We Are All Closet Socialists

Despite the fact that many entrepreneurs hate people telling them what to do, they end up running their own agencies using a “central planning” model. Instead, David encourages entrepreneurial leaders to set clear standards, give staff more freedom, and institute kind accountability, for them and ourselves.

Links

“Countering Your ‘Central Planning’ Tendencies” by David C. Baker for punctuation.com

Transcript

Blair Enns: David, our topic today is You Might Be a Closet Socialist.

David C. Baker: [laughs] Wait.

Blair: Not you. That's the worst insult anybody could hurl at you, isn't it?

David: Kind of, yes. I think there's a little bit of socialism on around the edges as I get older and softer and kinder and-- Wait, is that true of me?

Blair: That's interesting. You wrote a post recently. We're calling this title, You Might Be a Closet Socialist, but that wasn't the title of the post you wrote, was it?

David: No, it was a little less evocative, I think. This just hit me in a passing way and I wrote the topic idea down, just a sentence, and then I thought about it for months. It's like I kept seeing things that I wanted to throw in that basket because I've always been struck by the fact that there's this internal conflict. The people that you and I work with, they're all pretty heavy entrepreneurial minds, and some of them more on the progressive side in terms of their politics and so on.

They have an aptitude for risk. They make money. They're capitalists. They may not like that term, but they're really capitalists or entrepreneur is a softer term for that. Then I look back, and I think how they are running their firms, and I notice that they're running their firms like socialists, but they're entrepreneurs. That led me down this path, and I just thought, "Oh, I need to write something about this." I got some really interesting feedback about it. When I hit send, I just never-- "Oh, do I really want to hit send on this thing?"

Blair: Those are the best posts.

David: Yes. I did get some really good feedback on it. The whole notion of central planning is what got me thinking about this, right? Because that's the central feature of socialism, is that we're going to control everything from one place. Then what really sent me down this path was this notion that pricing is a signal, and you don't have pricing the signal in socialism, and you try to control everything; the means of production, the distribution, the pricing, all of that stuff, and so you're missing all of these signals.

That got me immediately, like right adjacent to that is this notion that entrepreneurs are control freaks. But the best entrepreneurs recognize their tendency to be control freaks, and they tamp that down a little bit, and they move away from central planning. An entrepreneur at heart wants to do central planning, they're a control freak, but the firms that are run the best aren't central planning. That's not central to them. This internal conflict just really got me thinking. I feel like I want to rewrite this article five years from now and all kinds of things are going to occur to me between now and then.

Blair: There's a lot to unpack here. I look at the topic and I think, "Okay, I get what he's going to do here. This will probably be pretty good." Then I get into it, and it's like, "Oh, this is so good." One of the things, you appeal to my vanity by quoting me in the second paragraph.

David: I have to throw that in, yes, every time I write something.

Blair: I appreciate that. It was you feeding me my own words and then going through your thinking on this, and then reconciling them once again with my own words led me to a realization. The quote you said, "My podcast co-host pictures effective economic progress like this; Capitalism is the fire, and the box that keeps the fire from destroying everything it encounters is the sum of thoughtful laws that contain it."

That's the metaphor I brought up on an episode a while ago. I said, "That's how I think about capitalism." The trade is the fire, and then the laws, social and judicial, are the box. We're in this constant battle or tension about how big the box should be.

David: Yes.

Blair: I appreciate that you brought that up. Then as you get to your recommendations for how you should think, how you, the business owner, should operate more as a capitalist, it occurred to me that what you're describing is that the owner's role is effectively to be the box, and your team are the kinetic thing that you just let happen. Instead of you trying to be the person that makes everything happen in the middle, you're the person sitting back thinking, "The box needs to be stronger. We need some reinforcement over here, or the box is too air tight, or it's too thick. There's not enough heat getting out." How does that sit with you?

David: I did not extend that picture to what you just did, but it makes perfect sense. I think where that truth surfaces is if you think back, when you as listeners, think back to any time you've tried to motivate people, it usually doesn't work. [chuckles] People are self-motivated, or they aren't. What you do is steer, comment, shape, twist, turn. I did not extend that metaphor to think about the principle "creating the box to control the fire." But what I really like about that is that there has to be fire, and that fire has to be other people at your firm, and you're simply just shaping it. I really like that. That had not occurred to me before.

Blair: It didn't occur to me either too. I'm looking at my highlights and my notes I made on what you sent me, and I resolved. I thought, "Man, this guy knows what he's doing. I should read more of his posts."

[laughter]

David: Speaking of me? That's what you're talking about?

Blair: Yes. We'll jump ahead a little bit. You talk about the right way. Then I'll back up and we'll talk about the advantages of socialism. You're saying there's a better way to run your firm, and then you list three things. I highlighted some of the key elements of the three things and I wrote "the box, not the fire". That's where it came true for me. What are the three things under the banner of the right way? You say there's a better way to run your firm. What are those three things that the principal should be thinking about and focusing on?

David: As you're building this box, now that we have this, we've agreed on this picture, and the employees are the fire, the first thing you do is to set the culture or how we think about things. I guess you could state it another way, it's like the rules of engagement. Immediately when I say that, people in their minds are going to jump right to that section of their website that says, "These are the six things that set us apart."

I don't think that's the answer because those all strike me as interesting. They made sense at that moment in your employee retreat, but they need to be deeper than that. How do we think about performance? How do we think about transparency? When would we turn work down? Those kinds of things, so that's the first. Set the culture, how we think about things, the rules of engagement.

The second is letting the troops make decisions on the ground. This needs to be unpacked a lot because people experiment with this. It comes as a surprise to the people that are being asked to make the decisions. These people are not used to making decisions. You haven't set the rules of engagement, so they don't know the framework to make those decisions.

You sometimes hire the wrong people, so you have this epiphany like, "We can't have a command-and-control thing. We can't have central planning here. I really need to be less of a control freak, so I'm going to let go of the baton." But other people don't take the baton well in the relay race and it falls to the ground and then we've lost the race. Then that just reconfirms some of your very deeply held beliefs about you really need to be doing things or things aren't going to be done right. It's self-confirming because you haven't hired the right people.

Anyway, the first is set the rules of engagement, second is make sure that the decisions are being made as low down the totem pole or the ladder as possible, and then third, spend your best efforts on the things that they can't or won't do. I've talked a lot about this. We've talked about this in previous episodes. Unless you get these things off your plate, namely all the little silly decisions that you shouldn't be making that are not close enough to the events, then you can't be doing the things that only you can do for the firm.

Those three things all circulate, and they self-confirm each other. I'm sure there's a lot more we could talk about there, but that's how I think about the right way to do this. It's the right mix of making sure you understand what your role is, and it's still really, really important, but all the authority doesn't need to be vested in you. You're setting this box, to use your image, and the fire is the employees that you've hired, and you've given them the right instructions, and you've hired the right people, and you're coaching them and having the difficult discussions that you need to have with them and so on. Anyway, that's how I think about it.

Blair: When I read these three things you should be focusing on; set the culture, let the troops make decisions on the ground, spend your best efforts on things they can't or won't do. It triggered back that fire-in-the-box metaphor. I was overcome with a wave of regret. In a moment, I saw all of my management mistakes. I am not a good manager. I might be a decent leader, but I'm not a good manager. I just saw it all in this description.

Even the box metaphor, it's like, I'm in the studio, we're recording in December. Last thing I did before I left home is I stoked the fire, and both of the cats were lying in front of the fire. I put the wood in the fire, I damp it down so when I get back to the house, the house is going to be nice and warm because of the fire. What's the fire in the box? It's people. We're not burning people, but it's people.

[laughter]

First of all, you want to have good quality people. I want to just keep pushing this metaphor. It's got to be high quality. You have to have the right number, and then you've got to figure out a way to spark them and get them going. Then after that, it's all about the box.

David: Yes, exactly. They need to work together. Just to be clear, for people that don't know, you live in northern clime that's very cold and that's how you heat your house with a fire, so this is not just an academic exercise. It's like you really do need to make this work if you're not going to freeze.

Blair: Yes. On your middle point about let the troops make decisions on the ground, I thought of two things. I had a boss once for about 10 or 11 months, who by the end of it was so central command. By the end of it I had questioned my ability to write a simple letter, and I would have to get her to check it before. I was in a senior position, I had 11 people reporting to me and I had to get her to check the simplest of my work. That's what command and control did to my confidence. After that command and control environment for less than a year, could I have been turned loose in a box and been marshaled to go like, "Okay, do your thing, we trust you"? Because working under that regime had robbed me of the ability to be my best self.

Then a little bit before that role, I was working in advertising on dealer group accounts. There was a book that came out in the '80s called You Will Be Satisfied, and the guy's name was Bob Tasca, I think. This guy ran a Ford dealership in Rhode Island or somewhere, and he was the top performing store in the country. Ford would bring him in to talk to other dealers to share his story on how he did it. He basically said, "It's simple. I really have one rule. I push decision making to the lowest level of the organization. Everybody in the organization has the authority to make the customer happy." To prove this was the philosophy that took him to number one, he sold his store, bought one that was in the toilet, that was a poorly performing one, implemented the same management style and rules, drove that store to number one and bankrupted his old store in the process.

David: Oh.

Blair: That idea of just letting people make decisions, giving them authority, pushing authority to the lowest level in the organization, and he did this without firing a single person.

David: That's quite a leader who could do that.

Blair: He turned around a poor performing organization by pushing authority to the lowest level of the organization.

David: What's the allure? When you're a command and control or central planning freak, it's exhausting. In your story, you have this person who needs to read everything that you're writing before it ever gets sent out. It's exhausting, but what's the allure? What's the big temptation that even drives us down this path? Well, we just don't like obstacles and that's something that's true of all entrepreneurs. We hate obstacles. We hate being told, "This can't be done or this takes longer," and so you just step in and you say, "No, this is going to happen." So people just follow you and then you set up this recurring theme that you can never get out of until you have some big light from the sky that says, "This is not the only way to do things."

What's interesting to me about that story you just told, is that the guy was able to turn this around without hiring different people, so he must have been very self-aware at that point. He didn't have to swap them out and say, "Oh, well these people, they can only just take my orders. They can't think for themselves." Apparently he figured out a way to turn his current staff into more of a fire, and he stepped back and he was the box around the fire.

Blair: Yes. Wow. It's really got my wheels turning. You mentioned that there is an advantage to socialism and there's an advantage to central planning. As you were describing the benefits of it, I thought, "Oh yes, that's China." Then your last sentence was, it's basically China. Do you want to talk about that a minute?

David: Yes. It's like, we need more housing, we need more electricity production. That means we need to build big dams. That means that a lot of people are going to lose their homes. Sorry, that's just what has to happen here. We need to connect these big cities, so we're just going to build this high-speed railway between them. There's massive advantages in socialism because you can get things done, but then you have either a populace, if it's in a country, or you have a bunch of employees who are just simply sitting there waiting to be told. You're also going to capture all the blame when things don't go right. I don't want to pretend that central planning doesn't have a lot of mystique and advantages to it. It really does, but it's like it puts you in this situation where you are just trapped for life and the people who work for you don't really enjoy it. That's the big theme here. As an entrepreneur, you have this innate drive to get things done. You don't want to let that slip over to how you manage things and just simply tell everybody what to do. As an entrepreneur, you don't like being told what to do, but you don't think about that when you start telling everybody else what to do all the time. We just need a moment of self-reflection here about what really works and what doesn't.

Blair: That's the challenge in a nutshell, isn't it? You became an entrepreneur because you didn't want to answer to anybody, and now everybody answers to you. You're putting them in the same situation you were in.

David: Yes, exactly.

Blair: That's ironic. We talked about the right way in these three points of set the culture, let the troops make decisions on the ground, and spend your best efforts on the things they can or won't do. You also have an alternative path for people who just can't let go of their central planning tendencies. Do you want to speak to that?

David: Yes, that would be the change is not going to happen overnight. It's probably going to be slow in coming. It will be painful. Honestly, it's more about you or me. It's not so much about the people. It's about coming to some realization. This is very personal for me. I ran a firm, it wasn't massive. I had 16 people at its height. Then I worked for myself for many, many years, and then hired Jonathan because the M&A practice was too big for me. There were a few things that I had not really figured out really well, especially on the buy and the sell side search portion of what we do.

I brought Jonathan on four or five years ago. I've seen this personal struggle. It's like, "No, this is the way we do things." It's like, "No, this is the way we did things when things weren't as good as they should have been. Jonathan, whenever you need or want my feedback, I'm very happy to give it to you. There's a long leash." His side of things is growing so much faster than my side of things. It's in part because I have stepped away from trying to, like, I was the problem. I need somebody who has a bigger vision, who's more competent about this stuff, and I still am fighting two or three times every week.

I'm slapping myself back. It's like, "Oh, that's not the way I would want to do it, but that's the way it's working." The two of us just got off a call with a client, and after every one of these, he'll say, "What would you have done differently?" Then I ask the question, "What do you think I should have done differently?" It's such a painful process to be open to that feedback instead of the central planning way of doing things. It's so freeing too, where I know the best use of David's time, and I also see like, "Wow, this is so much more healthy and profitable and growing," because I'm not doing all of that little stuff.

I'm sure this is a little silly for people to hear, but that's the path that every manager goes on, especially every entrepreneurial manager. Can you just let go? It's not like the suggestions that you would make in a central planning role are wrong, which often they are just honestly, but that's not the main issue. When you're doing that, you're not forming the box around it. You're not creating this environment that can grow safely and provide all kinds of warmth for all kinds of people. How many of us have any leadership or management training? Hardly anybody. We're just picking up things, good things or bad things.

I've had both kinds of managers. There's three people that I worked for that have been very influential in my life. All three of them had minor weaknesses, but largely, they were really great examples of how to do things. I just find myself so fortunate. I don't think I've ever read a book about leadership or management.

Blair: I wrote one.

David: [laughs] I don't think I've ever read one.

Blair: I've read one. The one you wrote.

David: I actually, I asked Jonathan to rewrite that. I said, "Man, this needs a younger perspective," but anyway. Yes, it's just interesting to me to step back and say, "Let's not talk about positioning today. Let's not talk about financial performance. Let's talk about what your role is and how your tendencies to control everything are like that's what entrepreneurs do, but it's not in your long-term best interest."

Blair: That's a great point on which to end. I will leave it there. Thank you, David. I've really enjoyed this article, and I enjoyed the conversation. I feel like I've grown because I can feel the pain in my gut.

David: [laughs] Thanks, Blair.