Holding Opposite Perspectives in a Healthy Tension

David wants entrepreneurs to live with tension in various aspects of their business, using it to their advantage in making important decisions instead of just worrying about resolving the tension itself.

Links

Shane Parrish’s Farnam Street Learning Community

Transcript

Blair Enns: David, if I'm reading this right, the topic today is tension.

David C. Baker: Yes. There's a bunch of people are going to join us and we're going to have a discussion.

[laughter]

Blair: An intervention. I love interventions. I've never been to one.

David: How have you escaped interventions? I can think of so many good interventions that would apply to you.

Blair: What happened recently that made you want to do a whole podcast episode on the subject of tension?

David: Maybe it's just me struggling with things wondering like, "What's the right thing to do here?" I feel myself getting pulled in one direction and then the other direction and feeling like, "I really need to make a decision about this," and then I can't make a decision. How do I resolve these two different tensions? If I go this one direction, it violates the other one. I've discovered it so many times that it's okay to not try to resolve those tensions, but to try to live with them, and actually, the struggle of living with those competing tensions is really good.

If nothing else, it helps a lot of time pass, so you don't do stupid things or as stupid a thing. That's really what got me thinking about. By tension, I don't mean the kind of tension that you might have in a relationship where it gets uncomfortable and eventually ends in divorce. I'm thinking more of healthy tension, that kind of tension that holds up buildings. It's the kind of tension that engineers intentionally put into a plan, like holding up a bridge and so on, and we wouldn't dare resolve that tension. That's kind of the image I had in my mind.

Blair: This idea that tension is potentially good and bad, but it's mostly good, and there's a tendency among many of us to want to do, as you say, resolve tension or make the tension go away. But you're saying a certain amount of that's healthy, right?

David: Right. We're looking for clarity, and sometimes we define clarity as lack of tension. In other ways, it might show up even interpersonal. There's this employee who's always seems to be finding fault with your idea and pushes back and never is rah, rah raising their fist, "Yes, let's do it." They always question. Your immediate tendency is to get rid of the tension or this decision that you have to make, that you go one direction, it's very different outcome than the other one. It's just I think one of the things that leaders, in particular, and I think most of the people who listened to this podcast are leaders of their firms. I just thought it was worth talking about anyway. We'll see. They'll be the judge of that.

Blair: It totally is worth talking about it. I love this topic. Here's an example in my world. When my clients hire business development people, if we get into conversations about how they pay them, I want to pay business development people full salary, but I want a business development person who wants to be paid a highly leveraged compensation plan, who has a high degree of confidence in their ability, and they don't want a cap on what they earn. I want somebody who's pushing to get paid based on performance, but I don't want to pay them based on performance. I'd rather take the bulk of the risk and pay them full salary. That tension is rarely resolved in the firm. The compensation of a business development person is rarely resolved in healthy compensation agreements. Healthy relationships or agreements in this case are not the tension-free ones.

David: We somehow think that we'd like to remove that tension. We'd like to arrive at a very clear decision that everybody is happy with and what I'm trying to say here and I think your examples and my examples are hopefully going to demonstrate that, that we need to live with that tension, which means acknowledging it, talking through it and not necessarily trying to resolve it. Being open to, I don't know, more information, being wrong, just being humble about it, trying to learn. That's a very good example. I think anybody that's had a new business person that resonates with them, for sure.

Blair: I feel like I've already learned something profound and we can just stop the podcast.

David: Should we just end it? Yes. Let people get back to their miserable lives.

[laughter]

Blair: Let's go into some examples. We've listed a couple already, but you've probably got a whole bunch more. Where else are you seeing this sort of tension?

David: The first example came up in a client call earlier this week, and I was talking about how we have to have this balance between confidence and openness to learn. When you're working with a client, they don't want to work with you if you're constantly second-guessing yourself. They expect a certain level of confidence that you believe that you are right based on your prior experience, your research, whatever it is. But if you take that too far, then something else happens, which they don't like either and that's not being open to new information, to being wrong about something. What is that balance we have to strike?

We don't dare go one direction entirely or the other. It's more, "From everything I know to this point, this is what I think is true. It could be that your situation is a little bit different than anything I've seen before, and I want to be open to that, but I also don't want to throw out all of the things that I've learned that seemed to be pointing to this conclusion." That's sort of the spirit that I'm trying to illustrate here about living with tension. I need to be confident if I expect my clients to pay me well, but I also need to be open to being wrong, not about everything, but about some things where I haven't dug quite as deep in those areas.

Blair: We're really walking the line here. I see this too. When you think of how we, when with our pitching, teach people to behave in the sale, you're in this-- we call it the polite battle for control. You're jocking for the power position to be seen as the expert practitioner, but some people with a certain personality makeup like mine can easily err on that side and constantly push too hard, and to the point where now you're just annoying your client or prospective client. There's this balance between putting your expertise and your opinions forward, but not just constantly badgering the other person, whether it's a client or a team member.

David: Yes, because ultimately this advice that we're giving in whatever context, it's delivered from one human to the next, and they want you to hold this tension of knowing pretty certainly what you know, but being open to learning. I think all of these examples have happened this week. Maybe that would make me think about this topic.

Blair: Let's keep debriefing about your week. What else happened, David?

David: The second example of holding things in tension would be drawing everything you can to keep an employee that you really value. They've probably been there a few years for you to value them this highly. They get how you work, they fit the culture. They've taken over something that you used to do, and you're really grateful that you don't have to mess with that anymore, but because they're good, they get these offers and you're not sure how you should just keep responding by paying them more, giving them different titles, maybe giving them a small percentage of the firm, whatever it is. This tension that you're trying to hold all the time is having people around you that you really hate to lose, but not doing something that mortgages your future by paying them too much and being willing to start over.

Your goal is really not necessarily to find employees that are so good that you never lose. Your goal is to build a system that brings good people along so that you have fresh blood all the time because those new ideas come in and they're helpful, and you simply can't afford to keep everybody for a really long time. Living with that tension all the time, that's something that came up this week as well. I really don't want to lose her. This was the client, really don't want to lose her, but maybe I just need to. It's that tension that I think everybody feels to some degree.

Blair: The example of how to reply in this situation would be to, as you say, not resolve the tension and say to that person, "Listen, that's a great offer. I can't match it. If I've got to lose you, then I've got to lose you." Maybe there are other reasons why that person will stay, but if that type of tension is something that you feel you always have to resolve, that'll get very expensive, won't it?

David: Yes, exactly. I'm glad you brought that back to the fact that we need to try to not resolve this. Just having a conversation with them, exactly like you modeled is the right thing to do, and then just letting things fall where they were. This is part of my whole theory around decision-making is use the right process to make a decision, and then don't worry too much about the actual decision itself, and that's a good example. You just have an honest conversation, "I'd love to keep you, you know that. I simply can't afford to pay you. If you need to leave, let's make this a great departure. Let's stay friends. Maybe we'll work together again in the future."

Blair: Annie Duke, who wrote a great book called Thinking in Bets, and she's got a brand new book out right now, I forgot what it's called, but it's on decision-making. She would call that resulting. What I mean by that is, if you're judging the success of your decision by the outcome, that's a mistake, that's resulting. It's making the decision based on the results. You have the framework for making a decision,

and in her case, it would just be probability. You have the framework for making the decision. You make the decision, and then you let the chips fall where they may, and you don't lose sleep over the outcomes.

David: Yes, I love that.

Blair: Okay. What else happened this week?

[laughter]

David: Thinking about, how do you balance the two competing needs of running a business that consistently delivers profit, without eroding your cash cushion so that employees aren't worried about whether they're going to get a paycheck, that sort of thing? Every once in a while, an opportunity comes along, and you feel like one or two of these, you need to do it, even when it violates your principles of running a safe firm. Whether that's hiring somebody who is a once-in-a-lifetime-hire, you're not even looking to add their service offering to the roster, but you've known this person for a while, and something has changed on their end and all of a sudden, they're available, or maybe it's doing something that a client has never asked you to do, but it's going to require a lot of your mental attention and some money. You're going to have to put off some of your new business efforts for it. It's taking your chips and pushing them forward and putting a bet on something.

We're not trying to resolve this tension. We're trying to live with it. We're trying to make good decisions, but we're not too worried about making the right decision. We have to live with the tension of running a sustainable business, but also in your words, creating future value with the risks that we take. It's a risk. We call it a risk. That means if it goes bad, somebody's going to get hurt. It's going to cost some money or something. That's what I mean in this example.

Blair: I don't know if anybody else is getting anything out of this episode, but each of these examples, I'm finding to be deeply profound. This one, any business owner has experienced this, this tension between profit-taking versus reinvesting in the business. That is just a constant tension. It's just something that business owners are always faced with.

David: I hear business owners tell me frequently when I asked them how much money they're making, how much they're taking out regularly. They'll tell me the number. If it's not a very high number, they'll almost always say, "I'm reinvesting in the business," which in some cases is absolutely true. In other cases, it's simply the way that they put a band-aid over the fact that the business is not generating enough profit regularly. This is real. Anybody that runs a business makes these kinds of decisions. This is really real. I hope we don't have people listening who are saying, "I wonder what he's talking about?" Like, "What is this putting the chips forward and making a big bet?" Those kinds of folks may not be looking carefully enough at what's happening in the world around them, and being open to changing their business in a big way. When you're innovating, what you're doing is what most everybody else, the majority of everybody else thinks is stupid. That's what innovation is. Talk about balancing risk here.

Blair: There's no tension there when you don't have the ability to build up cash, but you start to feel it when you've got a sizable amount of cash in the bank, and you think, "I could just take this. We could just take this as distributions," or, "No, no, no, no. Let's invest in the future." It's really all of one and none of the other. It's usually some combination of that. That tension, I find, is very, very real. The temptation to take it all, take all your rewards now and potentially take on this risk of harming your future, or invest everything in the future and sacrificing the present, and that's something that never leaves you as a business owner. Don't you see business owners heading in one direction in the earlier day to their business? That's investing, risk-taking, and then as they tire of the business, they start to take more out and they do less investing in the future. They do less risk-taking. You've talked about that at the previous episode.

David: I think, whatever side you tend towards, it tends to get calcified. If you're not comfortable operating between both ends of the spectrum, going back and forth, you'll get comfortable with the pattern of just always taking profit, or always pushing that profit forward, taking risks in trying to reinvent or innovate the firm. Like you say, don't try to resolve this tension, try to live in it. Living in it, living with it, probably means in this case, sliding back and forth from time to time. Don't just get locked into one very distinct viewpoint on what you should be doing on this front.

Blair: What else have you got in the list?

David: The other one I've thought a lot about, I don't know why it's hit me recently, maybe because I haven't been traveling. I've always joked with people that you ought to think about axing a service offering, or drastically raising how you charge for something when you're on an airplane flying home and you're tired, and you may be impatient, and you've just worked with a client that was tough. Since I'm not on an airplane anymore, I don't have that advantage, but I was just thinking about pricing. This is your area, so this is just me, not as advisor on pricing, but just as somebody who thinks about it for myself and for my clients. The goal is not correct pricing all the time. There's this sliding scale, where there are times when you feel like, "I just don't really want to experiment too much right now. The team needs the work. I'm going to do that." In other times, it's like, "Shoot, I am so tired of some of these clients. The value I consistently deliver is just not being captured in how I normally price this work. I'm just going to lay it out there. If I don't get it fine." You throw your arms up at certain points.

If we follow this theme, we're not trying to resolve that tension. We're acknowledging that both of those poles are yanking us apart like a medieval torture machine. It's good to be aware of both of those, and it's okay to dabble in both of them sometime. It's honest to say, "I feel this way sometimes, other times I feel this way," and living with that tension, because it helps us think clearly. That's what I mean on this example.

Blair: This to me, is another profound point because it speaks to what I see as the most common mistake in pricing among our audience. That is the idea that there is one right way to price. That it's either retainers, or it's value, or it's some performance pay, or it's something else where we're going in search of like, "What is the right way to price?" What you've just articulated is something that I think is more appropriate, which is that pricing is a bespoke creative act in a customized services firm of any kind. From time to time, depending on the financial health of your firm, depending on the client that's in front of you, depending on the opportunity you see to add value to the client, depending on whether you see them as a worthy partner in terms of putting compensation at risk, depending on all of these variables, you should be looking for the right pricing strategy in that moment rather than trying to resolve it universally by going to just one pricing approach.

David: Trying to understand the principles of pricing, not necessarily land on one particular approach that can be used every time, which is the lazy way to do it. It's our seeking for efficiency. What you're talking about is, "No, it's more nuanced than that." I love that.

Blair: Great. What else is on the list?

David: The other one is around decisions that need to, at a minimum, be socialized and maybe, to some extent, they need to be democratized. Though I'm a little nervous about that. There are times when you're making an important decision as a leader, where you really ought to do what most of your people think. You need to assume that they don't have it wrong, that there is wisdom in crowds, that they have a better perspective, it's a little bit more balanced, it comes from different directions. If that was what we were aiming for, then all we need to do is take a vote before any big decision, right?

Blair: Yes.

David: The other extreme is that there are times when you need to make a decision that the majority, maybe even almost everybody, disagrees with, but you have a slightly different perspective on it. Either because you've been talking to different people, you have a different aptitude for risk. Maybe it's your money on the table. Maybe you feel like there's someone in the crowd, which is your employee base, carrying some undue influence over people. It's not as if we're aiming to have a very clear way to make leadership decisions that impact the team. It's more that we need to be willing to live in a world where there

are times when you should listen very carefully and do what everybody is telling you, and there're times when you should not. It would be the wrong approach to end up near either one of those guardrails. It's more bouncing back and forth between them and wrecking both sides of your car. [laughs]

Blair: I'm lost for words. You're just hitting me in the gut. That's not the right metaphor, but each one of these is landing quite profoundly with me. As you're describing this, I'm thinking of lots of examples in my life and in my business where there're times when, "Just defer to the team. They're all saying the same thing." Then there're other times when, "Everybody is wrong, and I'm right and this is my decision." They'll follow me but I've got to make the decision.

I was also thinking about when I published my first book which was over 10 years ago now. I sent one of the close to final drafts out to a bunch of friends for feedback, including you. I got some common feedback from two or three different people about a change that they suggested I make to the book. You didn't make the suggestion and I looked at it and I thought, "Wow, there's three of these people I've said effectively the same thing." I had to think on it and I decided they're wrong, I'm going to publish it the way I want to publish it, to this day I forget what the specifics were. I have a vague idea of it. I'm so glad I overrode the feedback when there was a clear pattern of a few people saying, "No, no I think you should make this change."

David: People you respected. If you wouldn't have sent them the draft if you didn't respect their-

Blair: Totally, yes.

David: -opinion. Yes. When you did the manifesto, I remember you asking me-- I don't remember specifically what you're talking about here but I do remember you talking about how to promote this thing, and this is a small thing but it just illustrates the point. You said, "I think I'm going to let everybody read it for free, then put it on my website and let them read it for free," and I'm thinking "What kind of fool--"

[laughter]

David: Meanwhile that book has sold probably seven or eight times the number of books that I published about the same time.

Blair: It is not available for free anymore but it was for about four or five years. It was going against the grain. Have you got another example of things that happened to you last week that created tension with David?

[laughter]

David: The last one is something we've talked about in other contexts but it's worth mentioning here. It's thinking about the different approach that you would take compared to the approach that all of the people who work for you would take. You listening to this as a principle of a creative or digital or marketing or advertising or whatever firm, you're obviously entrepreneurial, but the people who are working for you are not normally as entrepreneurial as you.

We used to be able to say accurately that they weren't just entrepreneurial at all, and that's not true anymore. Some of the people are quite entrepreneurial. Some of them are going to leave, they're going to start their own businesses, some of them are going to want to push you for ownership and they're willing to borrow $1 million and buy it from you, but generally, the people working for you aren't as entrepreneurial as you.

As the entrepreneur, you thrive in lack of structure, and the people who are working for you in your firm on your team, they want more structure than you think. Those are the two extremes. You're trying to pull them to a place where there's less structure because you feel like that yields a more entrepreneurial environment. They are trying to pull you towards more structure because if you don't do that, they're just going to leave. We're not trying to resolve that tension, we're trying to understand both extremes and live within it charting a course that isn't always right down the middle but pulls both parties in the opposite direction in the right way and we're open to seeing our natural tendencies and learning from the other party and charting-- Together the entrepreneurs and the non-entrepreneurs build a beautiful business together.

Blair: My face hurts from grinning so much.

[laughter]

Blair: Tell the audience why I'm grinning David.

David: Yes, this goes to the EOS framework, doesn't it, where you have the visionary and the integrator and how we team. I've always thought of the EOS systems which a lot of listeners are using in some form or another. I've often thought of it as the system that allows normal people to work at firms with an entrepreneur.

Blair: Yes I think that's a great way to put it. Dan Sullivan, the founder of Strategic Coach, one of his many books is titled-- I think it's called The Entrepreneurial Organization or Working in an Entrepreneurial Organization. We've given it to new team members. It's like, "Here you think you're coming into this highly organized place? Read this."

[laughter]

David: "Read it and weep. Be seated while you read it."

Blair: It's just, accept the fact then in a small entrepreneurial driven organization. Yes, there are frameworks for certain things but there's also a lot of thinking on your feet and there's a lot of taking responsibility for things and other things like that. I love it. I love his way of thinking. But that EOS system, as you point out, really balances those two different sides. I'm grinning because my wife, who is my business partner and who doesn't listen to this podcast, she's often saying to me, "I'm not an entrepreneur." Like, "Quit torturing me with your behavior and your decisions. I am not cut out for this." There's a healthy amount of tension between these two business owners that is rarely resolved, you'd be happy to know.

David: Yes and that's really the whole point of this. It's just understanding your own tendencies, where you might fall on a particular decision-making spectrum, and not trying to resolve these two tensions. We're not seeking the right decision. We're seeking the right process to make decisions and we're not worried too much about whether the decision itself is exactly right. We're worried about whether we have tried to resolve these tensions. That's what leads us to the best decisions.

Blair: Do you have any advice for what process or process in Canada people should employ for decision making? You said earlier, you've got some theory of decision-making, and that theory I think you said was basically focused on the process and let the outcomes follow where they may?

David: Our younger son is really into board games. He's written a couple of IOS apps that support that industry. I would love to create a board game with him that helps with decision making. You have certain colored cards that say, "Okay, I'll never violate these three things, my ethics, my-- whatever those things are. Every once in a while I can play a high-risk card but here are the implications of that." It's really a matter of writing down for yourself even if nobody else ever sees it, how is it that you make decisions and how do you try to balance these things. As with all things in life, I think you can probably solve it by forcing yourself to articulate how you think, what are your short term goals, what are your long term goals, how do you balance those sort of things? Really, I don't have any great system here. I just want people to be willing to live with that tension and not try to resolve it but try to understand it and use it to their advantage.

Blair: I've mentioned that Ben Thompson of Stratechery fame has this idea of a principle stack. We all have these principles like we as individuals and organizations and some of us even proudly articulate those principles and it seems you articulate a principle then somebody is going to call you on it and say, "Well, you violated that principle when you said or did X." Thompson's point is that this idea of the stack where principles take priority, so your highest principle might be, "Do no harm." Then you would have other principles that fall under that because whenever you have multiple principles, you'll often find yourself in a situation where you're placed in a position of tension between two or more of those principles. How do you decide? If I take your advice and I apply it to Thompson's idea it would be, have this principle stack and then go down the stack. "My first principle is this, my next principle is that. Okay, this third one is in violation with or tension with the second one, so the second one wins. Therefore the decision is X."

David: Yes. Shane Parrish of Farnam Street has some good courses on decision making as well which I think really speak to this. I've been through one of them and I thought it was really useful.

Blair: Well, I'm 54 years old and this is the first time I've really thought deeply about this. Since I was a young man, I've had this idea that inside every person there's two people striving to get out, and all of the decisions are made in the tension between those two people. Hadn't thought about that one in while, but the examples that you listed, like I said a couple of times already, they just really hit home with me.

This may come as a surprise to some listener. It's probably in my nature to want to ease tension, particularly among team members, but this whole body of research on selling, it's articulated in the book, The Challenger Sale, it says, "A challenger is the person who is comfortable increasing tension in the sale and they're far more likely to succeed in a relationship builder who's driven to ease tension in the sale."

We see that play out in these other domains too. It's got to be universal.

David: That's fascinating, I'm glad you brought up that example because that really does resonate. This is one fo those times when I wish we were in a group of people where we can all just have a great conversation together, unfortunately, it's you and I. Hopefully people are taking these thoughts and taking them back to their team and talking about them and thinking about how they make decisions too.

Blair: Well, we didn't plan this but I'm glad you brought that up because we're going to roll out an opportunity for others to participate in these conversations right after listening to the live recording of 2Bobs. Stay tuned for that. There's your little teaser. David, thanks for this. This is been a really, really good one. I feel like I should send you some money but I'm not going to.

David: Yes. Thank you, Blair.

Blair: Thanks.