Critical Chance

Author: Alex

  • Ninety-Percent of life is about showing up… on time

     

    Written on March 1st, 2018

8 minute read

    Ninety-Percent of life is about showing up… on time

     

    Compounding interest is perhaps one of the most important and powerful discoveries of our time.

    “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”  

    – Albert Einstein

     

    Einstein wasn’t just referencing money when he said those wise words; in nearly every domain of life, compounding can either make or break you. If for example, you only get 1% better everyday for a year, versus 1% worse, you’ll be over 1000% better by end of year.

     

     

    When you break it down, success is actually played at the margins; it’s about getting slightly better each day over a long period time, instead of dramatically better in one fell swoop. [James Clear on Marginal Gains]

    The classic example is saving for retirement. When you start early and stay consistent, accumulating a large nest egg becomes much easier. With an Employer Match, a 20 year old could invest as little as $5 each day to retire a millionaire by 67 (The Impact of a Starbucks Latte).

    If you imagine compounding as a Dr. Seuss-like machine, there are two ingredients going in to create varying levels of “Success” that come out the other side: TIME (when you start) and INVESTMENT (deliberate practice).

     

    Here’s the best part about it, you control both inputs. Given the first example (1% better), you can see that, if time is on your side, you actually don’t need to invest nearly as much. However, the longer you wait, the more you’ll need to catch up. If you contribute $1,000 each year into an investment account, which compounds at 7% each year, below is the final balance you’d have by age 67, based off what age you START:

    If you start at age 5, you’ll be a millionaire. Say you wait until half way through this chart (31 years old) to begin, you’d end up with a mere 17% of the total opportunity.

    Perhaps the more powerful input you control is how early you start, not how much you invest.

    Intellectual Compounding told by greats

     

    “An investment in knowledge pays the best interest.”

    -Benjamin Franklin

     

    Most people know about financial compounding, but few recognize intellectual compounding. That is, the same exponential curve can apply to your growth as a thinker, an entrepreneur, or any related skill. If we were to plot how much you push yourself to learn, we see the same 1% better trend lines. By learning everyday, you become better at learning new things and adapting to your environment; it’s not a linear relationship, but instead an exponential lift.

    “Read 500 pages every day. That’s how knowledge works. It builds up like compound interest.”

    -Warren Buffett

     

    The prolific speaker, Tony Robbins, has also acknowledged this phenomenon. When Tony started his career, he wasn’t nearly the presenter he is today. In fact, Tony says one of his co-workers was much better than him, which made Tony wonder why. What was difference between them? Did his co-worker have a gift that Tony was incapable of? Not even close. Tony realized he was only giving 1 presentation a week, whereas his co-worker was giving about 3 a week. So to be better, Tony quit his job and started giving 3 presentations a day. In about 2 months time, Tony gave the equivalent number of presentations that the other guy would give for the rest of the year.

    Tony massively elevated his deliberate practice, but he also started early. While his fame emerged after his first book release at age 28, his first job as a motivational speaker was at age 17 – a full 11 years earlier.*

    “The most important thing to do is start investing now so you can unlock the power of compounding.”

    -Tony Robbins

     

    We typically over-praise the individual versus their positive habits, environment, or commitment to growth. Whether you’re starting a business, a new job, or working towards an ambitious goal, compounding is the secret sauce that gets less attention. When we think of becoming great in any domain, we usually think about working harder and longer than the proverbial other guy. Instead, we should be thinking about starting one day earlier than ‘the other guy’.

    Timing needs a higher priority

    Working hard is the easier part; it’s not difficult to wake up an extra hour earlier or stay at the office after hours if it’s something that you find deep purpose and potential in. Figuring out when to start though, that’s hard.

    “Bookstores have an entire ‘how to’ section but not a ‘when to’ section… [Yet] timing… can be everything.”     

    -Eric Barker (This is the Time)

     

    Perhaps we can simplify this though; start now. There are probably millions of great ideas waiting to be unlocked, but we’re too afraid or too slow to start. When you understand compounding, you give timing the attention that it deserves. Successful people understand this and it’s why, when they get asked about their biggest regret, many of them answer that they wish they had started sooner.

    One of my favorite high school teachers used to say, “Ninety-Percent of life is showing up on time.” He would go on long tangents about the value of time, whenever someone arrived late to class. Ironically, we’d end up spending anywhere from 5 to 15 minutes of class time listening to him dissect the topic. To him, it was imperative to show up, but the more important point was to be on time.

    Reflecting more than a decade later, I believe he understood something much deeper about timing. If you want to be the next Mozart, you can’t wait 30 years to begin learning piano, you need to show up when the opportunity first strikes. When you’re late to start, you miss much more than just the opening credits of a movie; you miss the character development, the plot, in fact, you never reach the conclusion. Using compounding interest, a late entry could reduce your returns by 100x; that’s the chance to learn, grow, or become your best self.

    To take advantage of our total potential, we need to be on time.

     

  • Forward vs. backward looking goals

     

    Written on February 22nd, 2018

8 minute read

    Forward vs. Backward Looking Goals

     

    We tend to confuse the two and that’s a big mistake.

    If you’re like myself, when you set your most ambitious personal goals, they tend to sound something like this:

    • Appear on the Forbes, ‘[insert age] Under [insert age] List’
    • Get promoted at work
    • Increase my net worth to $XX

    What do they all have in common? These are all backward looking indicators. In other words, they are signals that you’re doing well, but in the past. While achieving these accolades does correlate with success, they aren’t predictive of future success. Rather, they are proof that success has already happened, in the past.

    Your goals should really sound more like this:

    • Learn a new (seemingly unrelated) discipline
    • Embrace a new positive habit backed by science
    • Reach out to non-local friends more regularly

    The difference? These are all forward looking indicators; they don’t show off as accomplishments in the typical way we view “success.” Yet, if you do any of these things, it’s easier to predict your performance in the future. Following through on these goals won’t get you a celebrated medal, but they are the positive tactics that actually get you there.

    Learning from successful people 

     

    What do Warren Buffett, Mark Cuban, and Bill Gates have in common? They are vivacious learners. They dedicate many hours each day to reading about new subjects, because it challenges their mindset and allows them to connect independent ideas. That’s a forward indicator – agile mental models produce novel ideas but will never receive an accolade for habit itself.

    What do they also have in common? They are all Billionaires. Their net worth continues to climb and is a testament to their consistent ability to keep growing as individuals, entrepreneurs, and thought-leaders. That’s a backwards indicator – it reflects back on their total economic output to date, in the past.

    That’s the formula.

    The most powerful forward indicator is happiness

     

    Compared to their neutral or stressed counterparts:

    • Doctors are 19% more accurate at diagnosing their patients
    • Sales people are 37% better at closing
    • Operationally, we can be up to 31% more productive

    That’s just the beginning; there are studies that show we are more creative, better at problem solving, and more resilient and innovative when we are happy versus neutral or stressed. *

    When we increase wellbeing in the present, all of our our future outputs rise. We are a product of our environments. So, elevating these inputs also helps those around you; your family, friends, and co-workers. Start with happiness and finish with more success.

    We should be challenging our employees and organizations to set forward looking predictors

     

    • How are you going to push yourself to self-learn this year?
    • What’s the one positive habit you will commit to practicing this quarter?
    • When will you find time to connect with your network this week?

    Ignore the accolades, because they come later.

    Remember, when our team commits and crushes the small stuff, we need to celebrate too. Our brains are wired for short-term feedback loops, which makes forward predictors hard to set and follow through on. It’s easy to choose a well-known award to gauge success, but it’s the abstract and consistent daily habits that really produce it.

    By adjusting our measuring stick of success, we can elevate everyone around us. Eventually producing more backward predictors that we know and love.

  • The Impact of a Starbucks Latte

    Written on February 15th, 2018

10 minute read

    The Impact of a Starbucks Latte

    Every morning around the country coffee-fanatics line up in droves, waiting for that favorite cup of Joe. Not only can the wait be long, but it can be more than $5 a cup! Which should beg the question… how much does your morning cup really cost?

    On one side, we have people who get the occasional coffee every month. On the other side, we have the group that can’t go a day without their orange mocha frappuccino (you know who you are)… let’s look at the daily coffee camp.

    To start, if you’re buying a $5 cup each day of the week, you are spending $1,825 each year. If that doesn’t sound expensive enough, consider the income you need to earn to sustain this morning ritual. Using a 15% marginal tax rate, you must earn $2,098 each year. To someone who makes $50,000 a year ($24 / hour) that’s 87 hours or two weeks of working each year!

    Kicking the habit or making it yourself would put $1,825/year in your pocket – sounds simple, minus the potential coffee withdrawals. But what if we took this to the next level?

    Investing the savings into retirement accounts

     

    If you dumped that $1,825 into retirement on January 1st of each year, here’s what your estimated balance would look like over time:

    Assumptions: 7% annual rate of return, lump sum invested on Jan 1 of each year, return calculated without fees

    That’s the power of compounding.

     

    But since we’re talking about retirement, it’s only fair we discuss the employer match. Here, an employer may match the dollars you contribute towards your 401k. There are limitations to the amount they might match (check with your HR department), but let’s assume they’ll match the $1,825 dollar-for-dollar.  

    Now your investment becomes $3,650 each January 1st, and the results are staggering.

    Assumptions: 7% annual rate of return, lump sum invested on Jan 1 of each year, return calculated without fees. Employer matches $1,825, investment becomes $3,650 each year

    If a 22 year old beginning their career made this one change in their daily routine, they would have roughly $744K by age 62, and they’d break $1M by their 67th birthday.

    Saving the equivalent of a daily Starbucks latte could allow working Americans to retire on schedule. 

     

    Even if you don’t have or aren’t taking advantage of an employer-sponsored 401K or match, looking to cut a small habit is worth considering. Redirecting even a handful of dollars a day can go a long way.  It’s worth noting, the retirement problem in America is very complex. There are, of course, other factors contributing to the broader issue; but this is for the individual to consider.

    When small, everyday habits compound, they create extraordinary gains. 

     

    Habits are at the center of everything we do. Everyone has experienced this situation; you’d like to workout more often, but things come up and you never end up at the gym. Perhaps you find there isn’t enough time to get to the things you care about and love. Why? You may feel as though your decisions and routines are repetitive; like you’re driving your car on autopilot. We fail to recognize that we control the habits that we form and, thus, the direction of the car.

     

    “We first make our habits, then our habits make us” -John Dryden

     

    While not everything is within your control, existing habits can stop you from reaching your goals. Be an informed driver and decide the route you want to drive based on the conditions; not on the routine.

     

    “It’s the daily practice of all the monotonous, little, boring things like brushing your teeth that matter the most. There’s no single event. There’s no one thing I can tell you you have to do. It’s an accumulation of lots and lots of little things, which any one by themselves [are] useless, yet together add up.”  -Simon Sinek

     

    When it comes to money, turning a small expense into a small savings could make you a millionaire. The same exponential return is seen across other areas of your life.

    Want to become more insightful?

    • Read about a new subject for 15 minutes each day

    Want to raise your EQ?

    • Meditate for 5 minutes each day

    Want to become a more empathetic leader?

    • Put down your smartphone before stepping into meetings; give your reports 20 minutes of undivided attention each day

     

    Similar to retirement investing, small habit changes will be subtle at first, but  they add up and compound over time. It’s with patience and commitment to betterment, that we can achieve slow, yet incredible gains.

    What’s your Starbucks latte?

    Whichever area it falls into, it may just make you a millionaire.

  • Solving the impossible

    The U.S. Government spent billions of dollars attempting to land on the moon. Many people complained that the money should have been spent on poverty.

    Randy Pausch once responded,

    “When you use money to fight poverty, it can be of great value, but too often, you’re working at the margins. When you’re putting people on the moon, you’re inspiring all of us to achieve the maximum of human potential, which is how our greatest problems will eventually be solved.”

    Our greatest breakthroughs happen when we aren’t focusing on the issue at hand, but instead broadcasting our most ambitious goals.

    By working on things that fascinate us, we create industries that don’t yet exist and solve problems we never imagined possible.

  • Perception pivots and why they matter

     

    Written on February 8th, 2018

12 minute read

    Perception pivots and why they matter

    You should always focus on valuable realities; a familiar statement I tell Googlers attending my happiness course.

    There are 11 billion pieces of information communicated to us every single second.

     

    Crazy, right? If you look around, there are 11 billion things your brain can focus on. What do you think your brain can actually process (per second)?

    Here is where the really optimistic people shine. Some will shout out, “one-thousand” or even “ten-thousand,” but the answer is actually 40 bits per second. You don’t have to be a math expert to know that 40 is a really, really small slice of 11 billion. That’s the equivalent of choosing 58 people on the entire planet!

    Whatever you focus on, is the reality that you live in; and everybody focuses on something different. This is pretty nuts, and what we’re finding is people are quite literally living in different realities. If you’re a Stranger Things fan, we’re having the same thought; the upside down is being played out in real time! Well, not quite that dramatic, but directionally it’s actually correct.

    There’s an important group of people, who we call, “Positive Geniuses.” They focus on the right pieces of information in their environment, leading them to faster solutions, higher levels of creativity, productivity… the list goes on. They’re using perception to their advantage.

    There are two specific ways you can train your mind to become more like a “Positive Genius,” and I decided to try them out myself for 30 days.

    Daily Gratitudes – there’s a lot that you’re grateful for, so take the time to recognize it

    • Write down 3 things you’re grateful for each day, it can be really abstract or really simple
    • IE: Good music, cute puppies, and the opportunity to learn something new everyday
    • This rewires your brain to look for the positive things in your environment (the better 40 bits)

    Reframing Challenges – multiple realities exist and we need to select the most valuable reality

    • Choose something you’re struggling with and write down three ways you currently view the task; then, contrast it by writing down three alternate yet equally true ways to see that same problem
    • IE: I have a lot of work to catch up on, but I also have a lot of responsibility and control in my job
    • This forces you to view situations in multiple ways and, by doing so, you recognize new factors in your environment you typically miss (a different 40 bits)

    Would I start seeing the positive details in my environment? Could I be missing the most important 40 bits? Will it have any measurable impact on my performance at work or at home?

    The second exercise was most fascinating to me, and it flows into something I dub the “Perception Pivot.” We’ve all experienced it before – you learn a small fact about a situation and suddenly your option or outlook does a 180. IE: You thought the cashier was a terrible person, but suddenly you couldn’t have more compassion for them. Here’s an example that underscores this incredibly well, and it comes from my friend, Sean. At the time, he was a manager of an Apple Store.

    One Thursday, it was busier than normal and the wait was long. One woman in the iPhone repair queue was getting extremely agitated at the staff. She began acting out and screaming at employees. The other customers in line were looking at her like she was a lunatic, they tried their best to just ignore her. Eventually, she demanded a manager and Sean did his best to truly understand the situation by asking her a series of questions. After a few minutes, he found out something critical; she was a chemotherapy patient and used some of the applications on her iPhone to schedule her medical treatments. The longer she waited for her phone to be fixed, the more treatment appointments she was missing.

    I think anyone in that line, if they had known this fact, would have acted differently. Even you, feel completely different about her behavior at this point, right?

    Boom. Perception pivot.

    Back to my research, the short answer is yes; I began to have a more positive outlook everyday, I felt more satisfied at work and even found stronger meaning in my social circles with friends and family. It felt as though the exercises were working, I was certainly more grateful and saw challenges with new vantage points. But my conclusion was only anecdotal; I needed something else to show the exercise was working. And that’s when something incredible happened.

    I was meeting a friend after work who lived in downtown Ann Arbor. The building’s tenant base was predominantly graduate students and newly working 20-somethings. As I came through the lobby, I saw an older woman stacking large moving boxes; there must have been at least 4 of them, each full with belongings. She was having trouble moving them alone, and each lobby-goer passed by as if she wasn’t there.

    It was so strange. I mean, if you ran an experiment showing various situations and asked, “what doesn’t fit?” I think 10/10 test subjects would have chosen this woman. Nothing lined up, she was middle-aged, not recently graduated; moving out, not moving in; visibly upset and unhappy.

    In real life, you’re not forced to pick out things that don’t fit. In fact, we’re usually running on autopilot, deep inside our heads, there’s a lot we miss. Everyone assumes the script is always the same, but many times it’s not. Ah-ha! My perception exercise was working.

    Instead of passing her, my eyes met hers and I just began moving boxes. We didn’t say anything, I just started helping. Suddenly her individual operation evolved into a circuit formation. 10 additional boxes were transported from the lobby, to the parking lot, to the trunk of an SUV. At the car, there were two adults waiting, both in a saddened mood. After we packed the last box away, I answered their thank-yous and walked back towards the building.

    I had almost reached the entrance when I heard, “Wait a minute!” …she had followed me back inside. As I turned around, I noticed eyes held back tears. “That was really kind of you.” she said. “The two parents at the car just found out that their daughter had passed away. It was sudden. I knew her well because I am a professor at the University and she was one of my students, a great person. What you did means so much, it’s hard for me to describe. Getting help from from people in the community has been so important.”

    Boom, perception pivot.

    You should always push yourself to see how situations may be different.

    Angry at the driver who cut you off?

    • Maybe he’s driving his wife to the hospital, she’s in labor with their first-born.

    An employee comes to work late each day of the week

    • Maybe she’s taking care of an ailing parent, hasn’t been home earlier than 11pm each night

    See a stranger moving out of your apartment building?

    • Maybe she’s helping a friend who needs it more than you can imagine

    We tend to give ourselves the benefit of the doubt, but never offer others that same chance. It leads us to miss what’s going on right in front of us because we’re stuck in our own heads. We need to constantly challenge our perceptions, everyday, in every way.

    I challenge you to pick up a positive habit this week and view your reality differently. When we become Positive Geniuses, we don’t just elevate ourselves, but instead, we lift everyone up.

    Perspective pivots matter because they help us reach our greatest potential.

     

     

  • Setbacks by the thousand

    Edison had 1,000 documented failed designs of the light bulb.

    It took the Wright brothers 1,000 trials to increase their distance traveled by a mere 200 feet.

    Colonel Sanders’ famous secret chicken recipe was rejected over 1,000 times before KFC accepted it.

    It’s easy to be discouraged by failure. Brick walls are being built around us everyday. At first glance they may seem like they are keeping us out, but if you stick around long enough, you’ll find something different.

    Brick walls are there to give us a chance to show how badly we want something.

    Walt Disney was fired from a newspaper company because he “lacked imagination and had no good ideas.”

    When Walt Disney finally made it, he famously said,

    “If you can dream it, you can do it.”

    … BAM take that brick wall.

  • The Cost of Letting the Good Ones Go

    Originally written on November 16, 2014

8 minute read

    The Cost of Letting the Good Ones Go

    Every company is different, but one thing is certain; great employees require major investment. Recruiters will tell you that’s a no brainer, and it should be. However, time and time again, companies overlook the bottom-line cost when top talent leaves.

    Let’s start with an example. You have a manager who’s been in the organization for 4 years, a top performer. Based off a variety of reasons, they put in their two weeks notice. What’s that really cost your business?

    You can break this down into two categories; one hand are the benefits to the company if they stayed, the other hand are the costs of leaving. I’ll just breeze over the benefits, because the costs are the most overlooked and ignored. Here we go:

    Benefits of Staying: Remember this is a top performer. Most often, they have stronger skills than someone who could replace them. If they stay, their skills keep growing and they challenge the rest of the organization to keep up. These are the ones who teach their skills to other co-workers, the reason why the best perk is the people.

    When they stay their output keeps climbing. A number hard to measure, but we would expect them to keep producing great stuff that matters. And that’s disregarding the intangible and unforeseen stuff, because usually our best people surprise us with things we couldn’t imagine.

    Costs of Leaving:

    Costs vary by industry, but when we’re talking about top talent,  initial costs can be upwards of 200% of their salary. *

    How could that be? Consider our investment in them for a moment.

    • Recruitment: We pay an entire department just to find these people. Every resume or interview, someone’s being paid to search. If we’re really finding top talent, for every 10 interviews we pay for, maybe we find 1 candidate.
    • Training: Before the employee can fully contribute in their role, they need to be trained. Training varies depending on industry of course, but initially we expect the new hire to be asking more questions than producing. If we have formal training, someone is on the pay-role to conduct that too (another cost).
    • Output: We sacrifice a lot when they start. Productivity and performance will most likely be low compared to our tenure folk. We know it takes time and we’re playing the waiting game before we see their potential. If they are only half as productive, we’re paying them 2x what they are producing (at first).

    Here’s the Irony: We understand it takes time for people to develop, but when are they most likely to leave? It’s once they are finally developed and successful in their role. We’ve waited, invested in their growth, then they walk out the door. If the average attrition in your company is 20% YOY, that could mean upwards of 40% of your costs each year are just salvaging who you’ve lost. Woah.

    There are plenty of ways to keep employees engaged and invested in you. Here are my top two:

    #1 Challenge Them: Most top talent have one thing in common, they never stop learning or growing. Give them freedom, allow them to participate in discussions about the business. If they have an idea for something that can help the business, let them work on it. First make sure they are excelling at their core role though. If they are a top performer, they’ve earned the credibility to work on other ways to impact your bottom line.

    #2 Recognize Them: Studies are beginning to glean that recognition is more motivating than money or rewards. Another ironic part to this, recognition takes almost no time. Working into weekly conversations that you are thankful for their effort goes a long way. As an anecdotal story, I was fortunate enough to be recognized by one of our directors a few months ago. That was almost more fulfilling than completing the project. It energized me to keep furthering some of those ideas. If you’re in a position of power, your greatest strength is recognition.

    Sum it up; losing good people costs good money. Make sure your talent is challenged and recognized. Take time to ensure they understand your company’s mission and purpose. Otherwise it will end up costing you more than you bargained.