2Bobs

Shower Your Way to Sales Success

2Bobs with David C. Baker and Blair Enns

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David interviews Blair about his recent article in which he gives us methods to cope with our own natural emotional and physiological responses that can be triggered when unforeseen events unfold within sales conversations.

 

Links

"Can Improv and Cold Plunges Improve Your Sales?" by Blair Enns for winwithoutpitching.com

Blair's interview on the Undisputed Authority podcast with Liam Curley

What Doesn’t Kill Us by Scott Carney

Transcript

David C. Baker: All right, Blair, shower your way to sales success. It's like you've been getting feedback after your sales calls, there's a strange smell around you, and you decided, "Oh shit, I need to start showering before I have any sales calls."

Blair Enns: That's not what this is about.

David: Oh, okay, well, correct me, then. Shower your way to sales success: go ahead, tell me what this is.

Blair: I wrote a post titled Can Improv and Cold Plunges Improve Your Sales? The inspiration for this was: I was in training, leading a workshop a couple of months ago, and somebody was talking about a scenario where everything was going well until it wasn't. Somebody on the client side did something and just killed the momentum. They said, "It was like cold water had been thrown into my face." I thought, "That's actually a really good metaphor," because physiologically, it's effectively the same thing. That is what happens, and because I'm a big Wim Hof devotee.

David: That means you swim naked, right, in public? Or is that something else?

Blair: I think Wim wears clothes, but breath work, and cold exposure. I thought, "Oh yes, this is the invitation that I've been looking for to channel one of my hobbies into my work writing, so I embraced it.

David: Have you noticed that we are weaving more personal stuff in here? What does that mean?

Blair: I think we had this conversation. I have this fantasy, I have for years, this idea of launching another podcast that is all about the stuff that I'm interested in and has nothing to do with what I do for a living. It'll have no listeners, but I have not ruled out doing this podcast. Then one day, I thought, "You know what? Screw it. I'm just going to start weaving in the stuff that I'm interested in. I'm going to sneak it into my business writing."

David: 2Bobs with no listeners. We are slowly becoming this as we keep doing this.

Blair: We're men of a certain age who have quit caring about certain things.

David: When this person told that story about cold water in their face, they mentioned it as a negative. It's like 'that stopped everything', and you read it as, "Oh no, that can be a good thing. It's a metaphor for something else." Before we go too deep, can you just tell us a little bit more about your weird personal life and the lake you live on, and what happens every day, and all that?

Blair: We're recording this on December 18th, and here, just like in many parts of the world, we do this polar plunge. I think it's January 1st, where this local charity—my wife's on the board—a whole bunch of people come out, and they raise money, and then they jump into the lake. Everybody gets ready on the beach, and somebody else from the bullhorn do the countdown, and they yell, "Go." Then everybody starts screaming and runs into the water, and then they run out screaming. I do this every day, so I watch, and then my swimming buddies and I go for a regular swim, and we go actually swim for 5 or 10 minutes.

It's an interesting contrast. I used to be that person. I remember trying to conquer cold water, and I remember the reaction to it. It's funny, we're all physiology, largely. We're the same people; we're effectively wired the same way. To some people, it's a total shock. Well, here's the truth: to everybody, it's a total shock until you practice. This idea of cold water being thrown in your face, I thought, "Oh, yes, how do you deal with that? I know how you deal with that. You throw cold water in your face every day," but I also know that the physiological response of being in a sale—I don't recall the last time I felt this way—but I have been in sales situations throughout my career multiple times where I could not speak because something happened in the moment where I was like, "Oh, I was not expecting that. Okay, get your shit together, Enns. How do you respond?"

The bigger question: How do you deal with these disruptive moments? often power plays on the part of the client. How do you deal with them in a sales situation? How do you learn to get better at dealing with them over time? The answer is, you just put yourself in that situation repeatedly. It's an idea that comes from chemistry, I think. It's known as hormesis, or hormetic stress. It's the idea that what doesn't kill you makes you stronger. A small exposure to certain toxins or things that are harsh for you will actually make you more anti-fragile, more robust. That's a Nassim Taleb idea as well.

David: Well, I have not discovered that with certain people that really annoy me.

Blair: You're just not getting enough exposure to those people. You need to spend more time with them.

David: What doesn't kill me will kill them, probably. Can you give me some examples of what kinds of things you might hear, or maybe not just oral, maybe it's just things that happen in a sales conversation that would just stop you in your tracks, like this?

Blair: What stops me in my tracks—it's been years since this has happened—is somebody just questioning even my right to be in the room, like, "Have you done this before?"

David: Yes.

Blair: Or like, we hired a consultant one time, and we're really down on this but let's keep talking. It's not so much they stop you in your tracks, it's just like they take the air out of the room—I think that's what it is—you don't feel in control anymore. All of a sudden, some surprise has been handed to you, and you're not sure where to go next. It's just a deflating moment.

David: In the post, I wrote about a hypothetical example of a CFO showing up, the missing senior decision-maker that you did not identify in the qualifying conversation. You're in a closing conversation and there's this new person in the room, and you think, "Who's this person?" It's the person you didn't qualify in the qualifying conversation. You didn't identify. You move to the proposal, start sharing the proposal, and the senior person says, "Wait a minute. Stop. I don't know what anybody told you here, but we're not doing this. This project is not a priority." [laughs] That's an example.

Without the specific details, I've been in lots of moments like that. I remember being a young account person working on a national car dealer group account. I was given the creative. The creative was done in a different city. I was given this creative to present to a room full of car dealers who are on the board of this dealer advertising group.

I show the print ad and I do my little sales job on it. Then I stop and nobody says anything. It's the first time we've worked together, that I've worked with this group. These are car dealers, remember. Somebody says, "Well, there's a lot of white space on that ad." As soon as he said that, the most dominant person in the room—car dealers, they're all dominant— starts yelling, "Exactly. I knew we never should have hired you."

He starts swearing at me, and he is ranting about how beautiful and elegant and brand-like this harsh retail ad-- In his mind, it should have been screaming price, but it was too beautiful and too elegant. At the end of his rant, he said, "If you got to put snakes on the ad, put goddamn snakes on the ad." He sets off. Everybody's yelling. In that moment—I'm in my 20s—I'm physically looking for the exit, "How do I extricate myself from this room?"

My heart was pounding, and I thought, "Okay, I got to meet this head-on." At some point, I let them burn themselves out. Then I said, "You want snakes? You're going to get your goddamn snakes." I grabbed the stuff and I walked out of the room. As I was walking out of the room, the dominant guy goes, "See, that wasn't so bad."

Blair: [laughs]

David: I spent four and a half years with this group. I hadn't thought about this in years. My heart is racing, thinking about it. I was scarred. I used to grind my teeth at night because these people were so hard to deal with.

Blair: Part of it is just that repeated exposure, where you face a very difficult thing in the moment and it doesn't kill you. The next time it happens, you realize, "Okay, I'm not going to die. I figured out a way last time," so it just keeps happening. One of the other things you talk about in this article was how it relates to speaking as well, certain physiological things around deep breathing, and so on. I was listening to the episode that Liam Curley did about your career recently. It's a really good one. What's the name of it? Undisputed Authority?

David: Yes.

Blair: You talked in there about how you were not as comfortable as a speaker in the early days, and it comes very naturally to you now. You didn't talk about this next thing, but I kept thinking, "You know what? When I finally got comfortable speaking, the thing I still wasn't comfortable about was just opening the floor to any question at all," and now I just love any question at all. Talk a little bit about improv and the physiological breathing side of things, and how that relates to these very difficult sales conversations that we were just talking about.

David: To your point about why are we thrown in these moments, we're thrown because we weren't expecting it. After that first meeting with the car dealers, I knew to expect the worst, so I went in prepared, and I was never in that situation again. I was in difficult situations, but I was never caught off guard. It happens when everything is proceeding swimmingly, and then out of nowhere, out of the blue, you get this response.

What happens is we all have enough basic working knowledge of the brain that we understand that the amygdala is the fight or flight center of the brain, often called the reptile brain. It's part of the limbic system. We tend to live in our neocortex or the outer part of the more evolved outer part of the brain that's responsible for rational thought. We're living in this rational thought part of our brain. Then somebody on the other side of the table does something that triggers this fight or flight response. You have the sense to run or to fight back. That's exactly what's going on. The reason why cold exposure and breath work help with this is that they help you override your autonomic nervous system.

The autonomic nervous system is composed primarily of your sympathetic nervous system, which is all about mobilization, getting you to do things. There's some stress involved, like dialing up your sympathetic nervous system will increase stress hormones and all these, and your heart rate goes up and your breathing quickens, et cetera. The second major component of the autonomic nervous system is the parasympathetic nervous system. That's all about calming you down. We think of it as a switch, but it's really dials on both systems. We can generalize and say we're operating in one or the other. It's actually a little bit more complicated than that.

In that moment, when we're hit with something unexpected that we perceive to be dangerous to us, our autonomic nervous system—so autonomic—it takes over. It's not now about rational thought, it's about saving ourselves, in particular, the sympathetic nervous system. What we want to do in any stressful situation like that, whether it's sales or dealing with danger in the wild or in the streets or whatever it is, we want to be able to calm ourselves down. How do we calm ourselves down? It starts with breath work. We can get into the details of that. I cover it more in the post.

The way I was taught first aid, the first rule of first aid is to take control. Take control means first take control of yourself, and then take control of others. I've talked about this before. The woman who taught me would mime this coming up on a bloody scene. She would turn around so she wasn't looking at it. She would take a moment, she would compose herself, and then she would turn back to the scene and point to somebody and say, "You, call 911." "You, do this," et cetera. That idea of taking control starts with taking control of yourself. In that situation where you realize you are in fight-or-flight mode, how do you get yourself out of fight-or-flight mode? You have to take control of yourself. How do you take control of yourself? It always starts with your breath.

There's a guy named Scott Carney who wrote a book called What Doesn't Kill Us. He describes breathwork, controlling your breathing as jamming the thin edge of a wedge into your autonomic nervous system. The more you practice breathing, the deeper you can get that wedge in and you can override these functions that your autonomic nervous system are responsible for. You take control of your breathing, you will control your heart rate, you can start to control other things.

I've done all kinds of experiments in my own life where I was able to override things like nausea from car sickness. I went two years without shivering because I decided that I could override shivering. I now shiver again because I don't practice to the extent that I used to.

Blair: Your mind is weaker. [laughs]

David: My mind is weaker, but it's incredible, and it's a little bit addictive. Once you start practicing this, and it all begins with your breath, you will start to imagine all kinds of things about your body and your autonomic nervous system in particular that you can override.

Blair: When I was reading this article, I was struck by the breath thing because I really feel that I don't think I got to be a better speaker. I am not an exceptional speaker even now, but I'm a better speaker than I was. I don't think that improvement came. It had nothing to do with preparation. It was actually the breathing thing and the confidence thing, and welcoming questions.

In a speaking setting, somebody asks a question; they really do want to know the answer, but in an improv setting, the person asking the question is not curious; they're trying to get the person up front off their game. In that moment, before the person up front answers, the audience is saying, "Who am I going to put money on here? Did this throw this guy off, or is he going to come back with something really good and funny and relax the crowd again?"

Anyways, I was thinking about this breath thing. What struck me so useful about it is—obviously, just the deeper breathing is useful—the deeper breathing—this is something that you've talked a lot about here—creates this pause in which the other party might say something that would be very useful for you to hear. You've talked about there needs to be silence. Just stop and wait, and just endure the silence. That's a time for you to breathe, but it's also a time for somebody else to say something that will help you regain some of that control.

Blair: If you are terrified of the idea of shutting up in that moment and focusing on your breathing, which is what you should do, then it's helpful for you to recall this Win Without Pitching principle of embrace silence. I've said before that I think learning to be comfortable with silence is the single biggest little thing that you can do to become a better salesperson. If you tie these two ideas together, focus on your breath, then to your point, what does your silence say to the room?

It says you're not reacting. You're thinking about it. You're behaving like a professional. Instead of coming back with some sort of emotional response, you're not throwing off your game. It's actually a little bit of a power play yourself to just focus on your breathing and be comfortable with the silence that you create. When you create that silence, you invite the client to step into that silence. Nature does abhor a vacuum; people aren't comfortable with silence. When you are comfortable, you're inviting the client to fill the void. They keep talking. That gives you more time to control your breath.

David: This is just a small part of it, not the whole thing. I think at the core of what makes an entrepreneur, is they love control, and they can be naturally defensive. Both of those instincts can be wrong. The instincts that we're born with, this fight or flight thing, some of them are really useful. You can see what happens in certain very difficult circumstances where somebody needs rescuing, and so on.

There's also times when success means we need to fight. We need to defeat some of our natural instincts. We talked about this when we were doing that episode on motorcycle racing. You see some danger ahead, your natural instinct is to tighten up and stare at it. Both of those things will kill you. If you just take a bicycle with nothing on it and you just push it down the hill, it's going to stay upright until it runs into something.

If you tape the handlebars in a position, it'll fall over immediately. You've got to relax in these kinds of things. In that moment in this sales conversation you're talking about, you have this instinct to tighten up and control things and be defensive. What you're saying is, "No, pause, take a breath. Let somebody else fill the silence." It's just a beautiful metaphor for me to just think through.

Blair: Yes, I think so, too. The reality is, the only way to get better at this is to practice being in that situation. I don't have any data to support this, but I'm absolutely convinced that you don't have to practice being in that exact situation. Although it's probably helpful, it doesn't have to be a sales situation. I think it's any fight or flight moment, where you're triggered, and the amygdala is taking over, and you—or the rational part of you, the neocortex—wants to take control back.

I think these situations, whether it's diving into cold water or hearing something you didn't expect in a high-stakes sales conversation, it's all the same. It's all the same response, and we're trying to override the response. Whatever the scenario is, daily cold exposure, daily breath work, improv classes, all of these things are beneficial.

David: I have a lot of clients who do improv. I just wonder what is it about this field that interests people about improv? What makes them better at it in this field? Have you ever thought about that?

Blair: Yes. I, too, have seen the patterns over the years. Improv and stand-up. More improv than stand-up. I'm fond of Mihaly Csikszentmihalyi's definition of creativity, which is: Creativity is the ability to see. I know, from testing hundreds of people, that people who are highly creative, directly linked to creativity, is the ability to think on your feet. I don't fully understand why, but that's one of the reasons why the pitch and presenting persists in our business, because creative people are addicted to presenting. They love presenting so much, as I say in The Win Without Pitching Manifesto, they're willing to do it for free in the pitch.

There's this sense of mastery. They're in a flow state when they're at the front of the room, and they know anything could go wrong, and they're waiting for things to go wrong, and they're relishing the opportunity to address whatever goes wrong. That is improv. I've never done improv, but when you're up there with your troop mates, and you're in this binding contract with a very small number of rules that basically you have to accept whatever is given to you, and you just have to go with the flow and make something up on the spot. Improv is a lot like presenting. Now that we're talking about this, I think a good way to wean yourself off of pitching might be to join an improv group, get that need met somewhere else.

David: I think of it as diving into an empty concrete pool and inventing water on the way down and not being terrified of that.

Blair: Yes, I love that metaphor.

David: All right, thank you, Blair. This has been fun.

Blair: Thanks, David.

Why Entrepreneurs Are Unemployable

2Bobs with David C. Baker and Blair Enns

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Blair interviews David about a recent article in which he argues that the very traits that make entrepreneurs successful also make it hard for them to give up being their own boss and join someone else’s company.

Links

"What Makes Entrepreneurs Unemployable" by David C. Baker for punctuation.com

Transcript

Blair Enns: David, have you ever advised any of your agency owner clients to shut it down and go get a job?

David C. Baker: Oh, yes. Probably a dozen of them over the years, 1%. That surprise you?

Blair Enns: I want to know if the irony of that strikes you as somebody who you probably see yourself as I do, as unemployable.

David C. Baker: I think if you're not an entrepreneur, you are employable. If I don't think you're an entrepreneur, I'm going to recommend you shut the firm down, which means you are employable somewhere else. It's not always quite that simple because there might be multiple partners, and as long as one of those partners is clearly an entrepreneur, then they could work really well, but yes, I have for sure.

Then a bunch of my clients have decided that on their own. It used to be you might discover that you were on the wrong side of the divide. That you were on the client side and you really needed to be running your own firm, or the opposite, and you would fix that and flip to the correct side. It seems like there's more flipping back and forth these days, which I don't know how that feeds into my premise here.

Blair Enns: Does that negate our topic of what makes entrepreneurs unemployable?

David C. Baker: Yes, I guess, so we're done. This was a very quick--

Blair Enns: [laughs] Never mind.

[laughter]

David C. Baker: If somebody offered you a job. Oh, I can't even say that. They wouldn't have to fire you. You would fire yourself just graciously.

Blair Enns: From the job that I don't take, you mean?

David C. Baker: From the job you do take accidentally and incorrectly. The only variable is how long it would take before you decided it was a mistake. I'm thinking six months, seven months. What do you think?

Blair Enns: Oh, God, no. Before I showed up, I would realize the mistake. Both of us have been doing this long enough, and our careers or businesses are established. That's been a long time since any client ever offered me a job. When's the last time that happened to you? It must have happened in the early days where a client said, "You're really good at this. Why don't you come and be my general manager or president or whatever, janitor?" When's the last time that happened?

David C. Baker: It's never happened.

Blair Enns: Really?

David C. Baker: That says something, doesn't it?

[laughter]

Blair Enns: Yes. I'm surprised, but I shouldn't be. Never mind. All right.

David C. Baker: What about you? When's the last time somebody said, you should take over their sales?

Blair Enns: I don't remember. It's been a very, very long time. 15, 20 years, 15 years for sure.

David C. Baker: Maybe it's just that you and I are unemployable. We're just projecting this on everybody in the audience.

Blair Enns: Did you know you were unemployable when you were an employee?

David C. Baker: Yes, I did. The jobs I've had, I learned so much. Even though one of the bosses I had was really a jerk, but he had a good heart, and I still learned a lot. I don't regret working for him, but then the last job I had, that guy was a real jerk. He's still alive, so hopefully he doesn't listen to this. The business was going through a rough time. I was a general manager, and I had to lay off some people.

I knew that another round of layoffs was coming, and I just said, "You know what? I can't lay off these people. I need to let myself go here. This isn't a fit for me. It makes no sense for me to be general manager for a firm at the current size." It was smaller at that point, so I just laid myself off. I've never been fired. I've just always anticipated it like George in Seinfeld. Break up before she can break up with me.

Blair Enns: I've been fired, but that's a story for another day. Let's unpack this idea of what makes entrepreneurs unemployable. Why is it that some clients, even in tough times, and it's relatively tough times out there, as of this recording in January of 2026, for a lot of independent creative firms. Some in tough times maybe should shut it down and go get a job, or they contemplate it, and they think, "I just can't do that. I am wired to do this. I am meant to do this." What are the reasons at the top of the list?

David C. Baker: Yes, there's four of them that I could think of. The first one is just this idea of unlimited earning potential. This one strikes me as true, but hilarious, because when you're working for somebody else, you don't decide what you make. Somebody else decides what you make. Usually, you're going to make less than the owner unless you're really good at sales. There's some rare exceptions there.

You just think, "Oh, gosh, I cannot live in a scenario where my income is capped." It's not like you need that extra money. Here's the hilarious part about it. You quit the job because you're an entrepreneur. You go start your own firm. Now, your income is not capped, but there's a good chance you're making less money now than you made when you were working for somebody else. It's this intellectual ethereal-- It's like, "I don't want it to be capped. It doesn't matter too much what I make, but it can't be capped." I think that's one of the reasons that entrepreneurs are who they are, is they don't like the idea that there's a ceiling to what they can make when they're working for somebody else.

Blair Enns: That makes sense. Salespeople are like that, too, or a lot of high-drive salespeople are like that. They don't want a cap on their commission. They want unlimited earning potential. I have the same rationale for my many reasons to never retire. One of them is I don't think I could live on a fixed income, no matter how high it is. It's the same idea. To me, that's like being in prison.

David C. Baker: [laughs] That is so funny. Knowing you too, it's like, "Oh my God. That is so true." It's not like you spend a lot of money. The idea of a budget is just like-- what is it? You can't even spell the word budget.

Blair Enns: The joke in my house is I'm going to write a book called Europe on $5,000 a Day.

David C. Baker: [laughs] When you want something and maybe the money isn't there, it never occurs to you, "Maybe I shouldn't get that." It's like, "I'll go out and make money."

Blair Enns: I'll shake the money tree. Number one at the top of the list why entrepreneurs, maybe they're not unemployable, but they see themselves as unemployable, first of all, is the idea of restricting their income, their earning potential. They want unlimited upside, and they're willing to take the risk associated with that, meaning maybe there are years when you are in very little or nothing. They're willing to make that trade. After that, what's on your list?

David C. Baker: Next is this idea of mistakes. This one is also hilarious to me. I don't know why all of this is hilarious to me. As entrepreneurs, we make mistakes. When we are working for an entrepreneur, that entrepreneur makes mistakes. Somehow, the mistakes that that entrepreneur we're working for makes, those are much worse. [laughs] It's like something about "I'm allergic to any mistakes that are not my own. If I made the mistake, okay, I can fix it, but I just hate to live under a scenario where I have to eat the consequences of somebody else's mistake. I don't mind eating the consequences of my mistakes. I just don't want to eat them from somebody else's mistakes."

That's why it's hilarious to me because it's not like we are saying-- we do say we can run things better, but it's not like we're not going to make mistakes. It's just that they're going to be our mistakes, and we're okay with that.

Blair Enns: You can't countenance the idea of working for an idiot, but you don't mind being that idiot.

David C. Baker: [laughs] Yes. That's a better way to say it. Yes.

Blair Enns: There's a maxim, I don't know who first said it, but, "We judge others by their behavior, and we judge ourselves by our intent." Does that make sense?

David C. Baker: Yes. We don't look behind the actions at the intent. He meant well. That was just an honest mistake. We do that for ourselves, but not for other people.

Blair Enns: That might explain that. Makes sense to me. Next on your list is inefficiencies corrected by process. This one has got me scratching my head. What do you mean by this?

David C. Baker: What makes a great employee is a willingness to some degree to follow process. What makes an entrepreneur successful is their willingness to take risks, so their aptitude for risk. What comes along with that is the ability to see patterns and to fix them with better process. Now, here's where the hilarious part comes in here. The same people who put together processes are not the people who follow them. [laughs] You can see that in timekeeping, for instance. It's like, who are the worst offenders? Always, it's the people at the top. It's like, "Whatever." You make all these kinds of mistakes, but you really need to do it.

In the break room, we're going to post a little thing about anybody who didn't comply, and you don't get pizza on Friday, and all that nonsense. It's just an interesting corollary in that the people who are entrepreneurs, they see faults in the way things are done. When you are working for somebody else, you don't necessarily have the power to make those changes, but you're always looking at the way things unfold as an entrepreneur, whether you're working for somebody else or not, and you say, "This could be better." That's part A. Part B is, "I'm the one to fix it." That's a part of that personality profile. "This could be better, and I'm the one to fix it."

You want to run your own firm because you keep seeing these things, but you need your own firm to have the power to fix it, to put all these processes in place. It doesn't go further. You don't follow the processes, but you want the ability to just wholesale make any changes you want at the firm because of things that you see that aren't working the way you think they should be.

Blair Enns: It sounds like entrepreneurship is one big joke to you. All these things are tickling your funny bone about the way entrepreneurs think. Then you imagine dropping the entrepreneur into the job where there are systems and processes, and they have to follow them. What did they do then?

David C. Baker: They quit.

Blair Enns: [laughs]

David C. Baker: That's what I mean. They're unemployable because real true entrepreneurs can't follow process. When you're an employee, you got to follow process. That's one of the reasons you're unemployable.

Blair Enns: There's a relation to creativity there, at least the version of creativity that I subscribe to. That's this idea that creativity is the ability to see, which is the ability to think on your feet, and you can plot it out on a spectrum known as autonomy. Really creative people are highly autonomous. They issue systems, processes, and routine, and they want to reserve the right to think about it differently. What they really want to preserve is the freedom to adopt a new perspective, which means going and standing in a different place so you can look at the problem differently.

Systems and processes don't allow you to do that. They want you marching in a certain line and a certain rhythm, et cetera. The entrepreneur and the creative person really doesn't want to be hemmed in by the process. To your point, when they see inefficiencies in their business, they're pretty comfortable inventing processes for others.

David C. Baker: They don't mind just dumping a process seven days later and starting a new one. You see this happen in the EOS model where a visionary comes back to work Monday and says, "Hey, I've been thinking," and the integrator raises his hand or her hand and says, "Hey, you know this last process you brought me last Monday, we're still trying to implement it. Do you really want to change it right now?"

Blair Enns: That's where the integrator, speaking of my own business, needs to draw the line and say, "The last time you were thinking we're still wading through the carnage. How about you quit thinking and let's have the meeting that you agreed that we were going to have?"

David C. Baker: Can you say that in Colette's voice?

[laughter]

Blair Enns: I thought I just did.

David C. Baker: Oh, that's good.

Blair Enns: Anything else on your list of what makes entrepreneurs unemployable?

David C. Baker: Yes. I think it's so much a part of their identity. Somebody who is an employee attains a VP title, for instance, they've climbed the ranks. Say they're at a PR firm, there's seven levels. They've attained the VP level, and they're proud as can be for this. They can sit at that level and be fantastic contributors for a long time and be very satisfied, very happy. An entrepreneur looks at a VP title and just scoffs for themselves. I am laughing a lot here. I know. I don't know what's going on.

An entrepreneur, it's not enough to be CEO. You're also founder, CEO, President, you got to have three titles. It's like your whole identity is tied up in this. The joke is how do you know if someone's a pilot? It's like, "Don't worry about it. They'll tell you." The same thing is true with entrepreneurs. How do you know if somebody's an entrepreneur? Don't worry about it. It'll come out very quickly in the conversation. It's a part of their identity. I don't think it's bad. I think it's great.

I'm a builder. I'm somebody that makes something from nothing. Yes, made lots of mistakes. Maybe I'm not the best in the world, but this is mine. I made this. A lot of people helped me get here, and I appreciate them, but I made this. I'm the one responsible for this. That's part of the identity of the entrepreneur, and it's hard to maintain that when you're employed by somebody else. That's the last reason, I think.

Blair Enns: It's fun to poke fun at the characteristics of entrepreneurs. You and I are both entrepreneurs, and we serve entrepreneurs. I know I can speak for you when I say we both love entrepreneurs and love working with entrepreneurs. It's such a richer world than the opposite. I hope everybody's taking the jesting as it's intended. You have here three exceptions to this rule of where entrepreneurs are not unemployable. I think we've talked about them. Anything else you want to hit here before we talk about entrepreneurship?

David C. Baker: Yes. One is, we talked about this at the very beginning. If you are not an entrepreneur and you're running your firm, you're probably miserable. You correct that mistake, and you go work for somebody else. That's not a failure. That's actually a success to fix that. You go work for somebody else, you're happier, you sleep better at night, and so on. Another is when you sell your firm, because during the earnout, now, thankfully, earnouts are never five years. The longest they ever are three, and frequently, they're shorter than that, sometimes zero.

If there is an earnout associated with the purchase of your firm, then you are an employee, essentially. That's one of the factors that you think carefully about before you accept a particular deal, and while you craft that earnout really carefully. Then this one comes up every once in a while, this third exception, and I really love this one because if you look across the landscape of agencies these days, there are quite a few former principals who are working at these agencies but don't own them.

They decided that they weren't a great entrepreneur, but instead of going to work on the client side, they went to work for another principal. The reason I like this is because these people are often the very best employees you have because they understand what it's like to be in your role. They give you grace about how tough those decisions are. They take over little areas of a kingdom to relieve you of that. Everybody knows they're not out for your job. They tried that once. It didn't work.

They're like the former coach of a team that's now a position coach that could step in if you get sick or something like that. That's the third exception when you decide not to go work for the client, but go work for another entrepreneur in the same space.

Blair Enns: Yes, I haven't seen a lot of that, but as you're talking about it, I can see the appeal of hiring somebody who used to run a firm like yours. Seems like an obvious one. When you're talking about earnouts, I was thinking of many of the agency owners that I have known over the years who have sold their business and then just suffered during the earnout period because of that transition from an entrepreneur to an employee, just validating the fact that they were never meant to be an employee.

David C. Baker: Yes, absolutely.

Blair Enns: We're referencing a post that you wrote. It is called What Makes Entrepreneurs Unemployable. You don't use the word intrapreneur, but you talk a little bit about the entrepreneur who works for you. What do you want to say about that person?

David C. Baker: Yes, because many of these entrepreneurs that are listening to this podcast worked for somebody else, for another entrepreneur, and they discovered slowly that, "Oh, I'm not destined for this. I need to start my own firm." It was an ugly or a pretty breakup. Whatever. Those people who are now running their own firms they may have somebody on their team that is either a real entrepreneur and will start their own firm, or maybe they'll buy the firm from the entrepreneur they're working for, or maybe they think they're an entrepreneur and they're not.

What you shouldn't do is try to change somebody's mind, try to put golden handcuffs on. Whether the person is a real entrepreneur or not doesn't matter. It's do they think they are? If they think they are, then keep them as long as you can. Not with handcuffs, but just by involving them in leadership, having open books with them, teaching them everything you can. Then, when it's their time to leave, bless that and do it with as much goodwill as possible. Don't be evil about it.

I see too many principals who they look at somebody who's clearly an entrepreneur, and they don't know what to do about it. Don't try to change that person's mind. Now, assuming that this is a good-hearted person. If the person is evil, is going to take your clients and/or your employees, then bury them with extreme prejudice. Everything you can do up to the legal line. If everything is good, then make the best of it. Let them have fantastic memories of you because this is real. It's never been easier to start a firm.

After all, there are no moats. Like, "Tomorrow, I'm an entrepreneur," file a little form and hang out a shingle, and bam, I'm here. It's not like you got to get some certification. It happens a lot. Some of the people that started don't end up succeeding. That's fine. Then they sometimes come back. Some of those people, those boomerang employees, are also fantastic employees, especially if you've handled this process well. That's the one final note about having an entrepreneur who's actually working for you at the moment, how to handle that.

Blair Enns: As you're talking about that, I'm thinking of some of the agency principals I've known who are what I would consider to be the best leaders. I think all of them have been really magnanimous on that front when they've had entrepreneurs in their midst who wanted to go out on their own. Some of them even invested in their agencies, remained mentors to them for periods of time.

Your last point about some of these people come back, they find out, "Well, maybe I'm not an entrepreneur. Maybe I don't have the risk profile that I thought I had. Maybe it's more important to me at this stage in my life to have income security." They come back, and I think we've talked about boomerang employees like that before. You're a big fan of rehiring the good ones. I think a little bit of experience out there, putting themselves in your, the business owner's shoes for a while, and coming back, and understanding how difficult it is. That probably makes for a pretty good relationship and a great employee moving forward.

David C. Baker: Yes, for sure. Like you mentioned a minute ago, I too love entrepreneurs. I just love how intelligent and curious they are. I love how they can just make decisions quickly. That's what frustrated me when I was working for large clients, doing the same thing I'm doing for agencies. I was also working for large publicly traded companies, and I would just walk into the parking lot and think, "I've made no difference here. Nobody's going to make a decision." That's what I love about the clients I get to work with. They make decisions. They're not all correct, neither are the decisions that I make, but they make decisions. It's so gratifying to be part of a world where you can see that something could be better, and you make a decision to make it better. It's a beautiful thing.

Blair Enns: That's interesting. People who are used to selling to entrepreneurs, working with entrepreneurs, just even the sales cycle of selling to non-entrepreneurs. In my world, it would be selling to whole co-owned agencies. Oh, my God, the pace and the bureaucracy of it all. You know me, David, I lose interest after one sales call. If it doesn't close in one, it's like, "Yes."

David C. Baker: "It wasn't meant to be."

Blair Enns: Shouldn't be in the sales training business, maybe. Marcus, can take that out. Just kidding. You had a final thought on the relationship between entrepreneurs, generalists, and specialists. You want to leave a final parting comment on this?

David C. Baker: As if I haven't been rude enough to entrepreneurs. Entrepreneurs are generalists, and that's why they're really good at starting things, because they're good enough at doing lots of things, and then they bring people along, and so on. If your firm is successful, you're going to have to hire specialists who are better at every one of those things than you are. Now, you're a good manager that people want to work for.

If you find yourself looking at your team and you think you're better at most things than your people, or it could be that you just hired the wrong people, but that's not usually it. That just means you're a generalist with a very poor memory. Where you think, like, "Man, when I did that, it never took me that long." No, it's you just have a bad memory. That's one of the things that entrepreneurs need to realize is that they are generalists who know how to wrangle the efforts of a lot of different specialists and put beautiful things together for a great result for clients. That's what you are.

You know how to move all the pieces around. You're not one of those pieces, you're the person who moves those pieces around. You're the generalist, and you have to be okay with having lots of specialists who are much better at something than you are. You've got to be okay with that.

Blair Enns: That's great advice. Don't make the mistake of shaping your business like your generalist self.

David C. Baker: Right.

Blair Enns: The business should specialize, just as you have specialists in the firm. I like the idea that you're the one, the owner, you're the one moving the pieces around, and you're not one of the pieces. Very enlightening.

David C. Baker: Do I need to apologize for anything?

Blair Enns: No, I don't think so. I think the entrepreneurs listening know how much they're loved by the 2Bobs. Thank you for this, David.

David C. Baker: Thanks, Blair.

The Problem of Mechanistic Thinking

2Bobs with David C. Baker and Blair Enns

Download

David interviews Blair about his recent article in which he explores how our businesses are not simple machines that can be tuned (or killed) with specific wrenches, but they are complex adaptive organisms that we need to understand differently.

 

Links

"Your Business Is Not a Machine" by Blair Enns for winwitoutpitching.com

"Innofficiency in Your Agency" 2Bobs episode

"Grow or Die?" 2Bobs episode

Transcript

David Baker: Blair, this is going to be a little bit longer of an introduction. If you need to go get some coffee while I talk, feel free. I'm interviewing you today. You wouldn't know it by the level of prep I've had to do.

Blair Enns: I know.

David: You sent me this note. Says, "Hey, let's talk about this," two paragraphs. Then, "Oh, go look at this LinkedIn thing I did." I'm still waiting for-- Where are the notes that I'm-- Oh shit. I told my wife, it's like, "I'm going to have to prepare for this podcast."

Blair: I know. When I opened up the document before we started recording, I realized, "Oh, I didn't leave you with much," but there's a lot to talk about here. It's just not on the written page.

David: Famous last words. The problem of mechanistic thinking. I read through the stuff you sent me. I'm putting it together. I got this image in my head of a zombie apocalypse. I'm protecting my family, and there's this creature coming towards me. I go get my rifle, I start shooting, and nothing stops it. It just keeps coming at me, versus a vehicle coming at me, where I know I can just take out the tires or I can shoot the engine block, and the engine will stop. It's like one is a machine that operates with certain rules. The other is this complex adaptive structure. Whatever it is.

One of them is one, one's the other. We think that the business is a machine when it's actually more complex. How did I do so far?

Blair: Not bad.

David: Not bad. I know what that means in your world.

[laughter]

Blair: I know what I hate, and I don't hate it. You and I were talking about failing memory and just laughing about getting old. I've often said, I even say this in the preface to my latest book, that I've always hated the question, "What advice would you give to your younger self?" It's funny, in the last 2, 3 years, I'm 59, last 2, 3 years, I have just started to see all kinds of patterns that I guess take a few decades for you to notice.

Now that I've put onto paper and printed it in a whole bunch of books that I dislike that question, I now realize, "Oh yes, there are patterns that I see that would've been beneficial to understand earlier in life." It's like they've just started to reveal themselves to me, because maybe I'm just waking up, but one of them is this idea that mechanistic thinking is everywhere. This is a universal problem. We'll bring it back down to the domain of the business because that's the most relevant part.

I think, as I've said to you recently, I'm writing about whatever I want to write about, or the things that I'm interested in now. Talk about an old man. It gets all relevant to business in some small way, so I'm bending it to the business. My larger observation is that we are all so guilty of mechanistic thinking, of looking at the things in our lives and seeing them as machines. The smarter you are, the more you see yourself as a person who works through logic and inductive or deductive reasoning, the more you will be guilty of this.

I see it everywhere, and intelligence is not a buffer for this. Like I've already said, it seems to be the more intelligent people are, at least in certain domains, when they're in these linear logical domains of science, engineering, accounting, et cetera, there is this tendency to view things as machines. The big one is the business, but it's not just the business.

David: We would've never tried to tackle a topic like this in the early days of 2Bobs. There was an episode recently that was released about the big theory of everything, which was philosophical, like this one was too, and the response to that one was pretty off the charts, which I think gives us a little bit of encouragement that, okay, maybe we can go up a level and talk about some of this stuff.

I wonder if part of what you're thinking comes from the fact that most of these businesses that are listening start small, where they are a little bit more mechanistic, and then every person you add, every additional service offering, every market you address increases complexity, and we just encircle all of it and try to get our arms around this business. Even though there's a part of us subconsciously that knows, "Listen, this is more complicated than I think," we try to get our arms around it and say, "Okay, we've got to circle the troops here, and these are the ways we're going to manage the business."

You reference timekeeping. It's like the bigger we get, the more we're going to clamp down on timekeeping to make sure that we can manage this business as it gets more complex.

Blair: As you were setting that up, as you're talking through it, I'm thinking, "Oh, this is really interesting." I hadn't thought about it before. Your business is not a machine. It's a complex system. There's a subset of complex systems known as complex adaptive systems. It's a complex adaptive system. The adaptive part means it learns.

Machines are complicated, and complex systems are complex. What's the difference? They're both made up of numerous parts, but in a complicated system like a machine, there's a pretty straightforward relationship between the parts that is predictable and knowable. It's easy to deduce what's wrong, and probably more pertinently, it's easier to predict the outcomes of changes that you will make. That's just any machine, a computer, a clock.

It's interesting, if we go back in history, we'll get to this idea of viewing the universe as a machine. I didn't look up the timing of this. Back in the day, when the most complicated machine on the planet was a clock, people would view the universe as a large clock, and God was the clockmaker. Now the most complicated machine is a computer, so now our tendency is to view the universe like a large computer.

Now, in a complex system, you do have many different parts, but it's their relationship that's different. Here's the definition. Complex systems: made up of many interacting agents or elements whose relationships are dynamic, nonlinear, and emergent. Those words: dynamic, non-linear, and emergent. Your business is a complex adaptive system. It's made up of these individual agents that have agency, and those agents are people. You cannot predict what is going to arise from these people interacting. Where in a machine, you can predict how the components are going to interact.

Your people bump up against each other. You have culture issues. When I say issues, I mean good and bad. You have the dynamics of culture. You have the dynamics of feelings. People learn from each other in ways you can't predict, et cetera. I think, to your point, as soon as you add one person, you're adding another independent agent. You add a whole bunch of people, you have all of these independent agents. The idea that you can predict what will arise from this is ludicrous.

David: The difference between an adaptive and a non-adaptive system is that the adaptive system is learning. The only adaptive element of our businesses is the fact that humans are involved, right?

Blair: I'd have to think more deeply about that, but it might be right. The classic example is the weather is a complex system, but it's not an adaptive system. The weather doesn't learn. Your business learns. The economy learns. The planet learns. Your body, various components of your body, your immune system, your endocrine system, your digestive system, how you metabolize food, that all learns and adapts.

I think I made the point in the article that I wrote on this that seeing your body as a machine instead of a complex system and a complex adaptive system is one of the reasons why it's so hard for so many people to lose weight, because it's not as easy as calories in, calories out. You start restricting your caloric intake, and your body has ways of adapting to that. Immediately, your basal metabolic rate, the energy you burn when you're not exercising, it just drops. There are all these things that happen in response to it.

It occurs to me that there are so many people out there who struggle with losing weight, and they feel so shitty about themselves because they think this is a straightforward problem. It's not a straightforward problem. As soon as you understand that, maybe you can start to think about it differently. That's just the body. The same thing happens in your business. The same thing happens in the economy.

In fact, remember you and I had dinner with Rory Sutherland earlier this year, and he recommended to me Roger L. Martin's book, When More Is Not Better: Overcoming America's Obsession with Economic Efficiency. This word "efficiency" that applies to machines. What Roger L. Martin is saying is economies are not machines. They're complex adaptive systems.

If you recall the podcasts we've done on one of my pet topics, "The Innoficiency Problem," where I say innovation and efficiency are mutually opposable goals, you cannot increase one without decreasing the other. Many people just reject that idea because they have a mechanistic view of their business. They think you can just tweak some things to optimize for efficiency without some unintended consequences. As the point of that principle states, one of the consequences of increased efficiency is decreased innovation.

David: I think I am overly in love with the Industrial Revolution. It's partly because I'm really drawn to mechanistic thinking.

Blair: You're drawn to machines. You certainly own enough of them.

David: Yes. Taught motorcycle racing. It's like, "Okay, these are the laws of physics that are going to control whether you live or die." It's pretty straightforward. It's pretty black and white. There's a little bit of stuff at the edge we don't understand. Then you go back, and you think about the Model T. I think it was 33 hours it took to assemble a car, and then it went down to 31 minutes or something like that. That strikes me as a pretty simple equation. Whoever thought about all that, that engineer, that's amazing.

Then we take that thinking to AI, we have not done an episode on AI and I'm not even close to wanting to do one, but it enters the argument here because people are thinking, "Okay, AI," they're taking some thoughts about AI, but they're approaching it very mechanistically, I guess that might be the way to say it. They're saying, "Okay, it's going to put 20% of the people out of work." The universe just laughs at that bullshit. It's like, "No, we're not making that much change that fast." It's not that easy. It's just like we don't quite understand this. I don't know exactly what's going to happen, but the idea that 20% of people are going to be unemployed, that's just mechanistic thinking to me.

Blair: That's exactly right. That episode we did was called Grow or Die. It touched on AI. The reason I'm thinking about this is because I'm thinking a lot as we all are, but I'm thinking a lot about AI and AGI, what is intelligence, what is creativity, what is the domain of humans or people, and what is the domain of machines, of computers. I did a talk on that called A Theory of Everything, that we referenced. I wrote that post, Grow or Die.

This is part of a series of me writing about AI indirectly. I'm trying to understand, and then if I put together a cohesive argument, I will publish it. I'm not writing with the intent of creating a post. I'm writing to understand. I've already written a few thousand words. If it turns into a post, it'll be the longest post I've ever written. It really is on the future of human creativity. It is about why AI will not lead to AGI.

At the heart of that mistake that some of the richest, most successful people in the world are making is this mechanistic thinking, which is not about intelligence; it's about the belief that underpins their intelligence, because all of our logic is built on some foundation of belief. David Foster Wallace said, "Everybody worships, even those who claim they don't." Everybody worships. Everybody has a fundamental belief, a fundamental worldview, a fundamental theory of how everything works. All of these smart engineer types who are way smarter and way more successful than me, this is me, nobody, saying they're getting this wrong.

David: You realize how that sounds, right? [laughs]

Blair: I feel like I'm taking crazy pills. They're getting this wrong because they have a mechanistic view of the universe. In this mechanistic view of the universe, intelligence arises out of biology, and the consciousness question is basically a throwaway. The universe it's not a machine. It's absolutely a complex adaptive system. It's more appropriate to think of the universe as a living organism. It may actually be a living organism. I don't know if it is or if it isn't, but it's the right way to think about it. We've gone through that with the planet. We used to have a mechanistic view of the planet. Now we see the planet as a complex adaptive system.

If we can hit all the political flashpoint issues. One of the reasons why there's such a divisive, not even arguments, people aren't even arguing anymore, the subject of climate change, A, the stakes are super high, so it's existential potentially, but the reason we can't have a conversation on it is people who are creating these models and saying, "This is what's going to happen to the planet," it doesn't matter how much logic you have built into your system, it doesn't matter how smart these people are, these models, they're not worthless, but they're not right, because we don't understand the planet's ability to adapt.

This isn't me saying climate change isn't an issue; we shouldn't be doing something about it, we shouldn't be worried about it. I think we should be doing something, we should be worried about it, and we should be talking about it, but these prophecies of doom do not help. That's like, "Okay, we can model this out, this is what's going to happen." The planet is so freaking complex and so adaptive we cannot predict what's going to happen.

David: You gave an example of the difference in predictability and complexity that I was really drawn to thinking about, particularly because something really bad happened just about 40 minutes from me a week ago. The Accurate Energetic Systems, AES, it's where they make TNT and all kinds of explosive things. Something went wrong and an entire building disappeared, including 15 people that they could only basically identify using the rapid two-hour DNA testing.

The ATF is researching it, and they'll come up with some answer. It probably won't be the right answer, but if they can find the real answer of what happened, it will be a very specific mechanistic thing, like, "Something did this, then it caused this, then this happened, and bam, then there was no turning back." In your example, you compare that kind of thing, like somebody dismantling a bomb. It's very dangerous, but it has rules. There are laws.

Compare that with a gifted therapist untangling someone's past, and I couldn't help but think about the explosion that happens sometimes. This overlaps with AI. It's like the idea that I'm going to tell all my problems to AI, and it's going to counsel me out of this. It's like, "Do you realize how silly--" The best therapist in the world barely understand people. That's an example of a complex adaptive system.

Now, you're running a firm with 40 of those people in it, you are serving 30 clients, and you're serving a world of 200 and some countries and billions of people. Now, you might need to be rethinking everything every day and realizing that you don't have your arms around everything. Be humble about how much you can control and how to explain everything. It's just do your best, follow basic rules, but don't pretend that this is something that you can completely understand to get your arms around.

Blair: As you're bringing it back to the business, it's not an anti-efficiency episode. It's not an anti-efficiency rant. My abstract for the email that went out for this post was, "If efficiency is not your guiding principle, then what is?" A lot of firms still selling time have utilization targets. They have people tracking time. The time sheets are lies, but we measure them anyway. We have utilization targets, and we're trying to do all these things to push past this hidden barrier that, for some reason, we can't seem to get past this barrier of being more efficient.

We keep trying. As you push some mass toward the speed of light, it requires an exponential increase in energy. It's like all of this energy, all of this focus, all of this management angst around getting a few more points of billable efficiency. This is a result of mechanistic thinking. The solution isn't to abandon the pursuit of efficiency and be completely chaotic. Let's just not worship at the altar of efficiency. Let's appreciate that this is greater than the sum of its parts. The parts evolve, learn, change, and as a result, the mechanism it's more fluid. You're better off thinking of your business as a living system than you are thinking of it as a machine.

If you're an accountant, if you're an engineer, where you're working in a world that is more mechanistic, you are going to bring that mechanistic view to your business. Now, a lot of these creative firms they're owned by creative people. For creative people, culture's really important because they know creativity is something that arises out of the right culture, so they're really tuned into culture. They're more inclined to think of their business as a complex adaptive system. I suspect some of them feel like, "Yes, but that's just the creative in me. The grownups around me are telling me I need to be pursuing billable efficiency targets and doing these other things."

I would say to those people, "I think you should trust your intuition more." Don't discount these things. You don't have enough efficiencies; you're out of business. I think for a lot of people listening to this, their intuition around how the business should operate and the pursuit of efficiencies that makes them a little bit uncomfortable, I think their intuition is probably more correct, and they should pay more attention to it.

David: That's an interesting point, and maybe we should end here, but you think, somebody comes to the field from a creative field, they tend to look at something as a complex adaptive system, but they look around, and they realize, "Oh, I'm not making as much money as I should. I'll join this group, and I'll ask other people what I should do," then there's three suggestions, and they glom onto one or two of them, assuming that this will fix their world. It's like, "No." That fixed the other person's world. It may not fix your world.

That's interesting point, trust your instincts more, but balance that with looking at results, too. It's like you said, all time sheets lie. All tax returns lie, too, but the solution is not to omit tax returns. No. You still look at that stuff, but if you don't believe that there are complex adaptive systems, then try to tame a 61-acre farm like I have. It's a losing battle all the time.

That doesn't mean I stop. It just means I realize my role in it, I need to keep thinking, listening, and being curious, and this business it's fun, but it's also not depressing to think about it. It's like, "Oh wow, there's so much more to learn here. This is really interesting." I finally understand my business now, and then seven months later, oh, it's a different business. I don't understand it now.

Blair: Keep your agency weird.

David: [laughs]

Blair: Move it to Austin or Portland.

David: Yes. Thanks, Blair.

Blair: Thanks, David.

Oppositio Singularis: The Positioner's Folly

David sees too many marketing agencies trying to attract new business by staking claims of specialness on things for which nobody is claiming the opposite, instead of building their positioning on uniquely defined expertise.

Transcript

Blair Enns: David, oppositio singularis, the positioner's folly. Hoc disputamus. [chuckles] I've been studying Latin for five minutes.

[laughter]

We're holding you back a year. We're holding you back for another five minutes. [laughs] Hold me back 59 years.

David Baker: I'm just frankly tired of all this unjust criticism of people. Maybe it's just you who say that--

Blair: No, it's not.

David: Who say the titles, like come up with for my podcast episodes aren't as good as yours. It's like, okay, I'm fixing that. Oppositio singularis. Do you play the Latin card?

Blair: Yes. Oppositio singularis. The positioner's folly.

David: You like that. It has a good ring to it, doesn't it? You like it. Just honestly, tell me. Do you like it?

Blair: I love it. I don't hate this. I know what I hate, and I don't hate it.

David: [laughs] I know what that means. That means it sucks. That's also like you saying, well, that wasn't your best work, David. [chuckles]

Blair: That was the critique I was told as a young account exec in advertising. That's what you say to creative people when they share the concepts with you. I know what I hate, and I don't hate this.

[laughter]

Oh, gosh. Okay, what does it mean? Oppositio singularis?

David: Singularis, yes. What it means is that you need to quit claiming all the things for which nobody else is claiming the opposite.

Blair: Hold on. Say that again.

David: Say, if you were going to create a dating profile, and you said, I'll open the door for you, and I'll pay at least half the bill, and I'll listen to you at dinner. Okay, well, those are all good things. Check, check, check, yes, but is anybody claiming the opposite? Does this set you apart from anybody? Is nobody saying, well, you know what? I'll tell you the truth. I don't open doors anymore. I just discovered that it's extra work, and I want to go through first. If she can't stop from hitting her head on the door, maybe I don't want to. If nobody's claiming the opposite, this is not very powerful as a positioning tool. If you read through the positioning statements on agency websites, they are full of this shit that basically is making big claims that nobody is claiming the opposite of. I don't understand it. I don't know how we got there. It's just nonsense.

Blair: It reminds me of the Twitter profiles I used to see when I was on Twitter. Husband, father, patriot, Christian. I always wanted to write whatever the opposite of all of that was. Of course, I never had the guts to because you'd see it everywhere. That tells me nothing about you.

David: Pagan, divorced four times.

[laughter]

Gave my kids up for adoption. Well, what does say something about you probably is the order you put those things in, but we'll leave that aside. This just came to mind recently because we were doing an event in Atlanta. Jonathan and I were. We called it the mini-TBR, and we had, I think, 16 firms there. We asked people to send ahead of time a brief two-paragraph note about what set them apart in the marketplace. They knew they were walking into a trap because they've read my stuff before.

Then we got to the event, and I say, hey, Kate, can you expand on this just a little bit? Here are the kinds of things that people said, knowing that I'm in the room. They said, now, I know everyone says that their strategy is great, but ours really is, or our team is really great, the best around. I know everybody else says the same thing, but we really mean it, or we've got a process, and actually, it's a proven one, a wink-wink. We know it's not really proven, but this is what you just say.

We use it with every client. Because of that, it's like, now, other people have processes, but this one is different. How did we get to this point where the people who are in charge of positioning products and services cannot do it for themselves? It just blows my mind. These things are important, right? Here's the big distinction I would make. Yes, okay. Your clients are going to notice if you don't listen. They're going to notice if you're not strategic. They're going to notice if you don't have a good team. They're not going to notice that until they're already a client. These are the things that are not disprovable or provable until they become a client. They're the reason that your clients stay with you, not the reason they come to you in the first place.

Maybe make that a part of your story, but it's not on the front window of your storefront like this sets you apart. It just isn't. I just thought, okay, where's this is happening? What struck me is that if nobody is claiming the opposite, like if nobody's saying, yes, yes, we used to do that strategy thing. It just really slowed, deadbeat dad. I hate sports, devil worshiper.

[laughter]

Blair: In the absence of that, your claim is meaningless.

David: Yes. I don't know. Maybe this is a four-minute episode this time because there's not too much more to say about it, but I just want to tell people listening, make a distinction between why clients stay with you and why they come to you in the first place. If your website is largely interchangeable with everybody else's, it's just not going to be very powerful for you.

Blair: Is it so much that if somebody's not taking the opposite side of this argument, then it's not a valid argument if we think of your positioning as an argument? Is it that or is it that? I think you make a point here somewhere in your notes. Take the value proposition that you're leading with, the reason why you should hire us, and then call around to your competitors and ask them if they make the same value proposition.

David: Yes, right. In my mind, I have this vision of a story unfolding where you get way close to getting hired by this client, and what the client really loves about your story is that you are strategic, you've got great people, you've got a process, all that stuff. Then somebody raises their hand on the new-to-be client side and says, hey, you know what, right before we pull the plug on our existing agency and we hire this new one, can we just check around? Let's ask this agency's competitors, hey, do you have a process? Are your people good? Do you do strategy at the beginning of every engagement? They do that, and everybody's going to say they do. Do you think this is going to set you apart? It's like, no.

Blair: I remember the first time I heard a leader in an organization I was working at, say, the assets of this company go down the elevator at 5 PM every day. First of all, 5 PM was a lie. It was much later than that. I thought, oh, that's a really nice thing to say. It is a nice thing to say, and it's a nice thing to believe. I think in any knowledge-based business, it's a true statement. Your point is, just because it's true, it doesn't mean it's different.

David: It's not differentiating. Yes.

Blair: That's the table stakes in every organization. A great team, lots of talent, codified processes, the ability to think strategically about the work that you're going to do for your clients. All of these things are valuable. They're important. To your point, you'll get fired for not having them, but you're not going to get hired because you have them.

David: Yes, that's a very good way to state it. It's almost like back to the dating profile thing. I can walk, and I can talk. It's like, oh, good to know. What else do I need to know? Yes. I was thinking about this. I had some time to kill. I was in a waiting room of a repair shop a couple weeks ago.

Blair: In Lebanon?

David: In Lebanon, right? Not that Lebanon, but the Lebanon just north of Nashville. I thought, okay, I'm just going to pretend like I need to hire an agency. I'm going to do a Google search. I went into private mode, so it didn't inherit any of the earlier stuff I'd done. I found the firm that I should hire. That's a joke. This is what they said about themselves.

Blair: Can I ask you, what did you search for? Do you remember the search phrase?

David: Marketing firm near me.

Blair: Did you find a firm called marketing near me?

David: No. Like the dentist near me? No, I didn't. I just thought marketing firm near me.

Blair: I met the owner of a business last week. I was speaking at a conference. The name of their business was Best, and then business type, then the state. I thought, oh my God, talk about naming your business for SEO.

David: Like in the old days of the phone book, it's like AAA towing. It sorts to the top. This firm, I didn't even write down the name. I didn't want to get them in trouble, but here's what they said about themselves what makes them unique. We work for brands that refuse to settle. Okay, is there anybody out there? [laughs] We are industry leading. It's like nobody's saying we're third in the industry, but the first two are really, they're expensive. Don't bother with them.

We're award winning. Our proprietary framework for paid media guides. Every single ad dollar. World-class digital partners who deliver real growth. Performance first. Senior operators trusted by brands from startup to category leaders. It's like this means nothing, people. Here's an interesting way to think about this if you flip this around. If you said, okay, tell me some things that are true about you that are not dismissive of your competitors where they are actually better than you are.

I had a sales call this morning with a prospective client. I said, all right, there's probably two things you could do. One is you could hire me to do this for you. The other is maybe you need to work with a coach. I'm just not a good coach. I don't mean that dismissively. I mean it honestly because I don't want to get in an arrangement with a client who thinks I am somebody that I'm not. Can you say if this is important, then you probably should hire, and then you actually give somebody the name of a competitor. That would be powerful positioning, rather than this.

What this is, is you're opening your arms up really wide and say, hey, hire me. You're not helping them be choosy. You're just giving them all the things they want to see. If nobody's claiming the opposite, then you need to stop putting these at the top of the list. Have I said that before?

Blair: Yes. That's where I was going with this. Have you said this before? [laughs] I was recently thinking there's two things I never want to write about or talk about again. One is positioning, and I felt that way for a long time. Because what I want to say to the listener about positioning is you're not being honest with yourself about the claims you're making, and you're not doing the hard work, making the difficult decision and doing the hard work. That's all I want to say about positioning.

Timesheets, you're basing the operations of your business on a lie there. That's all there is to say on those two things. Now do whatever you want. I don't care. That's how I feel about it, and pay my bill. How much are you going to charge him to tell him those two things over and over again? If you're listening, and if you found value in that statement, it's Blair at winwithoutpitching.com. Just send me some money.

David: Venmo me some money. What's the call to action here? I want you to go to your website, and I want you to look at the primary claims, and I want you to see if anybody is claiming the opposite. If they aren't, then I want you to have a better story in your positioning. All this stuff, it doesn't mean anything. I don't even think you need to say it. Your clients, if they buy your positioning arguments, they're going to come to you, and they're going to discover that all these things are true of you, and that's why they're going to stay with you, but those are not the same things that you use to attract people in the first place because, like you said, they're sort of the cost of doing business. They're table stakes, right? We talk about these as if they're so unique. Come to my restaurant. It's like, we have dishes. We have utensils. You should come to our restaurant.

Blair: One of Charlie Munger's mental models was invert, invert, invert, always invert. It's a good practice to take the words that you're using and invert them, and just try on what the opposite of the meaning is. It's not a mathematical proof, so it's not 100% effective that way, but if nobody's claiming the opposite, then it's probably a little hint there.

David: Oppositio singularis, my friend.

Blair: Oh, okay. There we go. Oppositio singularity. David, if you were going to write the epitaph on the tombstone of the independent marketing agency business, what would it say?

David: [chuckles] The marketing field, the most undifferentiated firms in the world, helping you differentiate your company and message. You really should have hired us. That'll be on their tombstone.

Blair: Oh my God. This could have been a spoof episode, but people, it is not. Thank you, David.

David: Thank you, Blair.

Dealing With the Ghosting Problem

2Bobs with David C. Baker and Blair Enns

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Are prospects not responding to your follow-up after you submit a proposal? Blair goes through what might be causing their lack of response and then provides three tools to address the ghosting problem.

Links

“Ghosted. Now What?” by Blair Enns for winwithoutpitching.com

“The Power of a Metaphor” 2Bobs episode

Blair’s annual 100 Day Sprint post on LinkedIn

Transcript

David C. Baker: “Dealing with the ghosting problem.” Do you think this is worse now than it has been in the past? By ghosting, you mean like in a sales conversation, the other side has hung up, and you've been talking, and you don't realize it for a while. Is this worse than it used to be?

Blair Enns: Being ghosted by clients? Yes, I think so. I haven't measured it. I think anecdotally, it's measured. How did I pull off this lie? No. What's the question?

David: Do not take this out, Marcus. Is the ghosting problem worse now than it has been in the past? Anecdotally, it seems much worse. I keep hearing people talking about it. Well, they keep saying sales pipelines are moving more slowly. Is that another phrase for ghosting?

Blair: If your pipeline is moving slower, it's likely that you are increasingly being ghosted by your clients. I don't measure these things. I'm not a scientist. Anecdotally, absolutely. There seems to be a theme over the last couple of years. I think it's tied to any period of economic or geopolitical uncertainty, primarily economic. It's worse today, but it is an ever-present problem.

David: Well, you've talked about it for a long time. It's obviously been an issue that may or may not be worse right now, but it's been something that I've heard you talk about for quite some time. Maybe all the things that we're living through right now make it a little bit worse than normal. What we're talking about is, well, first, do you have a ghosting issue? Then, if you do, what do you do to solve that? How do you want to start with this?

Blair: Define it in the sales context. From my point of view, it's from the proposal onward. If you write a proposal for somebody and they say, "Yes, this is great, we'll get back to you," and they don't get back to you, and you might follow up multiple times, you don't hear a reply from them. That's what I mean when I'm talking about the ghosting problem in sales.

David: Yes. The ghosting clock doesn't start until you send a proposal, and you don't send a proposal until you think somebody wants one. One of the things I found most interesting, reading through your notes, was this notion that some people asking for a proposal from you, they don't really want one, or maybe they're not asking for one. Maybe you suggest you need to write a proposal, and they say yes because it doesn't cost them anything. It's not like that was new to me, but it just hit me in a new way.

Blair: Yes. I see two causes for the ghosting problem, and one is a problem of our time. It has increased because it's a period of economic and geopolitical, and trade uncertainty along lots of different dimensions. There's just a lot of uncertainty in the world. When it comes to big decisions, people are less likely to make a big decision. They're less likely to take risk. Matt Dixon, who's one of the co-authors of the great book The Challenger Sale, he has a relatively new book called The JOLT Effect.

In that book, he notes that between 40% and 60% of all qualified opportunities are lost not to competitors but to no decision. Within that, my estimation is at least half of those no-decisions, you're being ghosted. He calls the cause FOMU, fear of messing up. It's a prevalent problem. Again, two causes. One is a timely problem, period of economic uncertainty. I think the bigger problem that I want to pull on a little bit more, it's the ever-present one.

I've talked about it forever as the most common, most expensive mistake in any sale of expertise. That is the salesperson misinterpreting interest for intent, and then they crank up the pitching machine. They write a proposal that the client was never going to buy, a proposal they never should have written.

David: Man, just psychologically, what's happening in the salesperson's head where they are just looking for signals where sometimes they don't exist? What's happening there?

Blair: Even that word signal. In sales, there's this term buying signals. Your radar is up, you're looking for this buying signal, and you hear, "Mm, that's interesting, tell me more," or some version of that. You interpret any signal as a buying signal. I think that idea of buying signals does us a disservice. I think we need to be more nuanced about it. We need to recognize that people go through these stages in the buying process. Some of these signals, like, "That's interesting, tell me more," that is a clear signal of somebody who is an early-stage buyer as opposed to a late-stage buyer. We need to begin to make the distinction between the two and treat the two differently. We need to quit writing proposals for somebody who's merely interested.

David: Do you remember that episode we recorded a while back where you said sales is like, and then you filled in the blank? Your big example was skiing, I think, and one of the others was dating. I cannot help but think about dating in this context, seeing signals where they're not there. This is going to be new information to you. At night, I like to go into Craigslist. This is not going to end well. I like to go into Craigslist and look at the Missed Connections thing because that is full of people misinterpreting signals.

Blair: What is this, missed connections?

David: Don't act like you don't know what it is. [laughs]

Blair: I've been on Craigslist four times in my life and zero times in the last decade.

David: It's like, "Hey, to the girl at such and such a bar, I think you kept looking at me."

Blair: Now I'm going on Craigslist.

David: "If that's true, just so I know it's you, tell me what hat I was wearing."

Blair: Oh my God. Then, of course, somebody like you, you're busy replying to these people, aren't you?

David: [laughter] I'm leading them all along. No, I just cannot get this out of my head. It's like mixed signals. I think such and such a person is interested in me. It's like, oh, the truth is they just don't think about you at all. Mixed signals in a sales, it's like you're so desperate to sell something that you're seeing things that aren't there. If I could just reinterpret this and say, yes, ghosting is real, but it's not as real as you think it is, because you're starting the ghosting clock where it shouldn't even be started. They aren't even at that stage yet.

Blair: You proposed to somebody who wasn't even contemplating dating you, and you submitted a marriage proposal.

David: Meanwhile, they're off happily married to somebody else, and you keep wondering where they are.

Blair: They keep calling me. [laughter] Meanwhile, your boss is saying, "Hey, what's the status of that thing?" Looking at the CRM, at the pipeline report, just asking what's the status of that thing causes you to reach out again, which causes the person to go, "Oh my God, they called again. This person will not leave me alone."

David: We need a reverse CRM, people that you need to ignore.

Blair: Yes.

David: This is very helpful for me. Ghosting is worse because of the environment. Ghosting is not as bad as you think it is because you're starting the ghosting clock a little bit too early. If ghosting is real, then what do you do about it? You've got three tools here to address it.

Blair: Yes. One we've talked about at least once before. It's known as the magic email. I write about this, the first post I write in September every year because I see the 100-day sprint is starting the Tuesday after Labor Day. It's roughly 100 business days left in the calendar. I resend this post about the magic email. You've got all these deals that go dark. They tend to go really dark, or more of them go dark in the summer. Part of that is everybody's on vacation. You come back, it's the day after Labor Day. Everybody is focused on getting things done.

You look at all your ghosted deals, and you send them this email that was talked to me 25 years ago now as a voicemail script, and change it at your peril. It goes like this. The subject is usually closing the loop, and the short email reads like this. "I haven't heard back from you on this, so I'm going to assume you've gone in a different direction or your priorities have changed. Feel free to reach out if we can be of assistance in the future." That removes the emotional weight from the relationship that you've imbued by checking in, checking in, checking in.

I wrote that post recently, and somebody messaged me on LinkedIn and said-- I'll read you the two notes they sent me two days in a row. "Hey, Larry, just sent my first two magic emails to two of my ghostiest potential clients. They both responded positively within about 85 seconds. That email is cray, cray." I think this guy is like 60. "That email is cray, cray. Thank you." Then a day later, he returned with this update. "Final update on my magic emails, 8 for 8, 100% response rate. They are now all in the warm-to-hot lead category. Thanks again."

David: I've seen you post versions of this, well, the exact same email, but post notes like this on LinkedIn. People inevitably pop into the comments on that post on LinkedIn and say, "Hey, it worked." Part of this is just the tone of it, right? That's what I like about it. It's like, we're okay if this doesn't work, but we're here if you need us.

Blair: Yes, I get it. I'm reading between the lines. You've hired our competitor. You're no longer doing this. No problem. It's just business. You know where to find me. That's it. You're stripping all the emotions out of it. You are highly likely to get a response, and some of those responses are likely to be positive. "No, no, don't go.' Just the act of retreating will cause some people to step forward. That's the first of three tools you use to address the ghosting problem.

Any chance I get to put that back out into the world, it was taught to me by an old mentor of mine, Pauline O'Malley, not calling her old. I'm just saying it was many years ago. I forget where she got it from. I don't know the origin. It's often online attributed to me, but it's not mine, but it's been so powerful. That's the tool. Start there. See what you can revive from the dead. See what you can bring back to life here.

David: Then, do you mind if I go get some coffee while you walk through this part? You're going to talk about a CRM.

Blair: I'm going to get into the nitty-gritty of opportunity stages of CRM. We're going to lose half the audience right here, including my co-host.

David: You're going to talk about what we do in my Excel file, my CRM.

Blair: I have two other tools. It's really 2A and 2B. 2A is, think about measuring the problem. Let's conflate the two things here, being ghosted and losing to no decision, because being ghosted is losing to no decision, or you don't know what the decision is. For starters, let's measure the losing to no decision. Let's just see if we can't quantify the larger problem of how many of these proposals you're writing are you losing to fear of messing up or fear of poor qualifying as opposed to losing somebody else.

How you would measure it is in a typical CRM, almost every CRM, there are two closed stages, closed one and closed lost. I add a third, it's called closed slipped. What I mean by slipped is they were an intent late-stage buyer. They had the intent to hire somebody like me, not me specifically, but somebody like me. Then they slipped back to interested or even uninterested. They didn't buy from a competitor. They didn't buy from us. They didn't buy from anybody. I call that closed slipped.

That's the second tool that I would have you use. Then just see if you can't quantify it. You're going to come up with a number of somewhere around 50% of all of the proposals you write don't get acted upon. They didn't hire you. They didn't hire a competitor.

David: Could we rename this proposals anonymous instead of the closed slipped, proposals anonymous? You're still guessing here. You're not going to get actual information in some cases, or how do you decide what happened?

Blair: Well, when you send the closing the loop email, like I said, there's a high likelihood of getting a response. I don't know what that likelihood is. My guess is it's in the neighborhood of 80%, maybe even higher. You don't get a response to your proposal. They don't hire you, or they don't give you any information back. By sending that email, you should get most of the information you're looking for.

You'll hear, "Yes, sorry, we're no longer doing this," or, "No, no, it's still a possibility. We want to have a conversation," or, "We hired your largest competitor." If they hired your competitor, you marked it as closed lost. If they've decided to no longer do this, you mark it as closed slipped. If there's still an open opportunity, there's still an open opportunity, and you're still in the sale.

David: Then the third thing you talk about here is qualify for opportunity stage. This one is not as clear to me, so walk us through. The first one was use the magic email. Second is make sure you're measuring this accurately because otherwise, you're probably magnifying the problem bigger than it really is. Then this third is qualify for opportunity stage.

Blair: Yes. I mean open opportunity stages. If it's still open, make the distinction between an early-stage opportunity and a late-stage opportunity. If I cracked open the CRM of most of the listeners here, I would find open opportunity stages that are named by salesperson activity, got a meeting, delivered a proposal, as two common examples. If I showed you my CRM, you would see that the open opportunity stages are named interested, intent, and verbal commit. There are three open stages.

Interested, somebody's, "Mm, that's interesting, tell me more." Somebody who's interested is gathering information. They're assessing the pros and cons. They're overweighting the positives or the pros. We've talked about this before. Early-stage buyers overweight the positive implications of change, and they underweight the negative ones. They're actively looking for the emotional stimulus to help them form the intent to take action, which would then move them to a late stage opportunity, which we call intent.

What we're trying to do is separate the interested from the intent. I don't want to get too far into the weeds on this, but we do this by trying to uncover timeframes. We ask timeframe questions in a qualifying conversation for two reasons. Number one, resource allocation reasons. We want to determine when would we need to get started? Do we have the personnel? Et cetera. The non-obvious reason we ask timeframe questions is this goal here of separating the interested from the intent. Now you referenced that episode we did on metaphors.

One of the metaphors that I used was buying is like changing, therefore selling is like change management. That's where this idea comes from. We go through the stages of buying the same way we go through the stages of change. Now, when we're making a change in our lives, when we're what I'm calling interested, we're gathering information, and we're trying to form the intent to take action. As soon as we decide we're going to do this, the next thing we do is we look forward in time, and we anchor our change in behavior to a date, either a starting point or an endpoint.

In our role as salesperson, when we're trying to qualify for opportunity stage and determine whether this person is interested or they've formed intent, we want to pull on timeframe. When do you need to get started and why? When do you need to have a solution in place and why? My favorite timeframe question has nothing to do with timeframe. Here's my favorite timeframe question. Is this on the wish list or is this on the to-do list? I'm trying to get a sense of interested opportunity stage buyers.

You can think of them as tire kickers. They're not all tire kickers, but there is this propensity to stay at the interested stage for a very long period of time, and interest does not readily translate into intent. That's the mistake, the common mistake among salespeople. They hear interest, and they assume intent. What I'm talking about here, this third tool qualifying for opportunity stage is determining whether this is an early-stage buyer, somebody who's interested, or somebody who's formed the intent to take action.

David: If you have somebody who's not the decision maker, they can play around. I want you to tell me if this is true. I'm just making a statement to see if this is true. A non-decision maker can play around with interest because it helps their career, they have more to talk about, they can inform other people. If they aren't the decision maker, they can't even play with intent. It's like you have to be a decision maker to play with intent. The other thing I wanted to ask you is, if somebody is moving to the intent stage, they're going to hire somebody. It may not be you, but they're going to hire somebody to help them with this.

Blair: Yes. That's where you should be writing a proposal. There are things you can do to try to move somebody from interest to intent, sell them a diagnostic, do an envisioning workshop exercise, whether it's paid or unpaid. There's a saying in sales, no vision, no decision. Somebody who's interested is assessing the pros and cons, but they don't have this vision of future success that's coalesced in their mind that they're intent on moving to. Your job here is likely to help coalesce some vision of a beautiful future.

If you just bear this in mind, you're in a qualifying conversation with somebody, and there's lots of uncertainty, there's lots of talk about possibilities. "We might do this, could do this. I really like what so-and-so is doing. I like what you guys did for our competitor." There's a lot of nebulous talk about what the future might look like. That's a pretty good indication of somebody who's interested and has not formed the intent to take action. Somebody who is intent, they're committed, they've anchored their change in behavior to a point in time, either start date or an end date.

They're allocating resources in the form of people and budgets. Conversely, to somebody at the interested stage, they're now overweighting the negatives or the potential costs of failure of taking action. An interested early-stage prospect is quite prone to emotional arousal. I refer to as an intent nervous late-stage prospect is focused on fear of making a mistake.

David: If somebody just started listening to these podcasts and they want to go deeper, is the four conversations a place to get more about this?

Blair: Well, I'm glad you asked, David.

David: You go right into your sales voice.

Blair: Yes. Obviously, I blog about it extensively, too, but the latest book covers this. It's funny, not in a lot, a lot of detail. Now I'm thinking about it. I do talk about it in the book. I do make the distinction. There have been other times in my career when I've made the distinction more deeply.

David: If you're telling us to not write proposals to the interested, one obvious upside of that is that we're not wasting time. Another is that we're not getting our hopes up and thinking something's going to happen when the likelihood is much lower than we think. Are there other reasons to stay away from writing proposals to only the interested rather than people that have moved into the intent stage?

Blair: Well, I think just the math of it all is the big one. Let's go back to Matt Dixon's math. 40% to 60% of all qualified opportunities are lost not to competitors but to no decision. Let's take the middle of that number. Let's say 50% of your deals get lost to no decision. My estimate is 50% of those, so that is 25% of the proposals that you write should never have been written. I'm going to do math on the fly here, which is horrible, but let's say you've got a closing ratio of 40%. Here's my horrible math.

David: Buckle up, people. Blair's doing math.

Blair: 25% of those proposals, if you just don't write those proposals, your closing ratio goes to 50%.

David: I'm not going to check your math there, but [laughter] I'm not going to get dragged down with you on this one.

Blair: The audience holds their breath.

David: All I'm going to say is that your ratios are better at the end.

Blair: Yes, let's agree that the numbers get better.

David: I could see a firm that's really tightly positioned that has moved slightly further along the productization path, where sending proposals is not as painful. I could see how the advice we're giving wouldn't apply equally to every firm. Still, the whole thing of sending out a proposal seems to indicate there's a neediness, unless the other party receiving it really wants to get it. It's just interesting to me.

Blair: Yes, but even the productization, I know you run events at your own venue or your son's brewery, but you have booked other venues. Recall when you reach out to this fairly commodified offering, renting space for meetings, you reach out to two or three hotels. You want to have a conversation with somebody, you get a proposal emailed to you before anybody's actually ever gotten on the phone with you and just had a conversation with you.

That's an industry that is cranking out proposals that should never be written. I don't know how much time they're wasting on it. I don't know how much business they're losing because of it. Maybe the math works in that business. In a business of expertise, where most of these businesses are customized to a certain extent, it just doesn't make sense in these businesses. Be more discerning about the proposals you write.

David: One last question for me. I've been picturing a non-principal salesperson doing this who needs to please somebody and wants to show progress, and so on. I don't think that's really accurate because it seems to me like principals who are the sales, and there might be a partnership, and one of them is doing more selling than another. Even if you're the principal, if you're the owner, you need to listen to this stuff too. It's not just if you're a salesperson that just needs your hand slapped.

Blair: I have been in situations advising the biz dev person at a creative firm and getting them to get more discerning. Then witnessed their bosses, the owner of the firm, exert pressure on them to move faster, to push harder on a deal where it does not make sense to do so. It is not exclusively the problem of the salesperson. My friend, Scott Edinger, has written a great book on this issue.

It's called The Growth Leader. He basically says, "Sales is a leadership issue." He talks about all of the insidious ways that the people at the top of the organization destroy the business strategy by sometimes seemingly innocuous conversations that they have with salespeople that cause them to do things that are not in the best interest of everybody involved.

David: Yes. Wow. All right. This was a lot more interesting than I anticipated.

Blair: I'm glad I could brighten your day with some sales talk, David, your favorite subject.

David: Thank you, Blair.

Blair: Thanks, David.

Defending the Castle When the Moats Are Drained

2Bobs with David C. Baker and Blair Enns

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One characteristic of our industry is disappearing moats. After a brief overview of the fourteen moats we've lost from 1965 to today, we'll look at what turf we really have left to defend and what the future will look like if we get this right. It'll be very different, and you'd better get ahead of it.

Transcript

Blair Enns: David, by the time our listeners hear this, you and I will have spent three, I hope, lovely days together in New Orleans, where we are attending and speaking at the same conference, but we're both hanging out for the duration. Did we have a great time?

David C. Baker: We did.

Blair: [chuckles]

David: I am casting that positive thing into the world.

Blair: You are manifesting your future.

David: [chuckles] In my life, I have never manifested anything. What are you turning me into?

Blair: [laughs]

David: We're going to have fun, aren't we?

Blair: Oh, I'm so looking forward to this.

David: Yes, a lot of good people there, and good food, and there might be a Sazerac or two.

Blair: Yes. The organization is SoDA, Society of Digital Agencies. You and I have done a lot of work with SoDA and SoDA member firms. We think very highly of them and the person who runs the organization. I haven't been anywhere in months. This is early September, and I don't travel in the summer. I'm really looking forward to this. The reason I bring that up is, at this conference, this is the talk you'll be giving, or a version of it, and it's called Defending the Castle When the Moats Are Drained. If a goat is the greatest of all time, is a moat the messiest of all time?

David: [laughs] This is not starting out well.

Blair: [laughs]

David: This is slightly different than what I'm going to talk about, but it's basically the same idea. I presented, I think, seven or eight ideas to Tom at SoDA and said, "You pick one," and he liked this one. I have never spent more time in my life doing research for a talk. I had so much fun doing this. I knew what a moat was, I knew moats had disappeared, but I hadn't really thought about chronologically what moats have disappeared in our field.

My first entrance to the field I was a typesetter on a Varityper 4560. I was typing foreign languages right to left, Syriac, Aramaic, Hebrew. Nobody even knows what those are anymore. Then you would run it through a processor, and then you would wax the RC paper. Then you think about we used to make money on separations for photographs, we used to make money on printing, go on and on and on. I should probably talk about some specific ones, but this is such an unprotected field, isn't it?

Blair: It is. Are you writing a post on this eventually?

David: Eventually, yes.

Blair: Yes, because you've got this list you've chronicled, the disappearing moats for the creative professions over the years. Do you want to pick out a few?

David: Yes, like desktop publishing, or the democratization of the creative programs with Adobe changed this world. It gave access to all kinds of people. I remember 30-some years ago, I was helping a client move from Tulsa to Nashville. It was a post-production firm. I was in charge of helping them set up everything in their new facility. I helped them lease the facility and get the equipment and everything. It was about a $1.6 million post room.

That was the time when Avid Systems were starting to rise up. You could get an Avid then for $300,000. Now you get them for $40,000. That would do everything offline and online, including some of the color grading. The audio stuff, it could do. It just blew all of our minds. Then you think about far-shoring and near-shoring. Recently, some of the statements that our non-friends at Meta and OpenAI are saying about this field, they're basically saying, "The field isn't necessary. Within a few years, they'll be gone." You read all of this stuff and you think, "Oh, shit, maybe I should have made different life choices here." [laughs]

Blair: I'm with you. Zuckerberg and Altman saying, basically, imagine that their businesses are going to replace 95% of the marketing field. Yes, good luck, boys. Have at it.

David: It's not going to happen. Yes. Think about crowdsourcing creative and consulting firms dripping down and taking work from us, and freelancers, and fractional everywhere, and now online influencers that are a part of the media mix, the downturns, the whole remote stuff, people starting up from the bottom thinking that, hey, if I just start selling HubSpot to my customers, this is pretty easy to do. There's been this onslaught over and over and over again.

I'll tell you the biggest moat that I just want to mention this one before we move on, is the geographic moat. When I owned my own firm, all of my clients were local. There were four firms. I was not the best firm in town at the time. If you were a local business, you were going to hire me, or Tim, or Kevin, or one of the others. Then that moat disappeared with the internet largely.

It was good news and bad news. The good news was now I could work with any client anywhere. I didn't have to just have a local client, but these local clients could work with any agency they wanted. That's probably the best illustration of the moat that just completely changed this world. Then you think about AI. I'm not panicky about AI. I'm actually pretty excited about it. You do wonder, "What's the future going to look like with even more moats disappearing and we're standing naked in front of our clients without much protection, essentially?"

Blair: Yes, it makes you wonder why we would get into this business.

David: [chuckles] Yes, that's what I mean by life choices. It's like, "Oh, is this what we want to do?" It just goes on and on. I don't think we're in an existential crisis, but I do think that more and more of the things that we do to make money, we're not going to be doing those things in the near future. What does that mean for us? What does our business world look like when we're not making money from the same things that we were before?

Blair: You modeled out here various types of business risks, and you cite them as a forcing function for change. Do you want to speak to that at all?

David: Yes. I'm actually right near the end of my certification for the National Association of Corporate Directors. It's a really involved, expensive process. I just finished going through all the 15 modules. I'm doing practice exams now, and then I have the proctored seven-hour exam to come up. One of the slides and one of the presentations was pretty fascinating to me. This is directed primarily at publicly traded firms. They said, "These are the 10 significant risks that publicly traded firms are facing." Of those 10, we as an industry are facing six of those. An economic slowdown or uncertainty, business model disruptions, that's a pretty big one, geopolitical volatility.

Blair: Check.

David: Pace of technology disruption.

Blair: Check.

David: Industry consolidation, yes, that's a big one. Supply chain disruptions. Not the way they're thinking of it, but I think of supply chain as really the near and the far-shoring, labor rather than materials. If all of these massive trillion-dollar companies are facing risks that they haven't faced like this before, it makes sense that us little people at the bottom might be under the same sort of risk profile and how that's changing. It just really struck me.

Blair: We have this history of disappearing moats, and then we have at least six enterprise risks. I think everybody feels like we are in uncertain times. The geopolitical thing is really big. There are wars and potential wars breaking out on multiple fronts. There's trade uncertainty. There are a lot of people unsure of when to spend, moving away from CapEx or anything like that. I know on the sales side, our clients face, probably just anecdotally, the highest level of uncertainty among their clients ever. There are just still so many deals just stuck in a pipeline or lost to no decision. It feels like we are at the cusp of a new reality. Do you want to just paint the picture of what this new reality looks like?

David: I want to think in broad historical arcs. I think it's useful sometimes to back up from where we are in this moment, we're reading the news cycles every day, and think about the bigger picture. I want to take us back to 50 years ago. Almost exactly 50 years ago, something big changed. Before that, the media was aligned with agencies. They were arm and arm. The media and agencies were aligned.

Blair: Agencies were agents of the media.

David: Yes, exactly. Clients in those early days, in the late '60s and early '70s, they wanted to buy the media directly to bypass agencies and to not pay that 15% commission. That's when the phrase recognized agencies came up. Media outlets said, "We will only give these commissions to recognized agencies." They said that because they were trying to exclude in-house agencies from getting those commissions. That's what they meant by recognized agencies, is not client departments. That went away in 1975. The media then said, "Just kidding, we're going to sell directly to clients."

That changed a lot of things. Now we have these three parties that have had these different alignments over these last five decades, the media, clients, and us. Then something else happened when clients decided that they needed to have in-house agencies. That was sparked about 10, 12 years later when the whole brand standards movement came up. They needed some sort of a method to protect the brand image, everything about the brand. They couldn't trust that process to multiple agencies they worked with, so they had in-house departments.

Now fast forward to today, and 85% of Fortune 5000 firms have in-house departments. Where's the modern alignment? It was the media and agencies against clients. Now that has changed entirely. Not overnight, it's been a slow process, but now I think we need to view ourselves as being aligned against media and with clients. The clients are not the enemy. I've been saying this for 15 years, it's like, "The client is not the enemy." You cannot view the in-house department as your enemy. They're your friends, you need to work with them. The whole mantra is, "We're going to work with you until you don't need us anymore. You're our friend."

I think we need to be aligned with clients, and we need to understand that they need to be our friends. These clients, more than anything, what do they need more than anything right now is they need data. They rely on us to help them with that, and the media is over here basically saying, more starkly than it ever has, it's like, "You don't really need agencies. They're going away." It's a new day. I think we need to wake up.

Blair: I'm thinking of so many things. When you say the client is not the enemy, you're talking about in-house marketing departments being the client.

David: Right.

Blair: You're not talking about procurement not being the enemy, because everybody knows that-- [chuckles]

David: Oh, they're still the enemy. Yes. [laughs]

Blair: I'm just bracing myself. I know all my procurement friends are going to email me. Have at it, boys and girls. Have at it.

David: [laughs]

Blair: I love poking the procurement bear. This is the new reality. We need to think of ourselves as aligned with the client. We need to recognize we're in a battle against the media. Let's not fight the in-house department. They're there for a very good reason. We need to recognize our role in this relationship. Unpack our role in this new reality.

David: Here we are with the new reality of who we're aligned with, while more and more motes are being drained, and the enemy can just run across those dry beds now and attack our castles. What's our role? What are we supposed to be doing now given that there are fewer things for us to make money on, and we really desperately need this new alignment with clients?

I see our role in four parts. One is creativity. I just think that may be the very last mote that's drained, and hopefully, it never will be. Creativity. I don't just mean creativity as something we sell, I mean the people that provide that. We've talked about this before. Not everybody who feeds the best, best creative is in this category, but some people who do would never work for the client. We have access to those people. Creativity is one.

Blair: That's largely an issue of culture because these large clients with in-house marketing departments, as much as they try to create a culture in the marketing department, the culture is really set from the top down, the larger organization. It is a more efficiency-seeking, innovation-averse culture, and creative people, they need freedom. They need a culture of innovation and freedom, freedom to fail, freedom to think, et cetera.

We on the agency side, it's hard to see that mote going away. Personally, I don't think AI will ever solve for this. It will iterate existing things, but, as we've talked about recently, there are parts of human ingenuity, intelligence, and creativity that require the free will of the creator to think for reasons unknown to them, get up one day, and just think about the problem entirely differently.

David: Yes.

Blair: That might be the last mote.

David: It might be.

Blair: That's creativity. After that?

David: Next is data analysis. This is where people are going to like. What did he just say? Data analysis?

Blair: [laughs]

David: If you're just a branding firm or something, and you don't even think about data, or data analysis, or collecting data, you're a generation behind here. I just don't think there are going to be any thriving firms that don't include some heavy data collection from the work that they're doing, data collection that feeds their own unique IP, data collection that enables them to compare the work they're doing for clients and help set expectations about the effectiveness of their work. This is the area that I think we probably are most behind in, is data analysis, data collection. First is creativity and then data analysis. Do you want to say something about the data side?

Blair: I think that's an accurate assessment. You're going to have to make an ROI case. I'm hearing Rory Sutherland's voice in my head. It's like, "You can't immediately make an ROI case for much of marketing, and some of it, you can never make an ROI case for it. You just have to go with it, understanding that businesses are not entirely mechanistic. They're more like complex adaptive systems. They're more like living organisms." I think I would sound a note of caution around data analysis. I think there are times in the marketing world, especially when we're thinking about the creative side of it, where data is just overstated.

When the business starts to be run by the spreadsheet people, I think that's the beginning of the decline of innovation and creativity. I do acknowledge it's important, and some things can be measured. Those things that can be measured and make sense for you to measure, they should be measured so that you can make the appropriate case where it needs to be made. I also think, just as often, the person on the agency side should be making the argument against the mechanistic view of the business end of marketing, and should be arguing against data. What do you think of that?

David: I do agree with that. As you were talking, I was just thinking about the recent change that Nike made. It seems to me like just do it, which, by the way, was prompted by somebody on death row-- I don't know if you've ever read that story, but he was just getting ready to die, and they said, "Do you have any last words? He said, "Let's do it." The guy at the agency that worked for Nike remembered that and said, "Why don't we use that phrase and change it to just do it?" Anyway, that strikes me as a supremely creative phrase. The new one strikes me as being driven by data. [chuckles]

Blair: I didn't know they changed it. What's the new Nike slogan?

David: The new one is why just do it with a question mark, or something like that, because they're afraid of offending people who don't want to lose in a competitive environment. To me, I just rolled my eyes when I read it.

Blair: Why do it at all? Give me a T-shirt that says that.

David: [chuckles] This is why we are not running the account for Nike.

Blair: Yes.

David: The first is creativity, second is data analysis, and third is complexity taming. This seems like a really important role that we are capable of doing. We are living in a disaggregated world where there are so many different levers to pull to make things happen and so many different tools to use. I think clients are just overwhelmed. It takes somebody like the people like you and my best friends at these agencies who can put all this stuff together and help them make sense of an increasingly complex world.

Complexity tamers is how I'm phrasing that. That's the third one. I think that's one of the new roles we have, which is clearly consulting-oriented. It's helping them understand how to weave all this stuff together and not lose their minds in terms of marketing effectiveness.

Blair: As you were talking about, I'm thinking of financial planners. We do a lot of work in that space. I'm often saying to them that the value you create isn't financial. One of the common value drivers is just organizing complexity, making complex things simple. You could extrapolate, in a complex world, I think most advisors create value or should be looking to create value by organizing, taming complexity.

David: One thing that scares me here, though-- I'd be curious to hear your perspective on this. An example of taming complexity was really the digital transformation movement, which was led-- You never thought we would lead it, but we led lots of that digital transformation, helping people understand, reimagining things in a digital world. There was a lot of money to be made for a few years, but people still selling digital transformation, it's like that train has left the station a little bit.

The new train seems to be, "Let's help our clients integrate AI." I think there's going to be a lot of money to be made in the short term, but this is not something I would climb on permanently. I think it's a temporary thing, and AI is just going to be built into everything, just like digital is at some point. The idea that you're going to help clients understand AI, I think it just has a very short life to it. I'm nervous about people taking this complexity-taming notion and thinking it applies to AI and that they can do that for 10 years. I don't think that'll be true.

Blair: I'm with you on that. Can I just summarize these key elements of our new role in this new world?

David: Yes.

Blair: Our new modes are creativity. That's true today. As soon as I say this, it'll be over, but it should be true for the foreseeable future. Data analysis, and you say we're not very good at that, we need to get better at it. Taming complexity. What's your last one? Objective, courageous pattern matches. Want to talk about that?

David: Yes. What I really mean by that is just really understanding the scientific part of marketing. In my research for this talk, I came across this stat that just blew me away. 24% of us have any formal marketing training at all. The people who do have formal marketing training, it was a four-day course in the graduate program at Harvard, and now you lead your LinkedIn profile with that. This is really missing. We just keep riding this train without much formal education. It's not as if formal education will solve everything, but I'm just alarmed at how much we're just following our gut instincts when we're trying to understand marketing.

Blair: If you came out of the marketing track in business school, your first job was probably brand manager at P&G or the equivalent on the client side. The clients always hired for marketing education. Not the client, but a lot of Fortune 500 clients have always hired for a marketing education. It's not something we really do very well on the agency side.

David: We really don't, yes. I think it's a hole. I really think it's a hole. I think it's one of the reasons we lack some credibility there.

Blair: Yes. The people who did have any formal training, we were so enamored with them. We gave them brand new titles. We called them planners, and we gave them all kinds of special powers and responsibilities.

David: Yes. The whole account planning movement did not start because we wanted to be more strategic. It started late '40s because we were tired of account managers making shit up.

Blair: [chuckles]

David: We said, "We've got to have account planners." It was purely a reflexive defensive move in the industry, which we're pretty good at.

Blair: How do we think about this new role through your two-room model of a strategy room and an execution room?

David: I've talked a lot about this, and it's in the Business of Expertise book. The notion is that you've got this smaller room. It's the only room that has an opening to the outside. It's the strategy room, research and insights. It's where the client has to come first. Then, if they want, they can go through the connecting door into the larger execution room or implementation room and buy all of that stuff from you. You close that door off to the outside so that the only people who have access to buying your implementation are also getting your strategy first. That's the whole notion of the two-room model.

The problem is that we have been making most of our money from the implementation room. Every mote that gets drained, it changes the shape and the size of that implementation room. Now it's like, "Oh, I guess we're not going to make money from that anymore. What do we do next?" Slowly, over time, strategy/research/insights should be, anyway, becoming a larger and larger percentage of what we make money on.

Against that background, I've just got some suggestions about what does our new world look like? I don't have all the answers. When you and I face this, as we think about facing a new future, what's the framework? What's the set of principles that we have to keep in mind so that we stay on track and don't lose our heads as the enemies keep crawling across these dry motes now?

Blair: I'll just point out that that second execution room, that's where you got paid for your people to do things with their hands, whether that's typing. It wasn't always typing initially. It's mostly typing now. You probably charged for that in units of time, hours, days, FDEs. Now AI is your enemy because it's allowing everybody to move a lot quicker. This lucrative room where you worked slow, relatively speaking, and got paid well to work slow, that's disappearing.

David: Yes, exactly.

Blair: You said you've got a set of 10 principles, what you call 10 responses. You start with nimbleness. Talk to us about this and the others.

David: I can go through these pretty quickly. Some of them are pretty obvious, but the first is craft nimbleness. I'm talking here about financial nimbleness. Don't be signing any long leases. Don't enter any long contracts for anything. Crave your ability to react quickly as the pace of change increases. Crave nimbleness.

Blair: What I'm hearing you say, correct me if I'm wrong, is these are uncertain times. Everything's changing. You need a lot of dry powder. You don't want to be locked into anything because the future is so uncertain.

David: Right. Don't be locked into the same staff, the same facility, the same service offering design. Yes, be ready. Second is trust. I just think in a world where AI is going to make us take a second look at everything, like who created this, then trust, transparency, honesty is going to be so critical. I think you're going to have to present yourself differently publicly on your website. You're going to have to disclose so many more things if you want to remain trustworthy.

You could see how even recently, even today, people are still making decisions between firms based on the quality of the ideas, and the cost, and the nimbleness. Pretty soon, trust is going to come in there. It may not be ever measured mathematically, but people are going to start choosing firms because they trust what's happening there. That's the second one.

Blair: Does that mean you should be doing more or fewer AI-generated LinkedIn posts and comments?

[laughter]

David: If that's a real question, then you are no longer my partner.

[laughter]

Blair: Crave nimbleness, trust is the new lighthouse. What's next?

David: Size doesn't matter. You've got to quit believing that you need to keep getting bigger and bigger and bigger in growth. Tied to that is the next point. When are we going to drop this insane focus on recurring revenue arrangements with clients as if nothing else is good? In a world where things are moving quickly and nimbleness is really critical, you've got to do what's in your client's best interest.

I was talking about this yesterday with a group of people, and somebody was objecting to this. I said, "Give me specific examples in your personal life of all your recurring relationships." They listed mobile phone and cable, streaming. "Which ones of those do you like?" They don't like any of them. We've got to get around this idea that somehow recurring revenue relationships are the only way to move forward. I think we need to be open to way more fits and starts with clients, big and small projects, which means we're going to have to be more nimble as an agency, too, if we're going to manage the whole overhead equation.

Blair: I get that. I think there's a movement towards subscription. I see the appeal on the selling side, but as somebody who is drowning in subscriptions on the subscriber side, I have a hard time reconciling those two things. It's really hard to be nimble and adapt to the client when you're locked in in a services arrangement and a fixed recurring fee.

David: When a client feels locked in.

Blair: Right, that's the most important thing. The client feels locked in, feels like you are not nimble and the arrangement doesn't allow them to be nimble.

David: How many of you feel like the switch Adobe made 25 years ago to monthly costs was in your best interest?

Blair: It still pisses me off every time I log into Creative Cloud.

David: Yes. We sound like old men yelling at Cloud, too.

Blair: [chuckles]

David: Fifth is be a better collaborator and stick to your strengths. There's going to be less and less room for pretending you're good at something. Build great relationships with sister firms that you can work with informally here and there, and bring people in. Not quite the whole Hollywood model, but there's not going to be room in this new world for you to pretend that you know what you're doing. Be a better collaborator and stick to your strengths. Next is-- This is just more a warning, but I think small to mid-sized generalist firms are doomed. It's like you folks, you're just screwed.

Blair: Meanwhile, there are going to be many small and mid-sized firms that succeed. They are not going to be generalist firms.

David: Right, they're not going to be generalist firms. That's a big warning. Six. Seven, disintermediate yourself before others do. Our industry has this history of scrambling when one of the motes is drained. Let's get ahead of this a little bit. Let's imagine what AI will replace, for instance, and let's go ahead and fix that for ourselves.

Let's lower prices. Let's say, "No, let's just give this to someone--" whatever the answer is. I don't know what the answers are for all of these things. Disintermediate yourself. Be open to formal collaboration. I think this is going to drive some consolidation in the marketplace where you bring smaller firms together. Nine, trust your innate humanity and your ability to connect.

Blair: Same more.

David: This is tied to trust a little bit, but I think in the presence of more and more scientific tools that pretend to understand humans and how to reach them, we need to keep relying on our gut. We need to pretend that the users we're trying to reach are just like us. Even though we might be in slightly different places, socioeconomically, racially, whatever, educationally, politically, we need to trust our innate humanity and be human to human. This is the opposite of the data. I think we need to understand all the data, but then we need to wrap it in humanity. I don't see enough of that happening.

Somebody will write an article as a part of their marketing strategy, and they're paying all kinds of attention to SEO tools or some persona instead of imagining a specific person who thinks just like you and has the same fears that you do. We cannot lose that. We cannot lose the fact that it is a human on this side of it, and it's a human on the other side of it. I think that that's getting obscured a little bit.

Blair: There's a whole bunch of bullshit AI-driven messages in between. Sorry to keep coming back to that.

David: Man, I've just been imitated by spam every day, too. It's just disgusting.

Blair: Have you sent any of these spammers to our spoof episode?

David: [laughs]

Blair: Spam hack your way to growth?

David: I should say, "Please listen to this and then get back to me."

Blair: I've done this a few times.

David: Oh, have you?

Blair: Yes. A couple of people have replied, "Yes, will do," and I never hear from them again.

David: Of course. Anyway, it's about biggest creative challenges. I don't have any big answers. I just want people to have a framework about how to think about how to face this new future where the moats keep getting drained and we keep examining our life choices.

Blair: All walls fall, all moats drain. We're in a period now where there's so much change in the moats and the geopolitical and other environments. It is a time to rethink pretty much everything, to be nimble. I'm not going to repeat your 10 responses to the current situation, but it was a great conversation. I'm looking forward to the speech. Thank you, David.

David: Thank you, Blair.

The Four Priorities of Winning New Business

2Bobs with David C. Baker and Blair Enns

Download

What do we do in those situations where we have to pitch? Blair simplifies some important principles from his books into a sequence of four precepts we can follow when the sales process doesn’t progress like we’d hoped.

Links

“The Only New Business Indicator That Matters” 2Bobs episode

“Assume an Advantaged Player” 2Bobs episode

“Slapping Down Your Childlike Glee” 2Bobs episode

Transcript

David C. Baker: All right, today, Blair, I'm interviewing you. Topic is the four priorities of winning new business. I know the first one, there's four like the title suggests, but the first one is to win without pitching. Before we dive into that, I wonder if you could just define that a little bit because I hear a lot of people, especially on LinkedIn, there's too many people on LinkedIn, I don't know if you've noticed that, but they're all saying we never pitch. It's like, I know you pitch. What do you mean by you don't pitch? You mean you don't give away free ideas? What do you mean by pitching here? What's pitching and what isn't?

Blair Enns: In this context, pitching is giving your ideas away for free in the sale as effectively solving the client's problem as proof of your ability to solve the problem.

David: Sort of like we do in this podcast, right?

Blair: Yes.

David: Give away our thoughts for free. [laughs]

Blair: We should talk about that because I know you get the same messages that I do too. I can't believe this is free. I think, yes, I can't believe it is either. We've talked about it for years. People should be paying for this, shouldn't they?

David: To take this back to your point, you're not applying it specifically to a specific client. That would cross the line. That would be pitching.

Blair: This is some language that I got from you, which is, basically, you put your expertise out there in the world through content marketing, thought leadership, whatever you want to call it, but the minute somebody asks you to apply that thinking to their business, that's the minute when you start to charge. That's what's happening in a pitch.

A client is dangling this carrot, which is their budget in front of you and saying, now just show me what you're going to do. Show me what the creative is, come up with a strategy, et cetera, various forms of pitching free ideas. That's what I mean by pitch. A pitch, you think of it as a client-directed, arms-length selection process where you are told or it is implied that it's in your best interest for you to solve the problem as proof of your ability to solve the problem and a means of winning the business.

David: Okay, so you could be in a competitive situation without giving away your free ideas, and that would not violate this win without pitching. That's the first priority. You're saying there's four priorities of winning new business and the first one is try to do it without pitching, without giving away free ideas. Is that fair?

Blair: That's fair. Then it begs the question, well, how do you do that? The answer to that question has taken an entire business and series of books to answer, so we're not going to do it justice. These four priorities are covered in The Win Without Pitching Manifesto published in 2010. I guess the short answer to that question is follow the 12 proclamations of the manifesto.

David: Okay, so if they don't have that book, it'd be a good idea to buy it. You're saying this is your ideal, is the first thing is that you win without pitching. If you can't do that, well, then you go to the second one, right? That's why this one is first. Your whole business, you, Blair's whole business, is structured around this idea that we should win without having to give away our ideas?

Blair: Yes, but also the steps that follow, because you can't always. I understand that that's a nice ideal to strive towards, and it's easier for some individuals and some businesses than it is for others. The larger your firm, the larger your clients, the closer you are to New York City, the harder it is to win without pitching.

David: [chuckles] Do you have any idea, I don't know if you have numbers or if you've seen them, how many new business presentations involve giving away free ideas that are specific to that client?

Blair: Well, I think back in the day when I used to do it, it was all of them. Today, it would be somewhat less than all of them. I think there are many firms out there that, whether they've been exposed to my material or not, they no longer feel like they have to solve the problem as proof of their ability to solve the problem, but I have no idea what that number would be.

David: When I'm on the phone with a prospect, I'm a normal human tempted to give answers away too quickly instead of asking questions, stuff you talk about a lot. Sometimes I'll peel off some narrow little thing and go really, really deep and apply it to their business without getting paid just to illustrate the depth of what it might look like to work together. Is that wrong?

Blair: No, I don't think so every once in a while. I haven't met a rule that I'm not fond of breaking from time to time, or at least bending. [laughs]

David: Oh, I know you. Boy, oh my God, is that an understatement.

Blair: I'm fond of saying where I live, laws are more like guidelines. No, I do it too. When I'm operating at my best and I do it, I'm fully conscious of the fact that I'm doing it. I will say to the client in the call, "Listen, I'm going to violate some of my own advice, and I'm going to cross the line that separates talking about helping you versus helping you. I'm going to tell you what you should do in this situation."

I'll give the free piece of advice. It's almost always met with a thank you, with an understanding of, okay, I understand I'm not paying you. I appreciate the advice. Even I don't remember to do that all the time. Sometimes I'm just a little bit too lazy or too comfortable in a sale. I do not follow my own methodology rigorously enough. I wake up and I realize, what conversation is this? Is this a qualifying or a value conversation? What step? Am I really giving away free advice? I'm guilty of this too. Sometimes it makes perfect sense to do it, and sometimes it's just a horrendous mistake.

David: It seems like one distinction that's important there is whether the client asked for it or whether you volunteered it. It just seems to not be as evil and yucky if I volunteer it and it's not because they asked it of me.

Blair: Yes. We talk about the flip, which is the name for the moment in time when you move, in the mind of the client, from a vendor to the expert. I make this generalization. If you're not seen as the expert, then you're seen as just another vendor. You can tell early in the conversation whether or not this flip has happened, how they view you. Do they see themselves as the prize to be won or do they see you as the prize to be won?

When the flip hasn't happened, whether we're conscious of this or not, we're looking to make it happen. One of the ways that we might look to make it happen is to impart a piece of wisdom. Sometimes that piece of wisdom, very often that piece of wisdom comes in the form of advice beginning to solve the client's problem. There's a completely logical reason why we would do this.

David: Right. The first is to win without pitching. You say here that this is the ideal, but it's not always possible. We're picturing a client that you otherwise would really like to have and the other things sort of fit. If you can't just possibly win the business without pitching free ideas, what's the next step? What's the second priority?

Blair: The second step is to derail the pitch. When I think of the best new business people that I've ever worked with in the agency space, it's not their ability to command a room. It's not the size of their Rolodex, how many contacts they have on LinkedIn, the size of their network. It's not their ability to build and present a deck. It is their ability to derail a pitch. That's where the client comes to you typically self-diagnosed and self-prescribed and sometimes highly specified. "I know what the problem is. I know what the solution is. Here's what the solution needs to contain. Here's a list of the things that need to be true. I just need you to give me a price."

Now, it's not always that detailed where the client is that far down the road without an informed third-party opinion such as yours, but it's common that that's a situation. In that situation, client comes to you with a request for X or even an RFP for X. This is what I'm fond of saying. The best business development people can take an RFP for a tactical project and close outside of that RFP on a strategic engagement.

Again, it comes from this idea that the client is self-diagnosed and self-prescribed. They think they know what the problem is. They think they know what the solution is. They come to the agency, a vendor in this case, says, "I want to see your price on X." The salesperson looks and goes, "Okay, sure. First, do you mind if I ask you a few questions?" Then they get to the heart of, is the problem really X? Is the solution really Y?

This is what the book The Challenger Sale is all about, adding value in the sale itself by challenging the client's ideas of what the problem is, what the solution might be. I would add the path to procuring that solution. You get the client to rethink these things. Then you offer them an alternative next step. "Why don't we just take this small step together? Okay, now let's take another step." Before you know it, you're hired for the big project that is not the same as the project that they came to you and three or four others with.

David: The other three or four others are developing their ideas.

Blair: They're left pitching to the old brief, right?

David: This is the same client that would come to you later and say, "Hey, listen, we've got some needs here. Can you help me think through this RFP we're developing?" They bring you in before they develop the next RFP because you've shown a light on the old one and it wasn't all that good.

Blair: Yes, that's ideal.

David: One of the episodes we did that I remember the most was called The Only New Business Indicator That Matters. If you're listening, you haven't heard that, it was in October of 2019. That refers to this second priority, right?

Blair: Did you affect the buying process? To what extent did you affect the buying process? If you do what I just modeled where you get the client to put their problem and the solution aside, willingly rethink both those things, and then take a small alternative next step with you, that is significantly affecting the buying process. That is essentially, in as few words as possible, that's how you derail the pitch.

There are other tools that you can use there. An alternative next step is typically some form of a diagnostic, where they pay you a little bit of money to go in and validate assumptions or challenge their assumptions. Let's find out what's really going on here. Why don't you hire us to do X? X can be any audit or first-party research, second-party research. It can be anything. It's just a small paid step where you're going to uncover some information, get the lay of the land, validate or invalidate assumptions.

David: Does that project need to be profitable?

Blair: It should be profitable, but it doesn't need to be expensive. I'm doing something in a month where we're going deep into this. One of the first mistakes that you make when you start to formalize your diagnostics is you fall in love with them. You sell them too often, but you also make the delivery part too big.

Let's say you think, "I'm going to put a nice big price on this. It's not going to take me very much time," and you put a price on it, "I'll just pick $20,000," pick a number, don't read anything into that. You think, "$20,000 is good pay for the amount of work that we're going to do. It's going to be really profitable," and then you overdeliver on it. You overdeliver because of a lack of confidence, and you feel like you're making too much money for the amount of time you put into it.

You start to generate this ridiculously long report, and your profitability erodes with every word. That's just a part of the journey that you have to get through. Then you come out on the other side. Initially, the idea is they'll be profitable. Then you discover they're not profitable. You think of them as a loss later, and then you really should get past that and learn to rein in the report writing and make them profitable again.

David: Right. Back to the first step. The ideal is to win some work without pitching free ideas. That's not always possible. You still want this client. The second priority is to derail the pitch or, to use another phrase that you've used, to somehow influence the buying process. If somebody comes to me and says, "Oh, I really want this work, but it's an RFP and it violates," then the first question I'm always going to ask him is, "Do you think you can influence the buying process just borrowing that from you?" It's like their eyes open. It's like, "Mm." They know way more clearly, almost instantly, whether they should or they shouldn't. That's the second priority. Derail the pitch if you can. If that doesn't work, then what do you do? What's the third priority?

Blair: Third priority is to try to gain the inside track. In my most recent book, The Four Conversations: A New Model for Selling Expertise, I refer to this as the advantaged player, where the principle in the book is assume an advantaged player.

In every competitive situation, you should assume that there is a party that has the inside track, that has the advantage. They either have inside information, they have a connection to a senior decision maker, or sometimes it's gone as far as the outcome is predetermined, and you are just invited to the table to fulfill a requirement to get three bids. It's not always the case that there's always an advantaged player, but it is valuable for you to assume that there was always an advantaged player.

If you assume this, then the next logical question is, "Is it me? Are we the advantaged player?" Because if we're not, then it's somebody else. What we're trying to do here and gain the inside track is, again, we're trying to affect the buying process. We're trying to extract behavioral concessions that wouldn't be as significant necessarily as derailing the pitch as those that would cause us to derail the pitch. We're trying to extract behavioral concessions that prove that the client sees us as meaningfully different. They see us as different. Therefore, they're willing to treat us different. That was the subject of that podcast.

David: Assume an Advantaged Player, November 2024, if you haven't listened to it yet.

Blair: The other one, about The Only New Business Indicator You Need, something like that.

David: Oh, right. Yes. In October 2019, The Only New Business Indicator That Matters was what we titled that one.

Blair: Right. Did you affect the buying process? It's pretty clear you're affecting the buying process at the second priority, where you're derailing the pitch. If you can't derail the pitch, let's say the client says all the right things to you. "No, we really want to work with you, but I can't just hire you. We've got to go through this process," then you would say, "All right, I understand you've got to go through the process, or happy to accommodate you. Can you do a couple of things for me?" Those couple of things can really be anything. It's really under the banner of all the other behavioral concessions that you might extract from the client that would prove behaviorally that they see you as meaningfully different.

We've talked about this in other episodes, things like sharing confidential information, moving the meeting, them coming to see you. A big one is access to missing decision makers, paying for a first phase diagnostic, conducting an unpaid needs assessment, et cetera. All of these little things that were not originally part of their buying process, you get them to agree to them. You don't get them to agree to a list. Start with the one thing, see if you can affect the buying process in some way. Then from there, you'll start to get a sense of whether or not you have the inside track, you are the advantaged player, or somebody else has that inside track and they are the advantaged player.

David: This, to me, is like I keep thinking about a high school junior, senior prom or something. Assume that there is an advantaged player in her mind and it may not be you just because you're with her at this thing. [chuckling] This is recalling a very specific event in my life.

Blair: Say more.

David: Yes. [laughs] I think everybody understands exactly what you're talking about here because they have been dragged into a competitive dance-off something, but they've been assured like, we really want to use you. In fact, this is where, can you help us write this thing so that you're a better fit for it? Everybody has known when they've been the advantaged player. I think everybody has known when they have not been, too, where it just feels like, oh, it doesn't really even matter what I do, I'm going to lose this thing. Then every once in a while, they're surprised, but most of the time they're not.

This one, I think, really resonates with people. I don't think there's anybody listening to this that doesn't understand exactly what it means to be gaining the inside track or not having the inside track. What you're saying is, you need to make this a part of your decision matrix. If you don't think there's any chance you have the inside track, probably don't waste your time, or is that too harsh?

Blair: Well, if you can't gain the inside track, then you'd go to the fourth priority, which we can jump to. I'd like to say just a little bit more about this.

David: About the dance that I failed, or you wanted to dance?

[laughter]

Blair: It's important that we measure the client based on their behavior rather than their words. Clients will often say to you, "Yes, we really want to work with you. You just have to play ball," "Oh, we've been a big fan of your agency for years." You could infer from that language that they see you as the expert, they like you the most, you have the advantaged player position. Whenever you hear these words, and I've learned this the hard way, you need to try to extract a behavioral concession that proves that those words are true.

I'm still scarred by an experience I had before I launched Win Without Pitching when I was still doing business development for an agency. There was a guy I worked on for a couple of years, and there's a specific project I wanted from his very large company he worked at. I would buy him lunch every few months. He was pretty clear that, no, you guys are in a good position for us to-- I don't remember if he said we were going to get the piece of work.

David: He enjoyed your lunches while he's telling you this, right? [laughs]

Blair: He enjoyed my lunches. Then when he left, I didn't know, I've told the story a few times, and I followed up with his replacement. That person said to me, "Oh, we're not responsible for that, that's another department." He was leading me along the whole time. That's when a mentor of mine said to me, "Blair, we measure people based on their behavior, not based on their words."

It's nice that they say nice things to us, but we need to extract a behavioral concession too, so that they can prove that they mean those words. That's what we mean by gaining the inside track. What are you going to do for it? Are you going to treat me differently than you're going to treat everybody else? The question of what that treatment is, what the thing is, I don't think it's all that meaningful.

David: Could it just be telling us who else is participating? Could be something that small.

Blair: Yes, it could be sharing confidential information, this is who's involved, et cetera. When you find somebody saying, "Yes, it's not something we're giving to everybody, but yes, I'm happy to send you that or do that for you," that's a good sign. If the client says, "Yes, I'll share that information with you and then also have to share with everybody else," you're not the advantage player. You don't have the inside track.

David: Yes. People's instincts are probably pretty clear, pretty reliable, I would think about in this point.

Blair: They do get clouded in the excitement of a sale. We sometimes get overly carried away with the language. I've lived this for so many years. You hang up the phone and you say to the team, "Well, the good news is they loved us and we came in second." Everybody comes in second. Everybody who doesn't win a pitch came in second. [chuckling] We extract some encouragement from those words when we shouldn't.

David: All right. The first is win without pitching. If that's not possible, derail the pitch. If that's not possible, gain the inside track. Then our list is ending here with number four. Then it's like, okay, what's next? You've said walk away. I have a question about that from the very beginning. I think you would agree with me. As I was reading through this, preparing for the interview, I was thinking, this isn't the fourth step in that you only think about it at this point. It's almost something that you have to have as a bedrock underneath everything you do. It's like you're willing to walk away from anything, even though you may not pull that rope until the end. You have this as part of a mindset, right?

Blair: Yes. Even in my earliest days, I used to always say to myself, "I'm rich. Money means nothing to me," at a time when I was far from rich and money was very meaningful to me. There's something about the creative professions. I was just reading some stuff on LinkedIn last week of people lamenting how they were screwed around in a pitch and they were burned by the client. They just reek of this neediness. They just can't stand that they didn't win a business. They're so hurt by it. God damn it, it's just business. Can we not get so emotionally excited about the opportunities and then they won't hurt so much?

Then if we can go into these sales opportunities, just letting go of the outcome, not over-investing in the sale, following this model, and if we find we can't win without pitching, we can't derail the pitch, we can't extract any meaningful concession that signals to us that we are the advantaged player, that we've gained the inside track, can we just accept that in this competitive situation, our odds of winning are roughly 1 over 2n, with n being the number of firms under consideration.

Four firms under consideration, we think, well, we still have a 25% chance. No, you've tried to gain the inside track and you didn't, so somebody else has it. Your odds of winning aren't 1 in 4, they're closer to 1 in 8. That's an approximation, but they're way worse than 1 in 4, way worse. If you can affect the buying process in some way, you can extract a behavioral concession and get the signal that you are the advantaged player, your odds of winning are greater than 1 in 2. This is a pretty straightforward numbers game. It's not as straightforward as there are four of us, our odds of winning are 1 in 4.

David: You remember the episode you did, Slapping Down Your Childlike Glee?

Blair: Yes.

David: That's all I could think of while you're ranting. [laughs]

Blair: I remember the client situation where I had been working with these people for a while. A lot of them were senior gray-haired people. They were really grokking the principles and the frameworks. Then this big stupid thing that was never going to happen, but it had a multi-million dollar price tag on it, came in and they just lost their shit. It was like I was so-- It was like the sugar high and I just, well, nothing I can do. Let the kids run the sugar high off and maybe we'll have a conversation when they all crash back down to earth.

David: Your emotions at this stage are sort of like, "Oh, that's too bad. I'm the prize. Too bad they're not going to get it"? Or is that a little too self-serving?

Blair: What your emotions should be at this stage?

David: Yes. When you walk away, it's like, "Oh, that's too bad. This would have been fun, but I am the prize and they're not going to get it." It's rather than, "They are the prize and I didn't get it."

Blair: Walking away was taught to me many years ago as close number 10, the takeaway. When I say walking away, people see finality there and I don't. I'm a patient person. That's another way of saying I don't have a very high competitive drive. I think everybody's buying and the only variable is time and I'm willing to be patient. Now, I can't impose that worldview on everybody else. That's entirely personal. I'm not saying that's the right view. I would benefit from having more impatience, having higher sales drive.

When I take a step back, the first thing I'm doing is I'm seeing if the client follows. If they say, "Well, wait a minute, let's not get rash here. Let's have a conversation about what might be possible," that's the first thing I'm looking for. If that doesn't happen, if I take a step back and say, "I think we're going to take a pass on this. Doesn't seem to be a very good fit for us," pause. They say, "All right, see you later." [chuckles] I was never going to win that business. Never going to win that business.

If they say, "Really? Are you sure?" seems a little drastic. Then that's the door to keep the conversation going. That's the client keeping the door open, having a conversation. I can explain why I don't think it's a good fit. I can explain why the things that the client might do in both of our best interests for us to keep going. I'm taking a step back. I'm beginning to walk away. I'm not saying, screw you, I'll see you in hell. I'm not flipping them the bird. I'm not doing any of that. I'm just saying, I think we're going to take a pass on this. Doesn't seem to be a good fit for us.

David: That's just such a great addition. This is not an anger sort of thing. It's just more a recognition that as I understand it right now, I mean, you're not saying all this, but in your head, you're thinking, as I understand it, right now, this probably isn't a good fit for us, so regretfully, we'll probably need to step away rather than screw you, like you've mistreated us.

That's a very good addition to this because my mind went first to, well, they're the ones losing here. I'll go find somebody that loves me. It's not that. Always leaving open the response to still impact to see if you are the advantaged player, if they fight you. Rather than quitting and somebody tries to keep you around as an employee, it's like, oh, what a relief they left. It's not that.

Blair: If you're the client and I walk away and you let me walk away, I could say, well, good luck with your pitch. Listen, if the process doesn't yield what you're looking for and you come out of this and you're still frustrated and you want to have another conversation, just reach out to me. I'd be happy to have another chat. Then after that, I'm going to take a note.

If I still think, well, this would be a great project for us, I'm going to take note of the timeframe and I'm going to make a note to check in maybe a month, two, three months after they've made a decision and started working with my competitor, and I'm going to reach out and say, "Hey, just wanted to check in. I hope that process worked out for you. I hope you've found somebody you're madly in love and you've walked off into the sunset." You might hear, "Well, as a matter of fact, nothing worked out," or, "We hired somebody and it's not working out." You'll hear, "Yes, it's great. Thanks for checking. It was nice to talk to you, but yes, we've got somebody who's perfect for us." Or you might hear, "Hey, are you free for a chat?"

David: Yes, right. What I would say is, I just wanted to check on you. I was worried. I know who you hired. I was hoping that their bankruptcy or that the principal--

Blair: [laughs] The David Baker spin.

David: I know the guy went to jail for a couple of days. It probably didn't impact the delivery of the project. I just wanted to make sure you're okay. That's what I would be doing. [laughs] Maybe I should pass all these notes by you first.

Blair: Yes, that's fantastic. I love it.

David: Yes, so these four priorities. First, win without pitching. Second priority, derail the pitch. Third, gain the inside track. Fourth, walk away. If people want more on this, which book is it again they need to buy?

Blair: It's in The Win Without Pitching Manifesto. Then, Assume an Advantaged Player is in The Four Conversations.

David: All right. Thank you, Blair.

Blair: Thanks, David.

Understanding Earnouts

2Bobs with David C. Baker and Blair Enns

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If/when you sell your firm, it’ll likely be the largest transaction of your life, and so it makes sense to understand it! In this episode David gives a crash course in everything earnouts.

 

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"Understanding Earnouts" by David C. Baker for punctuation.com

Transcript

Blair Enns: David, our topic today is Understanding Earnouts. What is an earnout?

David C. Baker: First of all, let's just clarify that the audience has been clambering to understand earnouts.

[laughter]

The numbers drop.

Blair: Yes.

David: An earnout is when you sell your company, it's split into two parts. You get a certain amount of cash at closing. Then the second part, everything you don't get in cash at closing, is an earnout, and that's what you get over time if you hit certain performance targets. If you are selling your firm, it's probably the only time you'll do it. It's probably the biggest transaction of your life. Everybody knows what an earnout is, basically, but I'm trying to give people a 25-minute seminar on earnout so that they go into that possible transaction a little bit more intelligent about what's going on.

Blair: Point of clarification. If I never sell my business, nobody is ever going to give me an earnout, correct? [chuckles]

David: You did not have to say that at the beginning of an episode, but that is absolutely true.

Blair: All right.

David: It's an incentive.

Blair: It's an incentive if you sell your firm. I'm trying to have fun with this topic. You and I have been in this business a long time, well over 50 years combined. I remember way back people started selling firms, and earnout was like, "Oh, yes, it's a whole bunch of money but it's on an earnout." Then you'd think, "Well, good luck to you." Tell us a little bit about the history of earnouts without boring the shit out of us. It hasn't always been this way, has it?

David: No, it hasn't. There have been earnouts in our industry for at least 40 years, like there have been earnouts elsewhere, but they've changed significantly. In the history of earnouts, if we go all the way back to Abraham's lemonade stand, that's where entrepreneurship started. There were no earnouts. You bought a glass of lemonade for Abraham and you got paid. In the history of business, earnouts are a very new thing, like from really the '80s on. They've been true in our field as well. They've changed significantly. Now they're three years at the most, sometimes two years, sometimes one-year, sometimes you get all the money in cash at closing.

In the past they were five years. Earnouts didn't come along until about 40, 45 years ago, and it wasn't driven by buyers, oddly enough. You would think that buyers would say, "Listen, I want to protect my downside if this goes bad," but that wasn't really what happened. It was investors that were behind the buyers that said, "Okay, buyers, you want to start paying more for companies, we get it." Now you're saying, "Okay, we're going hedge out bet, and we're going to pay more for companies," but the more we're going to pay is going to come at an earnout."

These investors behind the buyers were saying, "Listen, we got to have a little bit more structure here. We have to have a little bit more certainty. We have to have these things structured very carefully." Which was a benefit to the buyers and the sellers too, because they benefited from knowing more about that. Earnouts are the last 45 years. Before that they didn't happen very often.

Blair: We went from no earnouts to five-year earnouts and then that timescale seems to have scaled back? It's now one to three years, is that correct?

David: Right. Every once in a while we'll have a deal that we do where there's very little of the purchase price paid in an earnout. Like we did one, I think, it was three years ago where we were representing the buyer. The person selling the firm was going to have an appointed post in the US government. They could not have any conflict of interest, and an earnout is a conflict of interest, because the seller would have some incentive to send business his way in order to get the most, and that couldn't happen, and so we had to structure it.

That happens every once in a while. When you sell to a client, like if you have a client concentration issue, and you sell your firm to an existing client, there is not an earnout there, but in almost every case there's an earnout. It's never more than three years and sometimes it's shorter. Sometimes the earnout doesn't have to be the same for each partner. They can be different based on what the buyer is looking for.

Blair: You want to walk us through the basic elements of an earnout? One of them is the time period that we talked about.

David: It's really pretty simple. There's the time periods, so how long will this last? The second would be the formula for calculating the payment. The third is any dependencies, like what has to happen for you to get this earnout. I just want to pause and say, the M&A market is so much better in almost every respect than it used to be. This is another area in that the earnouts, not only are they shorter, but they're so much simpler. You don't have these complicated spreadsheets about how you get them and accelerator clauses and all this stuff. It's like, "No, this happens and this happens," so it's much simpler, but it's always involving those three things. What's the formula, what's the time period, and what are the dependencies in order for you to earn this? That would be the basic structure.

Blair: The formula's typically based on, maybe this is the dependencies. It's usually a measure of, is it top line revenue, bottom line, or somewhere in the middle, gross margin? One of those three things?

David: It all depends on what the buyer is nervous at all about. Sometimes it's top line. Sometimes it's bottom line. Sometimes it's neither. Sometimes it's just growth rate that you maintain. Sometimes it's retention of a certain client base. Sometimes it's like, did you get this approval? Did you get a registration with a patent and trademark office through that helps retain the value of this asset that we're purchasing and so on? Usually, it's tied to something around profitability because profitability, unless it's a strategic purchase, is what's going to drive an acquisition price. They just want a little bit more certainty around profitability, so often it's tied to that too.

Blair: In your most recent book, Selling Your Professional Services Firm, you talked about earnouts. I think you told a story about the earnout dependency was not tied to the overt reasons for the purchase. Am I speaking about that correctly?

David: Yes. That's why in the early conversations that you have with a potential buyer, if you're selling your firm, you want to nail down, like, why are you doing this and why are you choosing our firm? You memorialize that so that you're all agreeing like this is driven by such and such. In the example I think you're referring to, it's like, "We're a coding firm and we need a recruiting presence in Austin." That's one of the things that's driving this acquisition. You record this and you memorialize it, and then later during the negotiations, they start beating you up because you're not all that profitable. Then, you have to remind them it's like, "But we're still in Austin."

That was what was driving this thing. You have to memorialize that and surface it early on. This is where you have to be really careful about aligning the incentives with what you think the company is going to ask of you. Let's say that they're nervous about the profitability path that you've been on. Well, they're not nervous about it because you've demonstrated, but they're nervous about whether you can keep it up. They say, "Listen, we're going to keep the books on your firm separate and your earnout is going to be dependent on your continued profitability."

What you love about that is you have all kinds of control over that, and you're not worried about hitting those because you know your firm really well. Now, the transaction happens. Now, they see how successful you are, and they see how you could impact other areas of their business. They start asking you to help, and because you're a team player, you say, "Sure." Then it dawns on you like, oh, wait, my earnout is not dependent on how these other divisions do so how does all that play in? Especially if I start to take my focus off of the company they purchased and I focus on helping other departments, how's that going to help me?

You have to think far ahead. Either that or you have to have a buyer who's open to changing these arrangements so that the incentives align with where they're asking you to focus. It's a big game you have to think about, and that's where an advisor can help you think through what they're going to expect of you. If you don't think that the prospects that you have on your own are very strong, well then, you're going to fight for an earnout that's tied to the overall performance of the bigger company. That gives you the freedom to not focus exclusively on your little sandbox after the acquisition, but to help the bigger company. In some cases, that's really in your best interest anyway.

Blair: That's interesting. Let's say I've acquired your firm and you're on a three-year earnout, and your earnouts are tied to certain metrics. Then I say, "Hey, David, can you spend a little bit of time and attention on this other thing?" Taking your time and attention away from the metrics which will drive your financial return. You say to me, "Go get stuffed, Blair," because basically, I'm going where the money is. From my point of view as the acquirer, you're not fully in my employ at this moment. I translate this to the owner of an agency saying to a salesperson who's on full commission, "Hey, I want you to take more time and be more diligent in completing the CRM or attending these meetings." That person's response is, "You know what? I eat what I kill. You don't pay me to be in meetings, therefore I'm not going to be in meetings. You don't pay me to update the CRM, therefore I'm not going to update the CRM."

David: Exactly. There's this inverse relationship between the degree to which the purchase de-risks your situation, and whether or not you are in the full employ of this other company. It's like, "Okay, if you're paying me 100% cash at closing and there's no earnout, then, yes, I'll do whatever you need. I'm at your beck and call."

Blair: I could also leave.

David: I could also leave and kill the whole thing. To whatever degree somebody is retaining risk and that's what the earnout is, then you as a seller have a really strong incentive to define that really, really carefully, and to hopefully have a good relationship with the buyer so that you both agree, "Ah, this just isn't working quite the way either one of us thought. Let's redo this." In many scenarios, those things are looked at again and are revised, which is the way it should be.

Blair: Things change on the ground. The acquirer wants the CEO of the firm that's being acquired to change his or her attention to something else. The incentives aren't aligned, so they agree to realign the incentives. That's not uncommon?

David: Not uncommon. No, not at all. Especially in a relationship that hasn't gone bad. If the relationship is still good, it's very common. When you change the arrangements of an earnout, you don't want to make it more complex. You want to retain the same simplicity, but just shine the spotlight in different areas. I firmly believe, but I don't have data for this. You might because of your experience on the sales side, but I don't think that complex incentives motivate people. I think they need to be pretty simple. When I think of my dog, for instance-- oh man, really, every time I say this. I really need a new example.

Blair: A new dog? [laughs]

David: I need a new dog too.

Blair: You need a third dog.

David: One of my dogs is good. When my dog does the right thing, I give him a treat. I don't add up everything and then balance things out and then on Sunday afternoon, we even out and decide what he really earned in the week. No. Complex incentives don't motivate even humans. You still need to keep this thing simple. You just redirect where the attention is.

Blair: The rule of thumb in sales compensation is A, the incentives has to be simple, and B, the reward has to be as close to the behavior as you can get it.

David: Right, exactly.

Blair: That's why a five year earnout seems a little bit ridiculous to me. When you said earlier that things in the M&A space are getting better, these deals are getting better, part of what you meant is that the incentives and these earnout structures are getting simpler. Is that correct? Simpler and shorter?

David: Yes, simpler, shorter. I wouldn't say that we're getting a larger percentage of the sale price in cash at closing, but what isn't coming in cash at closing, is coming faster and simpler. Those are both good.

Blair: Got you. You hit on a few things that earnouts are tied to, like top line revenue, profitability. I think you said growth trajectories. Anything else in there you wanted to touch on?

David: If I could just call out a danger here. Usually the specific incentive that gets suggested to you as the seller, so we know there's going to be incentives, we know there's going to be an earnout, but we don't really know what it's going to be tied to yet. When you first hear the specifics, it's usually in response to some bad promise you made to the buyer, where the buyer is raising a question.

It's like, "Oh man, three years and two years ago, things were great, but there was this fall off." You say, "Here's why it happened. It won't happen again," and yada yada. Or, "You've had great results recently, but they've been tied to this certain thing. Will that continue?" You assure them that it will. You need to be really careful about those promises that you make because it's really easy for the buyer to flip around and say, "Ah, that makes sense. Why don't we just build that into the earnout?"

Now you have to eat whatever promises that you've made. You want to be super careful about that. Whenever you make some big lofty promise, you need to be willing to back that up with some sort of an earnout. You just really want to be careful. The earnouts themselves are pretty what you would expect. Top line revenue targets, profitability, maintaining a certain level of growth, retain a certain client, or even milestones that you need to reach. Maybe a software product needs to receive this level of penetration in the market or whatever that is. They're all pretty simple. Usually it's not a combination of all of these things. Usually it's one or two, maybe three things at the most.

Blair: Got you. I worked for a guy who had a three year earnout and he ended up earning-- I don't know how to say this because it's not like I was on the inside of the deal, but everybody heard what the numbers were and in the end he ended up earning more. Is that even possible?

David: It's quite possible. Usually the sophisticated buyer will have a formula in there and there'll be some sort of a cap on it to prevent that from happening. That's also the most likely time the buyer's going to come back to you and say, "Hey, can we renegotiate this a little bit?" It does happen for sure. Even when it doesn't happen in the earnout, you'll find that to be true frequently if the seller has agreed to not get 100% of the purchase price, but to turn some of that into rollover equity. Where they say, okay, we'll allocate 20% of what we would've paid you in shares or stock or something like that, in the acquiring entity, and so you get sort of a second bite of the apple.

Frequently there's a lot of risk associated with that, obviously. When that happens, it usually means you're going to get quite a bit more money. You have a strong incentive as the seller to do a lot of research on the buyer's prospects too, because you're not going to get that money unless they hit their target. It's pretty frequent and it's a beautiful thing when it happens.

Blair: Some of these earnout targets, they're not hard numbers. They're not pass/fail, zero or 100.

David: They are when you first get them frequently, and that's when your advisor needs to push back and say, "Hey, if we have to hit 18% profitability or something, and we've only been at 11%, what if we hit 17? Are we going to get nothing?" That would be a cliff target. That's where the advisor's going to push back and never let you agree to that and say, listen, these need to be graduated. Maybe they can be algorithmic so that they're not straight, but they need to be graduated so that you still get something. You get some proportion. If you hit a proportion of the goal, you should get a proportion of the reward. The big point is you need to turn those cliff targets into graduated targets.

Blair: Earnouts are almost always tied, or maybe even always are tied to employment agreements where they should be. Is that right?

David: They should be. They often are not. In many cases, the employment agreement never comes up unless there needs to be some non-compete.

Blair: "Dude, you didn't hit your target, you don't get the earnout." "Well, you fired me." [laughs]

David: Yes, exactly. This is one incentive that the buyer has, to have shorter earnouts, because the earnout should be matched with a corresponding employment agreement. If I sell my firm and my earnout is three years, then I should be employed at that company where I have sufficient influence to hit the target.

I can be fired for cause at any point, you can't reverse that necessarily. Otherwise, I should have a job, I should have the influence to help hit this target. I need an employment agreement, which means you need to know how much money you're going to make. You need to know what your responsibilities are, you need to know what those carve outs are and so on. Always think about an employment agreement having to match the length of the earnout, or it's going to be very difficult for you to hit those targets.

Now, in most cases-- well, I'm not sure I should say most cases. I would say roughly half the time after the earnout expires, the seller is ready to move on for whatever reason. They're at the end of their career or maybe they want to do something else or whatever. Then the other half the time, they really love it there and it turned out to be great. They want to re-up their employment with the company and the company wants to keep them. We're not talking about that period where both parties have to agree.

We're talking here about the fact that there is a guaranteed employment agreement, and the only way that the buyer can get out of that is for cause, like you steal or whatever. Really bad things.

Blair: As you're talking about that, I'm recalling a client of mine, she sold her firm for bucket loads of money. Then when she gave me the details, she said, "It's a five-year earnout." I went, "Oh, you poor thing." She said, "No, no, I asked for it." She wanted to continue to work for the firm. I have a hard time getting my head around that, but that still happens, doesn't it?

David: Yes. It usually happens because they've done the entrepreneurial thing. They actually did pretty well or they wouldn't get an offer, but they love being a part of a bigger company. They like to play on a bigger stage. They like the fact that new business is a very different game for a big company versus a small company. We helped sell a firm from San Francisco to New York. Two women, one of them departed right after her earnout, and the other one has risen in the company's ranks and absolutely loves being a part of a bigger company. It's just how each of them approached it and where they were in their individual lives and what they wanted to do. That's another case where the sellers don't have to have the same approach to this. They can make different decisions.

Blair: What's the big reversal?

David: There's some risk associated in selling your firm. The risk is all associated with the earnout, because you don't have that money yet. What if something happens at the firm that is buying you, and maybe you've done your due diligence, but something outside of their control happens, and they start missing payments to you, or whatever those promises were? That does happen. If that happens when we're the advisor, we want to specify what happens in that case. What we want to make sure is that you get to keep the money that you've got, your release from your non-compete, you can do what you want with the clients that you took with you to that company, and so on.

It's not ideal because you didn't get the earn-out, or at least all of it, but at least your life isn't over, and you can start over, and you've kept some money from that transaction. Very few of these agreements account for that because they just assume that things won't go bad. We like to cover that base.

Blair: Have you been involved in some deals where things did go bad after the acquisition?

David: Oh, yes, absolutely. It wasn't anything either we, as the advisor, or the seller could have anticipated, but yes, absolutely.

Blair: This stuff happens.

David: Exactly. Especially in this world, where a company can be very strong on a Thursday and then be gone the next weekend. We saw some of that with some of these investment firms.

Blair: Yes, we were talking about that before we hit record. All right. Do you want to summarize the key points of understanding our notes for the audience?

David: Yes. This is meant just as an overview for people, but these are the big questions you want to think about. Does the earnout that you're presented with incentivize the right things? Will it be easy to calculate? What will happen if you don't hit the desired target, like that big reversal? Will it allow you to de-risk the ownership of your firm? This is the biggest question around earnouts. You sit back and you have an offer on the table, and you start thinking about it, and you realize, "What am I going to have to do after this transaction closes?"

You start thinking about it in terms of entrepreneurial risk, and you realize, "Oh my goodness. I'm still going to have to be an entrepreneur to hit all these targets, and I'm only going to keep some of the money." I'm not really de-risking this situation all that much. That's what an acquisition should do. It should de-risk your situation. If the earnout is such that you're still carrying most of the entrepreneurial risk, this is a bad deal for you, and you shouldn't do it, unless there's some other massive reason, like you just want to be a part of a bigger company or something. You probably shouldn't do it. That's the fourth question you've got to ask yourself, "Will it allow me to de-risk my ownership of this firm?"

Blair: I imagine you've been in some engagements where you're representing the firm being acquired, and the principal of the firm looks at the terms of the earnout and goes, "What's the point? Nothing changes for the next three years in terms of the risk I'm taking, the work that I have to do, other than a small amount in my pocket." Then that owner decides not to sell. Is that fairly common or not uncommon?

David: It's not uncommon. It's called a crossover analysis, where you say, "If I just keep this firm without selling it, how long do I need to own it before I get as much money as I'm projecting to get in the sale of the firm?" If you have to keep it longer than, say, two and a half, three years or so, usually it's better to sell it. Usually, in that crossover analysis you're doing, you just assume you're going to walk away from the firm, which you're not really going to do. You're still going to do something else with it.

If you're going to have a boss, your life better be very different, and it better be de-risked. If it's not de-risking your situation, the truth is you're unemployable. I'm unemployable. Most of the people listening to this are unemployable. They can hold their breath for two or three years and be employable, but it's a different game for them. They exchange a boss for de-risking their situation, and that's what you're thinking about when you're looking at an earnout.

Blair: I think three years might be pushing it, but 18 to 24 months, I think we could all hold our breaths.

David: You can hold your breath that long. [chuckles]

Blair: All right, David, this has been really informative. Thank you.

David: Thank you.

Grow or Die?

2Bobs with David C. Baker and Blair Enns

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Blair recognizes growth opportunities in every area of life and business, yet sees many people chasing metrics while unknowingly resisting genuine progress for various reasons.

 

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"Chief Growth Officer" by Blair Enns for winwithoutpitching.com

Transcript

David C. Baker: All right, so I am going to start this episode off by reading, I think there's like nine words in here, something you wrote that sounds very philosophical. You said, "The drive for growth is perhaps the most fundamental force in the universe."

Blair Enns: You went right to the most provocative statement. Good for you. Let's start with the good stuff.

David: I'm trying to picture, where were you when you wrote that? Were you on a beach? Had you just climbed the top of a thing? Had you just written something?

Blair: I was coming down after five grams of mushrooms.

[laughter]

Blair: That's about right past the peak. That's about when that thought would come to me. [chuckles] For the record, I have never done five grams of mushrooms.

David: Yes. The drive for growth is perhaps the most fundamental force in the universe. That's a pretty darn big statement. I got to say, when I first read that, you sent me this article that you wanted to talk about a couple weeks ago. I thought, oh, there's some bullshit hidden in here.

Blair: It's not hidden very well.

[laughter]

Blair: Yes. It's a little too obvious. I knew that would trigger you as a former divinity student.

David: Oh, actually, that's not what occurred to me. No, what really struck me is this. We'll get into that later. I want this to be about your thoughts. Instead of asking what prompted you to think about this, I want to ask a different question. When you let this realization flood your soul, what doors did it open? How did you start thinking differently about things? Oh, I got you with a good question, didn't I?

Blair: It's a great question. The subject of growth, I don't know if you've noticed it, but I keep coming back to it every couple of years. We're referencing a post that I wrote called Chief Growth Officer. It's a longer one. It might be approaching 2,000 words. It was a wonderful experience for me to write this as I explore this topic because I keep coming back to it over and over again. One of the stories I've told multiple times on podcast episodes and I've written about it is my first economics class.

I remember the professor making this statement and then he just breezed past it, which was that growth was a requirement for the economy. At the age of 18, I thought that's impossible. For years, I grappled with it. We've touched on this peripherally on a few different episodes where I would be at a different place and grappling with it. Now, I am fascinated by AI and all the prophecies of AI. I see all these tech people saying that AI is going to be smarter than humans. I think that's probably impossible for AI to be smarter than humans. I think it's likely we won't get to artificial superintelligence that surpasses humans.

David: You don't know some of the humans I do.

[laughter]

Blair: You live in Tennessee.

[laughter]

David: That's right.

Blair: Oh, there go all my Tennessee clients. It used to be AGI. AGI was the thing that would be the general intelligence that would surpass humans. Now, we've got some other wonky definition of AGI and we've replaced AGI with ASI, artificial superintelligence. Whatever letters you want to use, we're talking about the intelligence that will basically make humans redundant. Then we're going to be left with these issues of, well, if robots and AI are doing all the work, what's left? I just don't think we'll ever get there.

I'll call all of that stuff AGI. I think to solve AGI, we're going to have to solve the consciousness problem, the hard problem of consciousness. What is it? From where does it arise? We're going to have to have a theory of consciousness. I think for us to have a theory of consciousness, we're going to have to reconcile the two branches of physics, of quantum physics and classical physics.

I think consciousness is part of the problem, part of the reason those two branches aren't resolved. I think the dogma of scientists, the religion of scientists does not allow them to get to a solution at which consciousness is at the core. Are you still with me?

David: I'm still with you, yes, tentatively.

Blair: Where did I get this idea that growth might be even more fundamental than physics? The first place I got it was David Deutsch. He wrote a book called The Fabric of Reality in 1997. He's a Cambridge or Oxford physicist, mathematician, philosopher. He's the heir to Karl Popper in the area of epistemology. What he does say is there are basically four strands of reality. One of them is evolution and one of them is epistemology. These are the two different ways that anywhere in the universe we create knowledge; through the evolution of genes and through effectively the evolution of ideas, and they happen the same way through these two tools of conjecture and criticism. You still with me?

David: Yes. You write about conjecture and criticism, those two balancing opposing forces in the article.

Blair: It is fundamental to biology genes evolve, species evolve through this conjecture and criticism. His point, and maybe it was Popper's point originally, but he put them together and said effectively they're the same thing. I think Richard Dawkins did a little bit of that too because he coined the term meme. He said basically a meme is to ideas what a gene is to an organism. If ideas and organisms evolve through conjecture and criticism, maybe that's not fundamental at the level of physics, it's fundamental at the level of biology and things that arrive out of biology. If you think of ideas as things that arrive out of biology. You with me so far?

David: Yes, yes.

Blair: There's another really good Theory of Everything called My Big Toe, ToE stands for Theory of Everything, by a guy named Thomas Campbell, who's a former NASA physicist. I'm about three quarters of the way through his 800-page trilogy, My Big Toe. It is the most detailed, purely scientific explanation of a Theory of Everything, and it has consciousness at the heart of it.

In his model, and he's not the only one to have a really good Theory of Everything that has consciousness as basically the substrate of the universe. Scientists would say consciousness, we have physics, on top of that we have chemistry, on top of that we have biology, on top of that we have, let's call it sociology, even ideas would be in there. Then somehow with enough intelligence, consciousness arises.

Now, anybody who's spent any time thinking about this knows this can't possibly be true.

David: [chuckles] You just wiped out everything you just said.

[laughter]

Blair: It's not true. As Thomas Campbell and a few others, Federico Faggin, who's another famous physicist who has a lot of political capital in the world, in his domain, I think he invented the first, not the transistor, but the Intel 4004, and the touchpad and other things like this. He's got a somewhat related universal Theory of Everything, but the really interesting theories of everything today have consciousness as base reality and physics as something that comes out of it.

Robert Lanza, who wrote a series of books and his theory is called biocentrism. He's a stem cell researcher, similar. You are right in that declaration, and I hedge my bet a bit because it's not absolutely true, but I think it's likely, in that declaration, growth is mandatory for everyone and almost everything, and that the drive for growth is perhaps the most fundamental force in the universe, that does fall out of a collection of different theories of everything, which are just theories, that put consciousness as the substrate of the universe.

David: Back to how this article hit people, because you told me earlier that this article prompted more feedback from people than you've received normally. I'm just wondering why. Did they agree with it or did they disagree with it? What was it that resonated when you said the drive for growth is perhaps the most fundamental force in the universe? How did they even apply that to their own setting, running marketing creative firms? There's other readers, too, but that's the bulk of them. How did they read this and why did it strike them?

Blair: The reason why this spoke to people so much is I think most people are conflicted by the subject of growth, as I was for many years. I wrote in The Post, I spent 40 years grappling with this issue of growth can't be a constant because we live in a resource-constrained world and universe. That's one reason it's wrong. It just seems wrong to always be striving, to always be taking.

I define growth as a little bit differently for people. I went back to this, what it is that I think consciousness is doing, what are genes doing, what are species and ecosystems doing, what are ideas doing. They're basically trying to expand. They're trying to improve themselves and find the most profitable version of themselves and then double down on that and keep striving forward.

When I explained what real growth is and I said, don't confuse the map for the territory, these things that we use to measure growth in business, headcount, revenue, profit, they can be pretty good rough surrogates for growth, but they're not growth itself. Growth is essentially learning and expanding. Your consciousness wants to do that. Your biology wants to do that. Your ideas want to do that. The systems that are expressions of you or built on you, such as your business, it wants to do that too. Growth is a fundamental driving force of the planet, of biology, I maintain of, I wouldn't say physics, but of life that arises out of physics. I think it's fundamental. If you take it all the way to what I think is probably the root substrate of the universe, which is consciousness itself, consciousness wants to grow.

David: You define growth elsewhere in the article as self-exploration and self-advancement achieved through the twin actions of conjecture and criticism. Essentially trying something and then testing it. I like to say that leadership, it's not entirely this, but it involves making lots of decisions. Your job as a leader isn't to make all the correct decisions, it's to make lots of decisions. The more decisions you make, the more the criticism of that conjecture is a small price to pay. You don't lose a lot if you make a bad decision if you're making lots of little decisions. Is this different from simply a drive for meaning?

Growth as you defined it, self-exploration and self-advancement. I imagine a principal of a creative firm is listening to this and they want to grow because it signifies something, grow in terms of headcount. That's not central for them, but it matters a little bit. They definitely want to make more money every year. They want to do better work for clients. Are all of those expressions of this drive for growth, in other words, they are growing if those things are happening and they're not dying, or are you wanting to define growth differently than that?

Blair: I want to separate the map from the territory. Again, I think it's not like maps are useless.

David: Maps are pretty good approximate guides.

Blair: I forget who, somebody quite famous many, many years ago said all maps are liars, which I think is a great line because of this mistaking the map for the territory. I want to separate those two things. I want to point out that it was me speaking directly to the many people I've encountered and many more that I haven't who say things like, okay, I think I have enough. They usually don't say I have enough. They usually say that other person has enough. I don't see why they keep going. When you read this, did you think at all about the firms that you've encountered that maybe put aside growth goals, however you choose to measure growth goals, and try to focus on doing something good because they have a sense of guilt around what it is that their business is doing? You know the type of owner I'm talking about?

David: Yes, I do. That came to mind in a negative way. In a positive way, what came to mind is a firm that's maybe seven people and is going to be seven or eight people for a long time. They're not making tons of money, but they're very satisfied because there's this intellectual curiosity. They keep inventing models and thinking, and they love going to work because it's an endless challenge. Then, of course, I'm thinking of other people where intellectually they're not on the cutting edge, but they make a lot of money. I look at them and I think, wow, that's really impressive. I don't know how you did that. You're just very disciplined. I could see so many opportunities for growth to be misunderstood, but also many different ways how growth could be interpreted in unique ways and sort of fulfill this promise too.

Blair: If you think of growing as striving and you just accept that everything, everybody, every idea is searching for the next best version of itself, I think that's, whether it's more fundamental than physics or not. Okay, I'm being provocative. You can decide to dismiss that, but I ask you not to throw out the whole argument. I think we would all resonate with this, what I would suggest is one of the few truths in the world that everything is striving. As soon as you quit striving, you're going to be out-competed. You're going to be not just out-competed as in, like, lose a race. You're going to quit being relevant.

In a world where everything and everyone is striving for the next best version of itself while pursuing its objective to basically know itself, to advance itself, to become better, in a world where that is happening all around you, if you choose not to grow, you will be passed by. You will become miserable. You will become compost for everything else around you that is growing.

David: In an earlier episode, I don't remember what the topic of the episode was, but somehow it came up that you, in particular, could remember talking with certain principals that had decided to mail it in at that point. They often would let somebody else run the firm, and they're just collecting money and so on. It doesn't always have to be that. You said you could tell by talking to somebody when they had quit learning, in a way. I remember that stuck with me. That was even years ago. Do you remember that conversation?

Blair: Yes, one eye on the exit. As soon as somebody can tell you the date or the year when they're going to retire, they say, I've got three more years left, they're done. They might be chasing the metrics of growth to get the multiple up, but they are done. That individual is no longer growing.

David: Yes. They're stretching the rubber band, and eventually when they let go, it's going to pop back. I wonder if this article is somewhat of a countercultural article because you've touched on it in several places today in this conversation without coming right out and saying it. There's this sense that, okay, the world shouldn't have billionaires. That would be one way that you would hear this. One constraint I see people talking about a lot now around AI training is, okay, are we going to really have the electrical generation capacity to do this? Somehow that should stop us in our path, and we should not explore this very unique technology because of constrained electrical grid resources.

Then if you just flip this around a little bit, what if the world of micronuclear reactors got mature quickly, and electrical generation was not a constraint. It feels like those same people would need to find the next reason why we need to question growth in a way. I don't know if that's making sense to you, but there's something in the human spirit that you're either for it or you're against it. If you're against it, you're going to find a reason to be against it.

Blair: Yes. I agree with you completely. It's interesting. The energy is the massive constraint on AI. What's happening right now, the plans for energy production in America are going through the roof. They're catching up to where they need to be. I think a lot of people look at the same situation and they lament the amount of energy it's going to take. We've touched on this, and you almost did a topic on it, like abundance versus scarcity mindset. If you have a scarcity mindset, then you think growth is bad.

I give just one example in The Post of why we're not limited by resources when it comes to growth. It's the Joe Pine example he gives in The Experience Economy. I link to a video of him talking about it. He talks about when he was a kid and his mom made a birthday cake, she would go buy the ingredients, and they cost $0.20 or $0.30. Then she'd make a cake. Then time goes by. She buys a packaged cake or a prepackaged cake mix for $2 to $3. The price goes up by an order of magnitude.

More time goes by. For his kids, he buys a birthday cake, $20 to $30. More time goes by. It now becomes a birthday party at Chuck E. Cheesy's for $200 or $300, and the cake is free. More time goes by, and there are people spending $2,000 to $3,000 and more on their kids' birthday experiences. If you look at the amount of natural resources that go into that cake, it barely changes. Yet, what's that? Four orders of magnitude greater in value creation?

There are times in history when we're in spurts of growth and we're leaning somewhat heavily on natural resources. Now might be a little bit of that time, but the people with the scarcity mindset, they ignore things like the substitutability effect, or it's just called substitutability. It's like, I have an electric car. I have my reasons for buying an electric car. Some people are anti-electric car, and they point out, oh, there's a shortage of lithium in the planet. I say, well, go to Google Earth and look at the country of Bolivia. It's basically a big lithium lake. Even if it was, that's okay. We're going to use lithium in batteries for, what, another 5, 10 years? Then we will get to the next thing, and then the next thing after that. I've had that mentality. I've had that scarcity mindset. I grappled with this for 40 years, and for the first 30, I made no progress. I made absolutely no progress.

The people listening to this, the money that you make today, how far removed are you from natural resource extraction? You sell campaigns to people who sell services to people who sell maybe goods. At some point, somebody makes something. As more time goes by, it's more about the experience, it's less about the extraction, we're layering more and more order and knowledge on top of the resources that we have. If those resources run low, the capitalist incentives are there to find better ways. The incentives are there to recycle.

I'm arguing against my younger self, and I see a lot of people still holding that attitude that I had as my younger self. I'll just come back to it. It's just everywhere you look around you, everyone, everything, not everything, inert things aren't striving to grow, they're actually tending towards high entropy, chaos, disorder, but living things and all these systems that are products of living things are trending towards low entropy, high order, more knowledge, better versions of themselves, growth. Everything is growing and striving. Everything meaningful is growing and striving. To look at our business and say we should not pursue growth is just a fundamental mistake.

David: You say specifically your business must grow or it will die. Somebody's listening to this, it comes out on a Wednesday morning, somebody's listening to it on their Wednesday run or drive to work or something. How do you want their day to be different? How do you want this to impact somebody listening to this?

Blair: I want them to embrace what they feel deep down inside themselves, and that is to pursue the striving. A growing business often over the long run will become more profitable. It will generate more revenue. It should generate more profit. It might generate more headcount. You can limit any of those things if you want, but don't mistake the map for the territory. Grow, strive, create a culture. We've talked about this before.

You and I both like to bring up David Meister's post, The Problem of Standards, where he basically says there's two teams you can belong to, one where we're all getting along, we're one big happy family and standards are not enforced, and the other one where if you can't keep up, you can't stay. We can call that a tolerant culture and an intolerant culture, and you and I on that domain are fans of an intolerant culture.

What Meister says is there's no right or wrong answer. Then he says you have to choose what macro culture you want, tolerant or intolerant. He says there's no right or wrong answer. Then he says, but if you choose a tolerant culture, I can prove to you your lives will be miserable. I allude to this without citing Meister specifically. I allude to this in The Post. If you create a culture in your firm where it's like everybody's going to be okay no matter what they do, nobody can get fired, we're not enforcing any standards, and we are not striving, pushing ourselves and pushing each other, your life will become miserable. If your firm quits growing in the way that I'm talking about, you will become a magnet for stagnant people. They will bore you, they will demoralize you, they will bankrupt you.

David: Here's exactly what you said. You said your best people. Now, that best word is carrying a lot of water right there. Your best people want to work in an organization that is striving. If you opt out of growth, you will become a magnet for others who have also opted out, and they will demoralize, depress, and ultimately bankrupt you. That's not going to be a Hallmark card.

[laughter]

Blair: Maybe it's a Blair mark card.

David: All of us probably have had a job like that where we got a steady paycheck. There was no question of that. It was very stable, but nobody was reaching, and we felt like we weren't on a team that was exciting and fun and a little bit dangerous. There's some downsides to this too. I kept thinking of mowing the lawn. It's like as soon as I'm done mowing the lawn, well, the grass is already starting to grow again. One of the things you say is the prize for solving any problem is a ticket to the next problem because the striving that you're talking about here is really a series of solving lots of problems with curiosity and excitement, and your reward for doing that is just another one. [chuckles] I thought that was pretty funny.

Blair: I had a few different things that inspired me to speak to that. I think we live in the era of social media. I think there's a younger generation that people are putting their perfect lives out there on Instagram.

David: The van life.

Blair: Yes, and hiding all the warts. I think it's sending a message that life should be easy and fun and without struggle and without problems. Then when these people look at the world and see the problems in the world, they can become pretty defeated by it all. My point here is this is what you signed up for on this journey, on this life, is it is nothing but a series of problems. Like I said in The Post, your reward for solving the problem in front of you is the problem behind it that was brought into existence by you solving the problem. That is the rest of your life. That is the rest of your business. That is the rest of the political economy, the country, the world. To look at the problems and be defeated and say, okay, the problems will go away if we stop striving, yes, well, so will you. [chuckles]

David: Yes.

Blair: I had this realization a few years ago when it was like, oh, this is nothing more than a series of problems. This happened on Friday. I solved the problem in my business. It's like, bang, oh, this is perfect. Then out of that, having a conversation with a team member, holy shit, here's a whole new problem that I could not see, that did not exist until I solved the problem upstream from it. Now, I can choose to become demoralized by that. I can curse and swear and all of these things, or I can just chuckle quietly to myself and go, well, here we go again. Now, head down, solve this problem. Do you think you're going to solve the problem in front of you and then you're problem-free? That's not the way anything works.

David: I want to draw a distinction there about that solving problems, because what discourages me is having to solve the same problem over and over again. I don't mind solving problems, but I want them to be new problems.

Blair: Yes. That's a bugbear of mine. I don't want people in my team who take comfort in solving the same problem every day. You're not striving, you're not growing. You solve that problem, automate it, make it go away. It's human nature. Most people, especially when they're in an employee role, they think, well, if I make this problem go away, I'm going to lose my job. In my business, you lose your job if you don't make that problem go away, because I want you to work on the next problem. I can't see the next problem. Trust me, solve this problem. There will be another problem.

David: That's your reward.

Blair: Yes. That's what we all signed up for.

David: This is dangerous territory, this question I'm going to ask next.

Blair: Good.

David: It feels like you put your finger on a distinction between the Western world and the non-Western world. How do you think a Buddhist would listen to this episode and react to it?

Blair: Good question.

David: Haven't you just described the difference between the Western world and this striving? I don't know. That's probably a dangerous question to ask. I don't know what the answer is, but I think it's a legitimate question to ask, because there's a difference. There's a reaching, there's a desire for growth, there's never satisfied. That's a part of the Western world.

Blair: It is a part of the Western world, but it's a part of the Eastern world, too. What I would suggest is the Western world is more focused on the metrics of growth, and the Eastern world is more focused on growth.

David: What does that mean in real life?

Blair: Striving, acquiring more things, more head count, earning more money, making the stock price go up, as opposed to growing spiritually, growing in your ideas, growing in your relationships.

David: Right, because I don't want to delegitimize those last examples you just gave. Those strike me as just as important as examples of healthy growth, even just curiosity. I keep thinking back to that conversation we had. That's what keeps both of us alive, is curiosity. I just did a bunch of that this weekend, stuff I'd never done before, and I just had so much fun learning. Yes, there's a lot to think about here. I don't want to just make broad statements about the Western world. I just was curious about that.

Blair: Talking about different cultures, earlier this year, I was doing a speech on one of my pet topics, the inefficiency problem, in a country that 50 years ago was communist. Fairly young audience, and at the end of the talk, I'm taking some questions, and somebody said, "Are you sure the pursuit of efficiencies is the problem that kills innovation and it's not capitalism? Don't you think capitalism is the problem?"

I tried to temper my response. I was a slightly more impassioned response that, no, I don't think capitalism is the problem. I think capitalism is effectively the solution. Then I used the metaphor, which I think I've spoken about before. I see capitalism as it's the wood stove in my living room. The fire is trade, and the box that contains it and makes it safe and still allows for heat is the laws. Judicial and social laws that contain the trade. I said, the solution isn't to not have a fire in my house.

Then afterwards, I was thinking, the young person who asked the question, I thought, go home and ask your grandmother how life in this country was when there was no capitalism. Ask her if she thinks that the solution is to go back there.

David: Yes. When I think across, I'm in the US, you're in Canada, and I think there's a fairly large contingent of the population that's really not striving and reaching and trying and growing, but complaining about other people doing that.

Blair: There might be something culturally that's just shifting that's creating that, but it's probably more likely that there is something about the box that surrounds the fire. People are saying, get rid of the fire. I think the solution, and it's probably the way your current government is currently going, is like, no, the box is too strong, make the box less strong.

I've written elsewhere like, we're never going to agree on what the shape of the box should be, but that's just a problem that we have to keep working on, and we can't lose hope. We can't become dejected because this is a problem that never goes away. You and I did what I thought was a great episode on the subject of tension, and you made the excellent point, I've quoted you many times since then, that not all tension is bad. Some tension is required to, for example, to hold up a bridge.

To mix metaphors here, like what should the shape and the strength of that box be that contains the fire that is trade? That will reside in tension somewhere between people trying to pull it in two different directions. It's always moving slowly in one direction or another, but that's the conversation that we need to have, we're having, we need to keep having it, and we need to keep our composure as we have this conversation, and recognize that if the box moves a little bit in the other direction, the people pulling the other way aren't evil. This is part of the problem that we signed up for, so let's just keep working on the problem. Let's not lose hope, and let's not think that we're going to get to a world where we have no problems. That happens when you die.

David: Yes. The drive for growth is perhaps the most fundamental force in the universe, and the reward you get for solving one problem is to solve the next one. [chuckles]

Blair: Problems are the frontier of your growth. No problems, no growth.

David: Well, this has been very fascinating. It's probably wandered everywhere for people, but it's been great. You and I forgot we had an audience here, I think.

Blair: Yes. Well, thanks for letting me get a little bit philosophical. I don't think people come to my writing for that philosophy, but I like to sneak some in from time to time, and it's nice to be able to talk about it a little bit openly here.

David: Yes. Speaking of which, the other article you wrote that is also very philosophical and engendered quite a bit of response was called Attending the Way, so if you've enjoyed this discussion, make sure you look up that article too. Thank you, Blair.

Blair: Thanks, David.

You're Cheating Clients Unless You're Repetitive

2Bobs with David C. Baker and Blair Enns

Download

David recognizes that the fear of repeating ourselves in our client work is motivated by the right things: “am I delivering value?”

 

Links

"Repeating Yourself as an Expert" by David C. Baker for punctuation.com

"Questions, Not Answers" 2Bobs episode

Transcript

Blair: David, this topic is timely.

David: Like all of my topics.

Blair: Yes, like some of your topics. It's timely because I just got back from a 3-day trip with 10 family members.

David: This is about you. I knew.

Blair: Yes, of course.

[laughter]

Blair: That's why I'm here. [laughs]

David: You found 10 family members that wanted to be with you on a long weekend.

Blair: Nine, yes.

David: Oh, nine, okay.

Blair: Yes, we had a blast. As I'm reading this post of yours that we're going to discuss today, you are cheating clients unless you're repetitive. I'm reading this post, and just the headline made me think of all the stories I'm telling-- everybody in the family on this trip is younger than me, other than my wife, so everybody's younger than us. I'm doing what a person of my age might do with a younger group of family. I'm telling stories. Every story I'm telling, I'm thinking, "How many times have they heard this story? Why can't I stop myself?"

[laughter]

David: Is it the same story? Do they notice the subtle differences where now I'm the hero in this story? Before, it was an accident. [laughs]

Blair: I'm more and more of a hero as the years go by. Yes, that triggered that for me. Your point is, I'm cheating my family unless I continue to tell them these stories ad nauseam. Is that the point of this? Let's just get right to the chase here.

David: Yes, that is exactly it. Your family members each contacted me. It was so odd. They said, "We just love hearing his stories over and over again."

Blair: Tell the audience this story about your grandparents, a story that you have told to me four or five times.

David: [laughs] My grandpa was really sharp up until he died. He was over 100. He always wanted to be 100. He said, "Okay, I'm going to live to be 100, and then I'm going to die." Sure enough, he did. My grandma, she was not very sharp at the end like he was. Towards the end, they would come visit us every year for a week. They'd pull their travel trailer, and they'd call it the relative route. We called it the sponging route. They'd call it the relative route.

They arrived one of the visits after we'd purchased a new van. Grandma, we were taking them to restaurants or whatever and parks. I don't know, 8, 10 times a day, she would ask me, "Hey, David, how long have you had this van? When did you buy this van?" I'd say, "Six months ago, Grandma." She would just go on and on about how much she liked it and everything. I was just losing my mind. It's like, I cannot answer that question again. I thought, okay, I'm going to switch it up. She asked again, "How long have you had this van, David?" I said, "A half a year, Grandma." She looked at me and grinned, and she said, "You silly man. That is six months." [chuckles]

That's what got me thinking about repeating myself. On top of that, you just think about your experience with clients where you're on a phone call with a client, and it's a great client. They've asked a very legitimate question. You go into the answer, and you catch yourself halfway through and think, "You know what? I was saying the same thing yesterday." Then sometimes I'll joke. It's like, "You should have been on the call I was on yesterday with a different client because they asked the same question." You just realize, "Wow, there's a lot of repeating myself. Is this good? Is this cheating clients to repeat myself, or is this bad?" That's what got me thinking about it. Have you ever had that feeling when you're working with clients?

Blair: Haven't we had this conversation before?

David: Yes.

Blair: All the time, yes.

David: Do you ever feel bad, like, "Am I cheating somebody?"

Blair: Sometimes I find myself getting a little bit short, like I'm talking to a child with whom I have had the same conversation a million times, and we shouldn't have to have this conversation yet again. I don't know if it's discernible to the person I'm speaking to, but sometimes I find myself getting a little short, like, "Come on, we know this." That's called the curse of knowledge. I know something. Once I explain it to you once, I assume that you know it to the same extent that I know it. If it has to come up again, I start to think, "You're a moron." Meanwhile, how much repetition did it take for it to sink in on my end? I think we all suffer with this to a certain extent. The older we get, the more we suffer from it.

David: Yes. Where all the people have been so patient with me over the years, and somehow it seems like a burden to me to be patient with somebody that's never had the privilege of hearing this before, that paid me a lot of money, that's just wrong on my part. It's just natural. It's not evil. It's just a natural reaction. Then, when that hits me, I have an option. I can either be more selfish and just say, "Okay, I got to do something to break this up." Then, instead of figuring out a way to say it even better, I'll try to reinvent things so that I don't have to say the same thing. That's the whole point of this. You're cheating your clients.

If what you are telling one client is the right thing for them to hear, and if there are similarities in your client base, and the next client comes along that needs to hear the same thing, you're cheating them by not telling them that. I'm just trying to surface the fact that tightly positioned experts are going to face this. They are going to repeat themselves, and there are good ways to do it, and there are bad ways to do it.

Blair: What's the good way to do it?

David: The good way to do it is to think about better ways to say the same thing. That would be one way to do it. Another would be how to seed the brain of the person that you're going to talk to so that they can come to that same conclusion without you having to tell them that. You lead them to it by asking better questions instead of just coming right out with the answer, which is easy and efficient. Especially if you're impatient, naturally, that's the way you want to do it, instead of letting the client come to that conclusion by diving really deeply into the specifics of their situation, rather than just a pronouncement that sounds just like what you said last time.

Blair: More of a teacher where you're leading the student on a learning experience. We've talked about this. We've done at least one episode on questions, not answers. We've touched on it in other topics, too. There is this danger of being an expert in anything that you feel like-- and now this is pretty personal to me. I feel like it's my job to have the answers when really it should be to have the questions. There's this danger of seeing yourself as the expert and wanting to prove your expertise constantly by saying the same things over and over again.

Your point here is that the right way to do this is to lean into it instead of delivering that same rote statement that you've delivered dozens of times over the previous years. You would think of the question to pose to the client in this situation that would lead them to the understanding you're trying to deliver in the assertion.

David: Yes, exactly right. Then the context around that is something that you don't run away from. You actually embrace it and say, "Oh, wow, I have been saying something similar multiple times with different clients over the years. What's causing this? At what point does this happen? Or is there any pattern in the firms that experience a situation that calls for this statement?" You lean into it and you try to figure out everything you can about what's unique here. You embrace pattern matching as the very foundation of expertise.

If you're repeating yourself, that is a pattern. Embrace it. Figure out why that's happening. Figure out everything you can about it. Start to articulate that in some of your writings, and you use this as an excuse. Sometimes in my early days of consulting, a client would ask me a question, whatever it was, and I jumped to an answer, partly because I felt like I had to have an answer, which is the wrong approach. Also, I had this inclination, but I realized in myself-- I'm not sure that the client in this case even picked up on it. I realized in myself, I was like, "Well, I don't feel quite as confident about how I answered that question as I would like to. I'm going to start writing down some of those questions that I get repeatedly, and then I'm going to dive deeper into them to make sure that my instincts are correct here."

You use those repeated applications, those repeated questions that are leading to your repetition, you use those repeated questions as an opportunity to dig deeper and make sure. You ought to have pretty similar answers to similar questions, but there should always be some little question. It's like a provisional certainty. I'm not sure if that's the right phrase, but it's a provisional certainty. Like, "I'm pretty sure this is the right answer, but I'm always open to learning about this in a new way. I don't want to jump to the answer right away. I want to have this answer at the ready because I think it's correct. I want to listen to your situation more carefully and not just throw an answer back. Use all of these opportunities as a chance to dive deeper too." That's what I mean by provisional certainty.

Blair: I can think of many times where I have been provisionally certain on numerous topics, but maybe you could put it on a spectrum. You enter the conversation with a hypothesis, after hypothesis would be theory, after proven theory would be law of some kind. Instead of seeing these patterns as laws, maybe see them as theories of yours where you're open-minded to alternatives.

David: Yes. It's more like a principle that usually applies, that's worth surfacing and talking about, but always with our ears open because every time you learn something, it's an aberration from a pattern. The flip side danger here is that everything looks like a pattern, and you quit learning. That's something we want to avoid, either. We want provisional certainty. We want patterns, but we don't want them locked down. We want to be open to a client that comes to us with something that we think we've seen before, and we jump to the answer, but then it's like, "Well, wait a second. I haven't seen this element. Does that mean that I need to rethink this, or is that just something on the side?"

You remember we did an episode many years ago where we asked each other something like, "What is it that keeps you going more than anything else?" We didn't know how the other person was going to answer it. As it turned out, we both said the same thing. It was something about--

Blair: Psilocybin.

David: [laughs] Yes. Unless I've run out, then what's next? It was curiosity. It's the love of learning. When you lock down an answer for every situation, you're not curious anymore. You still have to maintain that curiosity. You don't go to the doctor, and you don't want him to stop from telling you the same thing he told another doctor just because he's bored with it. No, if that's the answer, you want him to tell you that, right?

Blair: Yes. You said something interesting a couple of minutes ago. I'm still cogitating on this. You said every time we learn something, it's an aberration, a pattern. That's interesting. I hadn't thought about that before. You've previously mentioned that pattern matching is basically how we test intelligence in young children, correct?

David: Yes, before they can even speak. You hold up Duck, Duck, Goose, and they point to the non-conforming image. That's how we teach them how to read, right? To see patterns of different letter combinations and so on. That's why we can test intelligence in kids who can't even read yet.

Blair: I want to back up a little bit. Looking at your post here, you say once you realize you're repeating yourself, you're going to have two possible reactions. We've touched on a bunch of this. Basically, first reaction is further selfishness. I'm bored. I need to reinvent the whole thing. You're saying, no, don't reinvent the whole thing, or do lean into that?

David: Don't reinvent the whole thing just because you're bored, but be open to adjustment all the time. Don't just say, "Listen, I'm tired of delivering this particular package over and over. Let's do something else." Any expert's boredom really leads people astray. The more you're an expert, the more repetition there's going to be. Don't let that repetition drag you off course, but still be open to things.

Blair: The other part was just this deeper realization. "Wow, I'm seeing a pattern here. I should explore this deeper." I don't think you've talked about this, but I have heard you say in many podcast recordings where I ask you, "David, what was the impetus for this article?" Your response has been, "I was just tired of having the same conversation with my clients, so I decided to put it in a post, and now I can point them to that post."

David: Right. Not because I'm trying to get out of work, but because I've realized that in the early days, when somebody would ask a tough question, it annoyed me because it meant like, "Oh shoot, I've got to think a little harder here. This is slowing me down." Now I love questions because it's an opportunity for me to dig in and figure out what I think about something. Not in a permanent way, but in a provisional way. Early in my consulting career, I started to notice all these times when it's like, "Oh goodness, I should have a better perspective on that that's carefully thought through that I could defend."

I started writing those down, places where I was stumbling around, whether the client noticed it or not. There were 55 things that people kept asking me that I didn't-- that seems like a lot in retrospect. I was like, "Maybe I shouldn't have even been consulting." I just said, "Okay, this'll be fun. I'm going to go through these one by one." Actually, I decided to write an article about each one. Some of those are still really good. Some are not. I just view it as an opportunity. When you get something that breaks the pattern, then use it as an opportunity to learn and get smarter and smarter and follow that curiosity.

Blair: Does this have anything to do with the academic paper you wrote in an earlier life on-- was it unconscious recurrence? Was that it?

David: Subconscious repetition in ancient literature. Oh, I don't know. Maybe. I don't know.

Blair: [laughs]

David: When you see your early work as an academic cited in an academic paper, most people would yawn. I get more excited than most people should probably.

Blair: You actually put something of value out into the world.

David: Assuming academics is value. Yes, subconscious repetition. I'm just reading literature, and I read somebody use a word. Then, a little bit later, they use the same word, but in an unexpected way. It's not the perfect word. They couldn't think of the perfect word, so they used the word they just used. That prompted me to do a lot of research in different languages and so on, and see if that was a thing. I basically invented it, and it's now being used in academic research. It's called subconscious repetition. I found myself doing it, even. It's just odd as human. I just like to notice things anyway. That's what makes me weird.

Blair: Okay.

David: You were supposed to disagree. "David, you're not weird."

Blair: No, I fell asleep during that last little bit, you talking about your academic research. I'm sorry I brought it up.

[laughter]

Blair: My mind is somewhere else.

David: You're going to repeat yourself. If you're repeating yourself a lot as a generalist firm, you are cheating your client.

Blair: You're an old man on a family vacation telling the same stories. Is that what's happening?

David: Yes, right. Where they don't even fit, there's very little relevance and so on. If you're repeating yourself a lot as a specialized firm, you're probably delivering value to your clients. There's a difference here because if you are not a specialist firm, then client scenarios that are being dropped in your lap are very different. You should not be repeating yourself because those scenarios are not the same. Repeating yourself is not a surefire sign of competence. It is if you're a specialized firm. If you're not, it's a sign of laziness.

Blair: You're either highly confident or highly lazy. You decide based on your own assessment of your specialization, which is going to be wrong. That's an interesting point. You have admitted previously that you find yourself having the same conversation, so you write a post on it. That's where FAQs come from, too, on various people's websites and products, et cetera. You just pay attention. When you start to get frustrated, note it in an FAQ. All right, you assigned some extra credit to the reader of this post if they have somebody follow them and write down all the brilliant things they say. Is that it?

David: In a positioning exercise, I'm not making people more competent. I'm simply trying to pull out the competence they already have, which they don't see in themselves. One of the reasons they don't see it in themselves is because they have heard themselves say the same thing so many times that they're just used to it. They're saying those same things because they have noticed patterns and their clients are bringing them similar situations over and over again.

When I say, "Okay, I'd like you to begin articulating your expertise," I have this exercise I call drop and give me 20. It's like, "Give me 20 things you know that another firm that's not positioned the same as you would not know. Some aha moments." Typically, they just look at me, staring blankly. It's like, "I don't think I say those things. I don't see myself as that intelligent or that brilliant." That's because they've been hearing themselves say those things over and over again.

If you flip that around and you put yourself in the shoes of the client who's hearing it for the first time, when they say it, their eyes open up, and they pause, and they say, "Ah, I hadn't thought of it quite like that." What I do in this case is I ask them to have somebody else in the meetings listening to the things that they say over and over again, and see how clients react. When those clients who are hearing it for the first time, when their eyes light up, bam, write that down. That is something that's very intelligent. It's a part of pattern matching, and that deserves further articulation.

They're very smart about that. What they haven't done is they've never codified that into a document that makes it even stronger. Then the other thing they can do, which wasn't available to us until a few years ago, is just using some AI notetaker to pick those repeated statements out and post them automatically in a summary. When you see an AI summary of what you've talked about, it's usually pretty good at picking out the statements that are summary statements. Those are the things that you've said over and over again. My point here for extra credit is that if you don't see yourself saying things over and over again, repeating yourself, it's not that you aren't doing it. It's just that you aren't attuned to it. You'll find it really interesting if you start listening to the way you talk more intently.

Blair: You are spotting the patterns, but you're not spotting yourself spotting the patterns.

David: Yes, right. Other people can help you do that, or an AI tool can do that.

Blair: When I worked as a consultant, your exercise of, "Drop and give me 20, tell me 20 things you know about X, your expertise that a more generalist firm wouldn't know," sometimes it's not very easy for them to do that. Just through the course of the conversation, throughout the day, they will make many assertions that are brilliant, and they don't realize how brilliant they are. You write them down, and when you start the exercise, you can say, "Well, here are six things you've already said." Yes, it's really interesting. There's pattern matching and then noting yourself catching the patterns.

The meta pattern matching is the difficult part because almost everybody listening to this is spotting the patterns. They are saying things that are worth repeating, but in many cases, they probably don't see the value in them. I think that's one of the key takeaways here, isn't it?

David: Yes, exactly right. Another way to say this is that most people listening to these things are smarter than they think. They just have heard themselves say things so often that they're used to them, and they don't hit them the same way that it might hit somebody who hears it for the first time.

Blair: Well, I know I'm a lot smarter than I think, and I think I'm pretty smart. Thanks, David. This has been a great topic.

David: Thank you, Blair.