Jewish.”
“They’re customer centric and they don’t eat the marshmallow.”
“You’re not going to start talking religion now, are you?”
“We’re talking about people – customers and employees – and we’re talking about making the world a better place, Sunshine. We’re talking about business.”
“Okay, tie all that together for me.”
“Moses ben Maimon was a Rabbi who lived about a thousand years ago. He’s usually called Maimonides, or Rambam. Anyway, he said there were 8 different ways to help people and all of those ways were good, but some were better than others.”
“Okay, I’m starting to see a little bit of a business application. Keep going.”
“He said the least effective way to help someone is to hand them the cash they need.”
“Why did he consider that to be ineffective?”
“Two reasons. Number one, it’s not sustainable. Number two, a person needs money because there is a problem. If you really care about them, you won’t just hand them the cash and walk away. You’ll get involved and try to find a long-term solution. Traditional Jewish thinking is all about sustainability. Always has been. That’s why they’re such amazing business people.”
“Okay, what did this Rabbi Moses-whatever say was the best way to help?”
“Take a guess.”
“Give them a job? Or maybe help them start a company, so they can also give jobs to other people?”
“You’re more Jewish than you realize, Sunshine. Now tell me how that connects to what Bezos has been saying.”
“Well, Bezos said, ‘We believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize ﬁnancial outputs over time.’ In other words, he believes in making investments that will yield long-term results, year after year. Julius Rosenwald believed in the long-term benefits of a ‘no questions asked’ return policy and the long-term benefits of education. Neither one is a TLB.”
“Okay, what else?”
“Bezos is all about taking action, doing experiments, and looking toward the future. He said, ‘I very frequently get the question: ‘What’s going to change in the next 10 years?’ but I almost never get the question, ‘What’s not going to change in the next 10 years?’ Bezos said the second question is the more important of the two. He’s all about things that don’t change. Rosenwald was all about things that don’t change. They’re navigators, staring at a star that never moves, constantly turning the rudder and adjusting the sails to stay on course and accelerate the journey.”
The car pulled into the parking lot at Starbuck’s. The old man opened the bag of marshmallows, put one in his coat pocket and said, “Can you handle another Venti?”
“Let me grab my laptop.”
CHAPTER FOUR – Customer Centric
The younger man took a seat, placed his laptop on the table and immediately went to work. The old man carried two Ventis to the table, placed the jumbo marshmallow alongside the young man’s computer and quietly snapped a photo. The younger man never noticed. The old man fiddled with his cell phone a bit, then turned it off and slipped it into his pocket.
“Take a look at this, Poobah. In the early days of Amazon, back when they were positioning themselves as ‘The World’s Biggest Bookstore,’ Amazon’s employees wrote most of the book reviews. Bezos told his people to be honest about their opinion, so naturally some of the reviews were negative. Bezos recalls getting an angry letter from a book publisher implying that Bezos didn’t understand that his business was to sell books, not trash them. ‘We saw it very differently,’ Bezos says. ‘When I read that letter, I thought, we don’t make money when we sell things. We make money when we help customers make purchasing decisions.’”
“That’s customer centricity, Sunshine.”
The younger man continued to read, “Although it seems counterintuitive on the surface – a little bit insane, even – Bezos knew that making honest reviews available on each product page was the right thing to do for the customer. Today more than half of all retail purchases begin with a visit to Amazon to look at product reviews.”
“Are you saying that Amazon.com has become the primary search engine for consumer product research in America?”
The younger man looked up and locked eyes with his inquisitor as he nodded. Looking back down at his computer screen, he said, “In this 2013 interview with Matt Kelley, Bezos said, ‘If there’s one reason we have done better than our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience.’”
The old man sipped his coffee. The server at the window caught his eye, then smiled and waved.
“Take a look at this, Poobah.” The younger man spun his laptop around so the old man could see the screen. “The top ten and bottom ten rated public companies in the Customer Experience Index at Forrester Research are called Customer Experience Leaders and Customer Experience Laggards. This chart illustrates the performance of equity-weighted, annually readjusted stock portfolios of Customer Experience Leaders and Laggards relative to the S&P 500 Index.”
“Okay. It looks like this was for the 6-year window from 2007 to 2013.”
“It’s showing us the S & P 500 Index was up 14.5% at the end of those 6 years.”
“But the stock price of the Customer Experience Laggards was down – minus 33.9%.”
“But take a look at the Customer Experience Leaders, Poobah.”
“Up 43%. So this chart seems to indicate that a company’s stock price falls when they disappoint their customers, but it rises when their customers think they’re awesome.”
“Poobah, that’s a stock price swing of 76.9 percent over a 6 year window.”
“So in the long run it pays to be customer centric,” the old man said with a smile. “Is that what you’re telling me?”
Staring into his computer screen as he typed, the young man said, “Stock price goes up when you’re customer centric. Stock price goes down when you eat the marshmallow.”
Minutes passed. The old man wandered off to the bathroom. When he returned, the younger man was waiting for him. “Poobah, I’m confused.”
“I’m always confused, Sunshine. Don’t worry, you’ll get used to it.”
“I was looking for the kinds of things Bezos might consider to be measurable inputs when I found these analytics used by Amazon’s Category Managers. And as you might expect, every one of the 4 is customer centric.” He spun the laptop around so the old man could see the screen.
Customer Analytics: Selection: 7x the category depth.
Price: 5% to 13% lower than top 5 competitors.
Availability: 20 inventory turns indicate that customers are finding what they want and are pleased with the quickness of delivery. Most orders are delivered from warehouses within the customer’s own zone or a zone directly adjacent.
Experience: 13% above the American Customer Satisfaction Index.’
The younger man asked, “But does this illustrate Customer Centricity or is it the result of Continuous Optimization? Or does it indicate a Culture of Innovation? Or is it Corporate Agility? Inputs that would create those outputs don’t line up under just one pillar of Amazon. They line under up all four.”
The old man stood up as he extended his hand and said, “Congratulations.”
The younger man stood to his feet and shook hand the old man’s hand with a confused smile. The barista was watching from across the room. “You just discovered the power of unifying principles, Sunshine.”
Sitting back down, the younger man said, “Now I’m more confused than ever.”
“As I was saying, you’ll get used to it.”
“How does my inability to categorize these metrics demonstrate the power of unifying principles?”
“Do you remember when I told you about the four unifying principles of George Eastman?”
“Of course I do.”
“Do you remember how I told you those principles helped him choose which path to take when he came to a fork in the road?”
The younger man looked at his notes. “You said, ‘Any time there was a decision to be made, Eastman would choose the solution that best aligned with those four unifying principles.’”
The old man continued, “When your thinking is split into departments and divisions, it’s easy to put things in neat columns. It feels right. It’s tidy and organized. It gives you a way to hold people accountable. It gives you someone to blame.”
The younger man looked at his notes again. “You said, ‘Unifying principles bring all the facets of a business into alignment.’”
“Do you remember what you said in response, Sunshine?”
I said, “Diamonds have facets. Businesses have departments and divisions.” Then the younger man smiled and said, “Businesses that sparkle have facets.”
“You have a bright light bulb hovering in the air above your head right now,” the old man said. “What did you just realize?”
“An option that lines up with two of your unifying principles isn’t as good as an option that lines up with three of them.”
“And an option that lines up with three of them isn’t as good as an option that lines up with four,” said the old man.
“So if the best decisions are the ones that align with all of your unifying principles, the metrics they generate will probably line up under all of your principles as well.” The younger man’s eyes became unfocused. “I get it… I believe I actually get it.”
“Very few people ever do, Sunshine.”
The younger man looked down at his notes. “We look at the numbers to see where we are and where we’ve been. Numbers show us the outcomes of all the decisions we’ve made so far. But they don’t tell us where to go.” Then he looked at the older man. “Unifying principles tell us where to go.”
CHAPTER FIVE – Alignment of the Pillars
“Sunshine, when you were looking at Sam Walton’s 10 Commandments, you said you felt Wal-Mart was still being guided by 2 of them, but that the company seems to have abandoned the other eight. Do you remember what those 8 had in common?”
“Seven of them were about caring.”
“It hit me when you were talking about the Rabbi, Poobah. Sam Walton’s actions proved that he cared about people. He cared about his customers, his employees, his suppliers.
1. Share your profits with your associates and treat them like your partners.
2. Energize your colleagues.
3. Communicate everything you possibly can to your partners.
4. Appreciate everything your associates do for the business.
5. Celebrate your success.
6. Listen to everyone in your company.
7. Exceed your customers’ expectations.
“I’m impressed you saw that, Sunshine.”
“Sam’s tenth commandent was about having a Culture of Innovation. Jeff Bezos appears to have picked up that torch when Wal-Mart dropped it.”
“What was Sam’s tenth commandment?”
“Blaze your own path.”
The old man sipped his coffee. “You’re right about Sam Walton, by the way.”
“How do you know?”
“John Huey sat at Sam’s bedside while Sam was dying and wrote a really amazing book from that experience called Sam Walton: Made in America.”
“I’ll have to read that.”
“Poobah, why do smart people do dumb things?”
“What do you mean?”
“Kodak abandoned the principles that built their company and it looks like Wal-Mart is doing the same. Why would someone quit doing the things that made them great?”
“Sunshine, smart people are good at rationalizing things they came to believe for non-smart reasons. Smart people able to brush off criticism since they’re convinced they’re right and, due to their superior thinking abilities, they can usually out-argue their critics even when the criticism is on target. This is how and why smart people often quit caring.”
“Are you talking about how Wal-Mart treats their employees?”
“Should I be?”
“Yes, I believe it’s worth talking about. Wal-Mart famously ignores the fact that their management policies abuse their employees and push them to poverty, but check out how Jeff Bezos responded when he was accused of pushing his people too hard and not being sensitive to their needs.”
“I’m all ears.”
The younger man looked at his screen. “In August of 2015, The New York Times published an exposé accusing Amazon of pushing its employees too far to achieve unrelenting ambitions. The article was titled, ‘Inside Amazon: Wrestling Big Ideas in a Bruising Workplace.’”
“So how did Bezos respond?”
“Instead of ignoring those accusations or explaining them away, Bezos immediately encouraged his 200,000 employees to read the story. He told them that he didn’t identify with the picture the exposé painted of Amazon, but that he would be making immediate changes to ensure that Amazon was the kind of employer it ought to be.”
The older man asked, “But when Jeff Bezos instantly embraced that criticism and made changes in his company, which of his four pillars did it align with? Was it Customer Centric because happy employees create happy customers? Was it Continuous Optimization in a Culture of Innovation? Or was it an expression of Corporate Agility, a willingness to change?”
“You know the answer, Poobah. It was all of those. Bezos took that action because it was the only choice he had that would align with all four pillars of Amazon.”
“And that’s why I call you Sunshine.”
“Did you know that when Rosenwald was alive, Sears was as powerful as Amazon is today?”
“But the next generation of leadership slowly abandoned the customer centricity that gave Sears its power. They developed a taste for marshmallows.”
The younger man said, “Sears ate its last marshmallow in January of 2017.”
“Let me read this to you. Craig Fitzgerald said, “Sears, the legendary retailer that started out selling shovels and pickaxes to pioneers through its mail order catalog, announced today that it was selling the Craftsman brand for $900 million to Stanley Black & Decker… The trouble for Sears is that you can only do a deal like this once… For many consumers that have watched Sears degrade from a retail powerhouse to a slightly upgraded Dollar Store, the Craftsman brand was about the only reason left to ever enter a Sears location… Stanley Black & Decker sells tools everywhere, from the last few remaining mom and pop lumber yards and auto parts stores, all the way up to major retailers like Home Depot. As soon as consumers know they can purchase a Craftsman tool without entering the depressing husk of a once-proud store like Sears, they’ll shop elsewhere.”
“Now Google ‘Edward S. Lampert.’”
“Unless I’m mistaken, he is currently Reigning Emperor of the TLBs and King of the Marshmallow Eaters.”
“He turned Rosenwald’s beautiful dream into a nightmare,” the younger man said. Both men were silent a moment. “You never did answer my question, Poobah.”
“Sorry. Which question?”
“Why do smart people do dumb things?”
“Because dumb things produce immediate results.”
“Are you saying that immediate results are bad?”
“No. Immediate results aren’t always bad. They’re only bad when the action you’re taking to generate those results isn’t sustainable. Sunshine, when you’re doing the wrong thing, it will produce big results immediately, but it will work less and less well the longer you keep doing it. When you’re doing the right thing, it usually hurts a little at first. But it works better and better the longer you keep doing it.”
“Can you give me some examples?”
“When I got my drivers license at age 16, General Motors sold two-thirds of all the cars in the United States. It was the bluest of all blue-chip stocks. Chevrolet, Pontiac, Buick, Oldsmobile and Cadillac were 5 distinctly different brands and the car you drove said a lot about you. It let people know how you saw yourself. It let people know what you believed.”
“So what happened to Pontiac and Oldsmobile? Do they even make those anymore?
“No. In the mid-1970s, GM decided to boost profits by eliminating the design costs and re-tooling costs of maintaining 5 separate product lines. They figured they’d just build one car, hang some different chrome and change the headlights and taillights a little and cover the seats with a different fabric and badda-bing, badda bang, you’ve got yourself 5 different brands. GM was selling 5 different versions of the same car at five different prices by calling the first one a Chevrolet, the second one a Pontiac, the third one a Buick and so on.”
“So who was the genius that made that decision?”
“It was a guy named Thomas Murphy. GM immediately began making record profits, of course, because brand loyalties were deep and loyal customers aren’t quick to abandon their brand. In 1980, GM still had a 62.9% market share in the US.”
“But they were watering the soup.”
“Exactly. They added a little water to their fantastic soup and people still bought the soup. They said, “Hey, look! No one cares!” So they added more and more water until, one day, no one was buying their soup anymore. This is what happens when an executive uses ‘linear no-threshold thinking’ when examining data.”
“‘Linear, no-threshold thinking?’”
“If 72 out of every 100 motorcycle riders die when they try to take a corner at 100 miles per hour, linear no-threshold thinking will tell you that 7.2 riders will die if they try to take that corner at 10 miles per hour.”
“I get it. There is a mile-per-hour threshold at which the corner becomes dangerous.”
“Murphy was the classic, no-threshold accountant. So he started sticking Chevy motors in Oldsmobiles, Pontiacs and Buicks because he had surplus capacity in his Chevrolet motor factories. Keep in mind this was when the Olds Cutlass was the top-selling car in America.”
“This guy is not customer-centric.”
“He literally said, ‘General Motors is not in the business of making cars. It is in the business of making money.’ This little turd of an accountant was heralded from coast to coast as a business genius when he took customer loyalty for granted.”
“How did the public respond to having a Chevy motor in their Oldsmobile?”
“People were furious. They felt their car had been degraded.”
“What did Murphy do?”
“He sent some people $200. He sent other people $400.”
“He was still thinking like an accountant.”
“But wait. It gets worse. He then decided that GM would abandon its traditional once-a-year price increase when the new models were released each year and replace it with random price increases multiples times a year. Sometimes the price increases would be double-digits. This is when the term ‘sticker shock’ was born. The end result of all this blurring of the brands was that GM had to shut down Oldsmobile in 2004 and Pontiac in 2009. GM’s total market share had fallen to just 19.8%.
“Hang on a second, Poobah. You’re saying that GM fell from 62.9% market share to just 19.8% market share? Where did you get those numbers?”
Moments later, the young man looked up from his computer. “You’re quoting Susan Helper, chief economist at the US Commerce Department, and Rebecca Henderson, a management professor at Harvard.”
“I don’t make this stuff up, Sunshine.”
“I’m sorry I doubted you. Give me another example of smart people getting short-term positive results by doing something really dumb.”
“Okay, here’s a related flashback. When I got that driver’s license and started driving my first car, no one was allowed to own more than 12 AM radio stations, 12 FM radio stations and 12 TV stations because the government didn’t want anyone to be able to buy up all the broadcast stations and control the news. But in 1996 that policy was repealed and Wall Street went on a buying spree. Investors would buy 5 radio stations in a city and dismiss 4 of the General Managers, 4 of the sales managers, and replace most of the announcers with a satellite feed that was customized to sound local. Payroll was slashed and profits skyrocketed.”
“That just sounds like efficiency to me.”
“There are two kinds of efficiency, Sunshine. The first kind of efficiency helps you serve the customer in the way the customer prefers to be served. The second kind just makes the product a little worse so that you can sell it a little cheaper, or even worse, sell it at the same price and make a larger profit. We’re talking about why smart people do dumb things, remember?”
“Watering the soup.”
“By 1999 these radio guys were making record profits. But cutting the fat is one thing. These guys were cutting muscle and bone. That announcer sitting in a studio in Los Angeles isn’t going to show up at the local concert or restaurant or car dealership in Cheyenne, Wyoming. Or even Charlotte or Chicago, for that matter. And a salesperson selling 5 different radio stations doesn’t have the passion or the confidence of a salesperson representing just one station. Back in those days, your automobile and your radio station were the robes and feathers of your tribe. When cars and radio stations became homogenized, people began to treat them like the faceless commodities they had become.”
“But some people would say import cars killed the domestic car business and the Internet made TV and radio obsolete.”
“Those same people would say Commodore Vanderbilt built his fortune on railroads.”
“But you say he built it on customer centricity.”
“Lots of people were going broke in the railroad business at precisely the same time Vanderbilt was becoming one of the richest men in the world. Success isn’t determined by the business you’re in, Sunshine. It’s determined by how you run your business.”
“So how did the radio thing turn out?”
“The biggest of the bunch accumulated more than 1,200 radio stations, 130 major concert venues, 770,000 billboards, 41 television stations, and the largest sports management business in America.”
“Why would they get into concerts and sports management?”
“I suppose it was the lure of cross-promotional efficiencies. When you control the media, you control the news, remember? The illusion is that you’ll have the power to make stars and break them, set up puppet kings and depose them.”
“So how did it turn out?”
“In 1993, their stock opened at $4.60 a share. In January of 2000 – just 35 months after broadcast ownership was deregulated by the government – that stock had soared to $95.50 a share. It looked like a rocket ship headed to the stars but really it was really just a company burning itself to ash, although no one realized it at the time. Investors were dancing in the street.”
“So how did it end?”
“Fifteen years later, a pale remnant of that company was $21 billion in debt and on March 30th of that year, its stock was selling at $1.01 a share.”
The younger man spoke quietly. “I know how that feels.”
The older man said nothing.
The younger man spoke as he typed.
“ONE. Don’t water the soup. It’s dumb to do things that produce immediate profit when what you’re doing isn’t in the best interest of the customer.
TWO. Don’t fall into the trap of linear, no threshold thinking when looking at data.
THREE. For the love of god, don’t eat the marshmallow!”
The young man looked up with a bitter smile.
After a few moments of looking at each other, the old man spoke. “Jeff Bezos made peace with the fact that doing the right thing hurts at first because he knows it will work better and better as time goes by.”
The young man said. “We talked about what would’ve happened at Kodak if Bezos had been CEO, but how do you think he would have approached the car business and the radio business?”
“Bezos would have employed continuous optimization, but in a way that was customer-centric. No watering the soup. His organization would remain agile and foster a culture of innovation. He would have lifted those businesses to new heights and made them more beloved than ever.”
“Do you think Bezos is unique, Poobah?”
“Don’t be ridiculous. Lots of bright people are building companies on those four pillars. Like I said, even a lemonade stand can brand like Amazon”
“Give me some examples.”
“Put on your sunglasses, Sunshine.”
“You’re about to be dazzled and amazed.”
CHAPTER SIX – Continuous Optimization
“Sunshine, when you
care about your customers and
care about your employees and
care about your suppliers and
care about your investors,
you can build a rocket ship while you’re flying it.”
“Is caring the fuel that lets you fly?”
“Caring is the fuel.”
The younger man spoke a sudden realization. “Continuous optimization is a by-product of caring.”
The old man nodded. “When you really care, you never quit trying to make things better.”
The young man reached into his laptop bag, found his sunglasses and put them on. “Now dazzle me.”
The old man took the chair across from him. “A guy named Richard Kessler had a little jewelry store in a strip mall on a side-street in a town you never heard of.”
“You’re right, never heard of it.”
“It’s north of Milwaukee.”
“How did Kessler build his rocket ship?”
“Okay, but how did he care, specifically?”
“The first thing he did was put the real price on his jewelry.”
“What do you mean, ‘the real price?'”
“Jewelers usually put an inflated price on their diamonds so they can offer a big discount or let customers negotiate. But Kessler believed everyone deserved the best price he could give them, even if they didn’t negotiate.”
“That’s customer centric, but his profit margins would be too small to ever offer anyone a discount.”
“He’s never offered a discount. Never. Not even to his closest friends. Everyone gets the lowest price that will allow him to stay in business. You don’t have to negotiate. You don’t have to wait for a sale.”
“I’ll bet customers love that.”
“Yeah, but they love his ‘Miraculous No-Loopholes Guarantee’ even more.”
The younger man waited for the old man to continue.
“Everything at Kesslers is guaranteed for life and all maintenance is free. Even if you lose the center diamond, Kesslers will replace it. They take complete responsibility for everything they sell. Forever.”
“Wow. That’s hard-core customer centric.”
“Kess gives new employees 8 weeks of training before they’re ever allowed to speak to a customer. Then on Graduation Day he says, ‘When you’re talking to a customer and there is a decision to make, make it. The price is the price, but customers are going to ask you for a thousand other things. Sometimes they’ll ask for something small. Sometimes they’ll ask for something impossible. You are the company. Don’t check with anyone. You’re not an intermediary. Just make a decision. Figure out how to make your customer happy.”
“Do his employees always make the right decision?”
“Of course not. And Richard knows they won’t. The very last part of his speech to them is this, ‘Out of every ten decisions you make, there is going to be one decision that I’m going to wish you had made a little differently. But I’m happy to pay that price to get the other nine decisions out of you.”
“He really puts himself at the mercy of his employees?”
The old man chuckled. “I remember this one time after he opened his second store, it was on the south side of Milwaukee, his people said, ‘Richard, we’d like to fix up the bathroom to make it more cozy, like the kind of bathroom people have in their own home.’ Richard said, ‘Sounds great! Do it!’ They said, ‘Give us a budget.’ He said, ‘Nope. No budget. When in doubt, just do the right thing.'”
The younger man smiled in anticipation of a punch line. “So how did it turn out?”
“A few days later Richard drove down to see what they had done. It was fabulous. I’ve seen it. Wallpaper, a rug, paintings, candles, a make-up mirror. Really nice.”
“You’ve seen it? You know this guy?”
“We’ve been friends since before you were born.”
“How much did they spend?”
“Four hundred dollars.”
The younger man rolled his eyes. “So a guy in Milwaukee let his people spend $400 on a bathroom? I don’t need sunglasses for that.”
The old man continued. “Just before that new bathroom came together in the south store, the north store in Menomonee Falls moved from the strip center into a stand-alone building that used to be a bank. Red brick, colonial columns, big lawn, nice landscaping…”
The younger man pantomimed a yawn as though he was getting sleepy.
“Upon hearing what the team at the south store had done, one of the staff in Menomonee Falls said, ‘Richard, I’d like to hang some lights and other decorations and really make this store a showplace at Christmastime.’ And Richard, of course, said, ‘Do it.'”
“Several weeks later Richard came to work and it looked like the circus had come to town. There was an 18-wheeler in his parking lot with 10 guys hanging Christmas lights from bucket trucks and 6 guys positioning a big sleigh piled high with gifts and teams of 2 were carrying 8 life-size reindeer. And they had only just begun to empty the truck.”
The younger man started laughing and slapped the table, “That’ll teach him.”
“Richard knew if he reacted the wrong way it was going to destroy the courage and confidence of his people.”
“So what did he do?”
“He walked in, got a cup of coffee and went down to his office in the basement and started working, just like always.”
“Yep. Richard says he’d been working for about 2 hours when a young man came down and asked if he had a moment to walk outside. ‘Sure thing!’ Richard said, ‘Let’s see what you’ve got happening!’ His young associate took him outside, walked him around and explained how everything was going to look when it was finished. After awhile, Richard casually asked, ‘How much are spending on all this?’ And the fellow replied, ‘About $36 thousand.'”
The younger man whipped off his sunglasses as his jaw dropped open and his eyebrows went to the top of his forehead.
The old man said, “Yeah. And this was back when $36 thousand was a lot more money than it is today.”
“Poobah, I’m not dazzled, I’m dumbfounded.”
“Put your sunglasses back on, Sunshine. This is where it gets dazzling. Richard said it was the best money he ever spent.”
“Every television station in Milwaukee sent reporters with camera crews to Kesslers Diamonds to show the never-ending line of cars driving slowly past the store each night after dark. The newspaper published a big feature-story about the display and the mayor gave Kesslers Diamonds a City Beautification Award. Richard says it took less than 24 hours for those lights to pay for themselves. Loading up the family and driving past Kesslers became a Milwaukee Christmas tradition.”
“But it doesn’t always turn out that way.”
“No, but the big wins more than pay for the losses.”
“Bezos said something like that.” The younger man looked down at his laptop. “Here it is. ‘Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments…'”
The old man sipped his Venti and nodded. “Kesslers isn’t just customer-centric, they’ve got corporate agility and a culture of innovation.”
The younger man said, “Do you know any other Kesslers?”
“Sure. There’s Ramsey’s in New Orleans, Shreve in San Francisco, Reis-Nichols in Indianapolis, Barnes in Amarillo, Occasions in Midland, Miner’s North in Traverse City, Schiffman’s in Greensboro…”
“Yeah, and just down the road in Charlotte is Dewey Jenkins. But he’s not in a sexy business like jewelry.”
“What does Dewey do?”
“He does whatever it takes to make the customer smile and say good things about his company. Whatever it takes.”
“I mean, what business is he in?”
“Heating and Air Conditioning.”
The younger man took off his sunglasses and smiled a crooked smile. “I’m not seeing much of a possibility for dazzlement.”
“I told you to prepare to be amazed.”
The younger man put his sunglasses back on and the old man continued talking. “The crown jewel of Charlotte is the Levine Children’s Hospital. It’s kind of like the Mayo Clinic for kids. Several of America’s top A-List celebrities support it and Ryan Seacrest built a broadcast studio in the lobby. So who do you think the hospital asked to be their spokesperson on TV?”
“The air conditioning guy?”
“One year the city fathers asked him to lead the Labor Day parade and a record crowd showed up to wave at Dewey and shake his hand.”
“The air conditioning guy?”
“People call the TV stations in Charlotte to ask when Dewey’s next ad is going to air. I’m not making this up.”
“How did he get to be so famous?”
The old man said, “ONE. Customer Centricity.
TWO. Continuous Optimization.
THREE. Culture of Innovation.
FOUR. Corporate Agility.”
“The Four Pillars of Amazon.”
The old man nodded his head. The younger man said, “Keep talking.”
“Do you know what the customers of home service companies hate more than anything?”
The younger man growled, then said, “Sitting at home all day waiting for the repair guy.”
“The service techs at Morris-Jenkins come whenever it’s most convenient for you. They take service calls until midnight, 7 days a week, no extra charge for evenings and weekends. Same prices.”
The old man nodded. “Do you know what service technicians hate more than anything?”
The younger man shook his head no.
“Writing up the service ticket with all those part numbers and prices. It’s tedious.”
“Paperwork usually is.”
“And then they have to restock their trucks at the end of the day when what they really want is to go home and play with their kids.”
“It’s hard being a grown-up,” said the younger man.
“The only thing worse than restocking your truck at the end of the day is looking for the part you need only to find that you forgot to restock it.”
The younger man’s forehead wrinkled. “Now you’ve got to drive all the way back to the warehouse while the customer just sits and waits for you.”
“Dewey has his warehouse team put bar codes on every part and when a service tech takes one off the truck, he just scans it with a bar code reader. Then at the end of the job his iPad automatically creates a detailed invoice with part numbers and prices. Presto, zippo, bingo. And as the invoice is being printed, the warehouse crew is informed of what was taken off his truck, so they put one of each item in a big plastic tub that has his truck number on it.”
“When the service tech gets back to the warehouse at the end of the day, all he has to do is pick up that tub and restock his truck?”
“Nope. The technician gets in his car and drives home. The warehouse team restocks the truck. Seamless. Effortless. Elegant. No wasted motion. Continuous optimization.
The younger man said, “I can see how Dewey keeps his employees happy, but you said he does ‘whatever it takes to make the customer happy. Whatever it takes.'”
“What do you think the biggest problem is in the air conditioning business?”
“When you’re installing a new system, customers often recall something they were told by an estimator from another company and then ask if you’re planning to do it.”
“But it wasn’t part of your quote?”
“Nope. It’s something that some other company promised. But that company didn’t get the job.”
“I can see where that could lead to some pretty ticklish situations.”
“Not at Morris-Jenkins. He trains his service technicians just like the diamond consultants are trained at Kesslers.”
“They’re trained to make the customer happy?”
The old man nodded his head in an exaggerated manner.
“What if the customer says, ‘Hey, weren’t you supposed to walk my dog, paint the back fence and cook me dinner?”
“A Morris-Jenkins tech would say, ‘Where is the dog, what color would you like the back fence, and what do you want for dinner?”
The younger man laughed.
“And his TV commercials are very entertaining,” said the old man.
When the younger man finished laughing, he sat quietly and stared at the tabletop.
“Building a business on the Four Pillars of Amazon is simple, but it’s not easy,” the old man said.
“Warren Buffet said the same about the stock market.”
“Making money on stocks is dead-simple; buy low and sell high,” the old man smiled.
“Yeah. Simple, but not easy. Knowing something isn’t the same as doing it.”
The old man leaned forward and extended his forefinger toward the younger man. “Knowing something isn’t the same as doing it. Write that down, Sunshine, and put today’s date on it. I want you to always remember what you just said.”
The younger man cocked his head. “Why are you making such a big deal of it?”
“The world is full of book-smart morons, Sunshine. Jeff Bezos never said this, but I’m pretty sure he works hard at weeding those people out.”
“The book-smart morons. You’ve met them. They can plan, plan, plan, and talk, talk, talk a thing to death, but when it comes to taking action – getting things done – they haven’t got the horsepower to pull a fat kid off the toilet.”
Both men started laughing. A fart rang out like a rifle shot. Now they were gasping for air with tear-filled eyes. The old man stood up, walked out, looked up and laughed into the sky until he regained his composure. The barista and the window waitress watched with amusement from behind the counter as the younger man laughed face-down on the tabletop.
When the old man came back inside, the younger man was sitting at the table wearing his sunglasses. His chin was high and his arms were crossed. “Dazzle me with flying lemonade stands, Poobah.”
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