Q&A 071

Published on:
June 1, 2022

Dear Q&A friends,

Outcomes and process. This week we investigate the relationships and approaches between them. Agreements and contracts, long term investments and influencing change. Enjoy!

🎤 Reporter

In tons of day-to-day situations, convincing others is a key skill. Wether you're trying to sell, either a product or an idea or get people to change, influencing is needed. A classic work in this field is Influence by Robert Cialdini. Based on our human instincts and biases, he explains how to influence people.

Influence reads like a magic bag of tricks, revealing how much of our decision making is steered by subconscious processes we are fully unaware of. Academic research has shown that motor neurons are activated even before a signal reaches our pre-frontal cortex, proving that some decisions (to get up and start moving around, for example) are done and dusted before any logic comes in.

Researcher Ap Dijksterhuis from Radboud University illustrated the balance between conscious and unconscious processes in a most wonderful analogy. The unconscious, he explains, can be seen as 200.000 factory workers in a building with opaque windows. They don't know exactly what's going on in the world, but they still run the show. Our conscious part of the brain is like a reporter, standing in front of the factory, explaining what's going on inside, spinning the stories. He's gotten so good at spinning these stories in a logical sense, that he believes he's running the show.

In my opinion, this wonderfully illustrates the power of storytelling. With stories (and visuals), you directly target the factory workers. Logic be damned, you can influence behaviour best by making people feel a certain way.

What are you selling right now? And how would this logic influence your tactics?

Handcuffs

Our coverage of money being a dissatisfier, spurred quite a bit of debate, mostly in a positive and constructive way. Last week, I got a first-row seat watching this 'tension' unfold.

Supporting a pair of entrepreneurs selling their business, I found myself negotiating the so-called bad-leaver provisions. Important reason why a certain company is bought is often the quality of the management team. It is therefore customary for a purchaser to get some assurance that the management will continue to work for the company. Besides good salaries and incentive plans, the contract usually entails provisions that in case you leave the company by your own decision within the next 3-4 years -defined as 'bad leaver'-, you'll not be entitled to all of the upside in the incentive plans.

In this particular negotiation, the other side was of the opinion that being a bad leaver meant you'll not only be entitled to any upside, but you'd also have to pay a penalty. In other words, there would be a big financial stick. I disagreed. In my opinion, this would create quite the opposite of what the intention is: create as much shareholder value as possible and ensure this remains preserved for as long as possible. However, a financial stick creates the incentive to stay even if you are totally demotivated and hence value-destroying for the company (and yourself).

The solution lies in creating a mechanism that works as a financial carrot to stay as long as possible, but at the same time is not financially inhibitive to leaving should you be demotivated or not fit the new environment. Something as simple as a discount percentage to the value of shares that diminishes over time would already do the trick.

I strongly believe that when you cater for freedom, you'll receive loyalty in return.

📝 Smart

Is the collective smarter than the individual? Is centralised decision-making better than decentralised? Big questions that I've been pondering many times, never quite arriving at satisfying answers. There are many examples that will prove either position.

In a recent Tim Ferriss podcast, Harvard law professor Noah R. Feldman enlightened me on a couple of points, while making the connection to developments in blockchain technology. He made clear that in principle the collective is better at answering factual questions. However, when it comes to making predictions, individuals tend to score better. This is because a collective represents an 'average' human being, which is a mixed bag of biases, beliefs and emotions.

_"... decentralized decision-making organizations, [such as] guilds, some labor unions, [...] can coordinate certain things really well, but there’s certain kinds of decision-making that historically are really hard to make in a decentralized way. So when you’re engaged in a conflict with another entity, when you’re engaged in direct competition with another entity, when you need to coordinate action beyond the initial purposes and evolve your purposes, historically, it’s been really hard for decentralized organizations to pull that off." _

In the blockchain world, there exists a phenomenon called 'smart contract'. They are an ultimate form of decentralisation and ensuring that what you agree, actually gets done. First thing I noticed while listening to this, is that these contracts are in fact not smart at all. They are quite stubbornly and sometimes stupidly executing a set of instructions, as a computer:

"... smart contracts are awesome because of their enforcement capacities. What makes a smart contract better than other kinds of contracts is, [that] it’s as close to self-enforcing as you can get. You don’t need a whole legal system to do the enforcement side of it, and that’s what makes it smart. But the uneditable part means it also has a feature that no real-world contract otherwise ever has pretty much, which is that it’s uneditable, right? You can’t evolve it."

There is value in these types of decentralised contracts, but they would become really of value when you can put the human element back into it: balance and emotion.

🌳 Tree

Planting a tree holds tons of symbolism. It's about aspiration, confidence in the future, a small seed turning into something vast and timeless. Wonderfully interesting guy Kevin Kelly tweeted a photo last week of the tree he planted 55 years ago:

"Long-term thinking: When I was 17, I planted an acorn in my backyard hoping that 50 years later I might return to see a huge oak tree. Here it is 55 years later (center). The best time to plant a tree is yesterday."

I'd like to add some wisdom to this from the Chinese, who say:

"The best time to plant a tree is 20 years ago. The next best time is now."

I love the optimism and pragmatism in this addition. The main point is to invest in stuff with large returns over time, be it in the past or in the present. Long term investments defy our short-term actions and reveal what makes us human. Even if you don't believe in a far-out future, the action itself is a statement. As Martin Luther said:

“Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree.”

What seed are you planting today?

That's it for this week! If you got forwarded this newsletter and like what you read, get your own. Or get an impression of everything else we shared in our renewed, searchable archive.

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Have a great week!

Quinten & Alphons