Value is created by doing; Make mistakes of ambition and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer

Value is created by doing

Sam Altman

Jan 17, 2014

Value is created by doing.

It’s easy to forget this.  A lot of stuff feels like work—commenting on HN, tweeting, reading about other companies’ funding rounds, grabbing coffee, etc [1]—is not actually work.  (If you count that as work, think really hard about the value you’re creating in your job.)  These activities can be worthwhile in small doses—it’s important to network and meet interesting people to stay in the flow of ideas—but they are not by themselves how new wealth gets created.

Value gets created when a company does things like build widgets and sell them to customers.  As a rough guideline, it’s good to stay in roles where you’re close to the doing.

Of course you have to do the right things.  Writing software no one wants does not create value—that’s called a class project.  So it’s critical to figure out the right thing to work on, and strategy is far more valuable than a lot of pivot-happy companies would have you believe.  But strategy alone has no value—value gets captured by execution.

It’s easier to sit around and talk about building a startup than it is to actually start a startup.  And it’s fun to talk about.  But over time, the difference between fun and fulfilling becomes clear.  Doing things is really hard—it’s why, for example, you can generally tell people what you’re working on without NDAs, and most patents never matter.  The value, and the difficulty, comes from execution.

There are good tricks for keeping yourself honest here.  When I was running a company, I used to make a list of everything I got done at the end of the day.  It was remarkable how I could feel like I had a really busy day and realize that night I got nothing done.  Similarly, I could have a day that felt only somewhat busy, but accomplish 3 or 4 major things.

Err on the side of doing too much of the sort of work that matters and blowing off all the rest, or as Machiavelli said:

Make mistakes of ambition and not mistakes of sloth.  Develop the strength to do bold things, not the strength to suffer.

You build what you measure—if you measure your productivity by the number of meetings you have in a day, you will have a lot of meetings.  If you measure yourself by revenue growth or number of investments closed or something like that, you will probably have fewer meetings.

Another example of not-quite-work is every night in San Francisco, there are dinner parties where people get together and talk about the future.  It’s always fun and usually not very contentious—most people agree we need to go to space, for example.  But at the end of it, everyone goes home and works on something else.

If you believe that going to space is the most important project for humanity, then work on it.  If you can’t figure out how to raise hundreds of millions of dollars, go work for SpaceX (joining a great company is a much better plan than starting a mediocre one).  If enterprise software is what you really love, then work on that. [2]

If you’re reading this and feeling unproductive, there’s a silver lining.  You can just close the browser window.  The good news is that it’s easy to course-correct, and it feels great. [1] I count blogging as a marginal use of time, but the reason I started is because I realized it was important to be good at writing, I was bad at it, and the only way I was going to improve was with lots of practice.  And sometimes I meet really interesting founders because of something I wrote.

[2] This isn’t meant as any sort of relative value judgment; if what you want to do is build an enterprise software company, then you should do that.  The problem comes when what you really want to do is build rockets.  A lot of people feel like they first should do something to make money and then do what they care about (or first work at a company for awhile before starting a company they really want to start).  While you of course should take care of your family before anything else, you should try to work on what you really care about.  You can usually find a way.  The danger is that life is short and you only get to work on a small number of companies over the course of a career—it’s worth trying to make them count.

The Cult of Overwork

THE CULT OF OVERWORK

by James SurowieckiJANUARY 27, 2014

For decades, junior bankers and Wall Street firms had an unspoken pact: in exchange for reasonably high-paying jobs and a shot at obscene wealth, young analysts agreed to work fifteen hours a day, and forgo anything resembling a normal life. But things may be changing. Last October, Goldman Sachs told its junior investment-banking analysts not to work on Saturdays, and it has said that all analysts, on average, should be working no more than seventy to seventy-five hours a week. A couple of weeks ago, Bank of America Merrill Lynch said that analysts are expected to have four weekend days off a month. And, last week, Credit Suisse told its analysts that they should not be in the office on Saturdays.

These changes may sound small, but, in the context of the Street, they’re positively radical. Alexandra Michel, a former Goldman associate who is now on the faculty at the University of Pennsylvania, published a nine-year study of two big investment banks and found that people spent up to a hundred and twenty hours a week on the job. In the pre-cell-phone, pre-e-mail days, it was possible for people to find respite when they left the office. But, as David Solomon, the global co-head of investment banking at Goldman, told me, “Today, technology means that we’re all available 24/7. And, because everyone demands instant gratification and instant connectivity, there are no boundaries, no breaks.”

Cry me a river, you might say. But what happened on Wall Street is just an extreme version of what’s happened to so-called knowledge workers in general. Thirty years ago, the best-paid workers in the U.S. were much less likely to work long days than low-paid workers were. By 2006, the best paid were twice as likely to work long hours as the poorly paid, and the trend seems to be accelerating. A 2008 Harvard Business School survey of a thousand professionals found that ninety-four per cent worked fifty hours or more a week, and almost half worked in excess of sixty-five hours a week. Overwork has become a credential of prosperity.

The perplexing thing about the cult of overwork is that, as we’ve known for a while, long hours diminish both productivity and quality. Among industrial workers, overtime raises the rate of mistakes and safety mishaps; likewise, for knowledge workers fatigue and sleep-deprivation make it hard to perform at a high cognitive level. As Solomon put it, past a certain point overworked people become “less efficient and less effective.” And the effects are cumulative. The bankers Michel studied started to break down in their fourth year on the job. They suffered from depression, anxiety, and immune-system problems, and performance reviews showed that their creativity and judgment declined.

If the benefits of working fewer hours are this clear, why has it been so hard for businesses to embrace the idea? Simple economics certainly plays a role: in some cases, such as law firms that bill by the hour, the system can reward you for working longer, not smarter. And even if a person pulling all-nighters is less productive than a well-rested substitute would be, it’s still cheaper to pay one person to work a hundred hours a week than two people to work fifty hours apiece. (In the case of medicine, residents work long hours not just because it’s good training but also because they’re a cheap source of labor.) On top of this, the productivity of most knowledge workers is much harder to quantify than that of, say, an assembly-line worker. So, as Bob Pozen, a former president of Fidelity Management and the author of “Extreme Productivity,” a book on slashing work hours, told me, “Time becomes an easy metric to measure how productive someone is, even though it doesn’t have any necessary connection to what they achieve.”

Habit, too, is powerful: things are done a certain way because that’s how they’ve been done before, and because that’s the way the people in charge were trained. When new regulations limited medical residents’ working hours to eighty a week, many doctors complained of declining standards and mollycoddling, and said that it would have a disastrous effect on training, even though residents in Europe work many fewer hours, without harming the quality of medical care. “I went through it, so you should” is a difficult impulse to resist.

To make these new policies stick, then, banks have to change not just rules but expectations. Indeed, as Michel told me, “it isn’t really external rules that force bankers to work the way they do. It’s an entire cultural system.” She cites the example of a consulting firm that mandated that people stay out of the office on weekends, only to discover that they were working secretly from home. In a culture that venerates overwork, people internalize crazy hours as the norm. As the anthropologist Karen Ho writes in her book “Liquidated,” “On Wall Street, hard work is always overwork.” Grinding out hundred-hour weeks for years helps bankers think of themselves as tougher and more dedicated than everyone else. And working fifteen hours a day doesn’t just demonstrate your commitment to a company; it also reinforces that commitment. Over time, the simple fact that you work so much becomes proof that the job is worthwhile, and being in the office day and night becomes a kind of permanent initiation ritual. The challenge for Wall Street is: can it still get bankers to run with the pack if it stops treating them like dogs? ♦

Read more: http://www.newyorker.com/talk/financial/2014/01/27/140127ta_talk_surowiecki?printable=true&currentPage=all#ixzz2rQSrI44K

If You’re Not Helping People Develop, You’re Not Management Material

If You’re Not Helping People Develop, You’re Not Management Material

by Monique Valcour  |   10:00 AM January 23, 2014

Skilled managers have never been more critical to the success of firms than they are today.  Not because employees can’t function without direction, but because managers play a vital role in talent management. Gone are the comprehensive career management systems and expectations of long-term employment that once functioned as the glue in the employer-employee contract.  In their place, the manager-employee dyad is the new building block of learning and development in firms.

Good managers attract candidates, drive performance, engagement and retention, and play a key role in maximizing employees’ contribution to the firm. Poor managers, by contrast, are a drag on all of the above.  They cost your firm a ton of money in turnover costs and missed opportunities for employee contribution, and they do more damage than you realize.

Job seekers from entry-level to executive are more concerned with opportunities for learning and development than any other aspect of a prospective job.  This makes perfect sense, since continuous learning is a key strategy for crafting a sustainable career.  The vast majority (some sources say as much as 90%) of learning and development takes place not in formal training programs, but rather on the job—through new challenges and developmental assignments, developmental feedback, conversations and mentoring.  Thus, employees’ direct managers are often their most important developers.  Consequently, job candidates’ top criterion is to work with people they respect and can learn from. From the candidate’s viewpoint, his or her prospective boss is the single most important individual in the firm.

Managers also have a big impact on turnover and retention. The number one reason employees quit their jobs is because of a poor quality relationship with their direct manager.  No one wants to work for a boss who doesn’t take an interest in their development, doesn’t help them deepen their skills and learn new ones, and doesn’t validate their contributions. This isn’t what departing employees tell HR during their exit interviews, of course.  After all, who wants to burn a bridge to a previous employer? Instead, they say they’re leaving because of a better opportunity elsewhere.  And so what happens is that organizations remain in the dark regarding how much damage their inept managers are doing.

Regardless of what else you expect from your managers, facilitating employee learning and development should be a non-negotiable competency.  Google’s famous people analytics team examined data from thousands of employee surveys and performance reviews to find out which behaviors characterize its most effective managers.  Coaching topped a list that also included helping with career development.  Research by Gallup has yielded similar results.  Work groups in which employees report that their supervisor (or someone else at work) cares about them as a person, talks to them about their career progress, encourages their development, and provides opportunities to learn and grow have lower turnover, higher sales growth, better productivity, and better customer loyalty than work groups in which employees report that these developmental elements are scarce.

Remember the Peter Principle?  The phrase refers to a process in which employees receive promotions as a reward for being competent in their current jobs, and they continue to rise through an organization’s ranks until they reach a level at which they are incompetent.  The predictable consequence of this pattern is that over time, an organization becomes heavily staffed by managers who are bad at their jobs.  Your organization cannot afford to let this happen.

Becoming a great developer of employees requires managers to expand their focus from “How can I get excellent performance out of my team members?” to “How can I get excellent performance out of my team members while helping them grow?”  Savvy managers know that doing well on the second part of the last question helps to answer the first.

The best managers ask, “How can we harness employee strengths, interests and passions to create greater value for the firm?”  Systematically linking organizational performance and individual development goals in the search for learning opportunities and better ways to work is a hallmark of organizations where sustainable careers flourish. And this is not a question managers try to answer by themselves; instead, they discuss it regularly with their team members.

Here are several steps you can take to stimulate learning and development:

Share detailed information with your team about current operations across the firm.  Be transparent about the firm’s challenges and direction, including such things as changing customer expectations, new vendor relationships, early-stage strategic plans, and top leaders’ thinking regarding the potential impact of industry trends and economic conditions. Invite their questions, thinking and suggestions on these issues as well.

Support the development of internal social networks that span functions and divisions in order to give employees broader understanding of the organization and help them spot opportunities to learn and to add value.

Instead of a once-annual conversation about career goals at the time of the annual performance review, have frequent short conversations throughout the year regarding employees’ career goals and interests, which may not be self-evident. Regular career conversations help employees to refine their goals. With better understanding of their learning goals, you and your employees are in a better position to spot developmental opportunities.

When planning your team’s work, ask employees to identify both how they can contribute and what they would like to learn. This gives employees the primary responsibility for clarifying what they want to learn and for proposing ways to incorporate on-the-job learning. It also helps to avoid having employees volunteer to perform only the tasks that they are already highly skilled at.

Ask employees to report back periodically to you and fellow team members on what they have been learning and how they are using new skills and knowledge.

Keep in mind that in addition to helping employees develop and pursue meaningful learning goals, regular career conversations also help to mark progress in development. And they serve as a reminder of the organization’s commitment to employee learning, which in turn strengthens employee commitment.

The Secret to Lean Innovation Is Making Learning a Priority

The Secret to Lean Innovation Is Making Learning a Priority

by Tom Agan  |   12:00 PM January 23, 2014

Lean innovation is being embraced by everyone — from the smallest start-ups to the largest global organizations. But in most cases, it’s still falling well short of its full potential because it either lacks or fails to tightly integrate with the mechanisms needed to systematically capture lessons learned and share them outside the team. And that’s where the money is in innovation.

Lean innovation embraces a philosophy of not letting perfection get in the way of progress. It leverages the Pareto principle that 20% of a product’s features (what’s distilled down into the minimal viable product) will most likely deliver 80% of the benefits sought by customers.

As an approach, lean innovation lends itself especially well to corporate cultures, often engineering ones and others strongly focused on process-improvement programs such as Six Sigma. Its straightforward, step-by-step methodology makes it relatively easy to explain and to implement:

Identify the minimal viable product.

Develop a version rapidly and test it with customers, ideally in a real-world competitive situation.

Repeat the process until the core product is competitive or pivot to explore a new approach.

Lean innovation stands in stark contrast to conventional approaches to product development in which teams expend enormous effort trying to create a perfected, many-featured product over an extended period without sufficient in-market customer feedback. The resulting new products are often too expensive, too complicated, too different from what customers want, and too late to market.

But an exclusively process-driven view of lean innovation obscures the underlying reason for its power. And without a deeper understanding, we limit our ability to fully benefit from its potential.

When I worked at Nielsen, I led a study of innovation best practices in the consumer-packaged-goods (CPG) industry with companies like Procter & Gamble and Kraft that revealed why top-performing companies average 600 times more revenue from their new products than the lowest performers. The research tied variations in new product revenue at almost 30 global companies to differences in processes, culture, organizational structure, senior executive leadership roles, and investment.

One of the key findings was that learning has far and away the single greatest impact on revenue from new products. And creating a better environment for learning is what lean innovation does so well. Its focus on the most important product attributes and rapid cycling of trial and error — ideally in the real-life competitive environment — accumulates critical knowledge at a rapid clip.

In other words, lean innovation is not a better innovation process; rather it’s a more efficient learning process. And by combining the lean perspective with innovation research from CPG companies, we can vastly improve the effectiveness of the lean innovation approach. Here is what the research tells us:

Companies with mandatory formal debriefs of both success and failure following new product launches average about 100% more revenue from new products in comparison to companies that don’t formally debrief.

When debriefs are led by an outside third party, the revenue increases substantially more.

And when the learnings are captured in a knowledge management system, revenue jumps again.

Companies that apply these learnings to creating, continuously improving, and strictly following decision-making criteria for the evaluation of potential new products average about 130% more revenue from new products.

Success can skyrocket by simply adding the above steps to a lean innovation process.

But this research also points to a cautionary note regarding lean innovation. Given that lean innovation teams move so quickly, the learnings are less likely to be captured than in traditional, slower approaches to product development. Secondly, given that lean innovation teams often exist in parallel with conventional product development teams, valuable learnings from lean teams are not always transferred to the development side.

We need to think of lean innovation as a process that drives more efficient learning. But to maximize success, lean innovation must be married to practices that effectively capture these rich lessons and make them readily available to everyone within the organization.

Five Questions Every Leader Should Ask About Organizational Design

Five Questions Every Leader Should Ask About Organizational Design

by John Beeson  |   11:00 AM January 23, 2014

A few years ago Dave Ulrich, a management thought leader from the University of Michigan, made a comment I found both insightful and profound: “Every leader needs to have a model of organization design.” Typically a graphic depiction of the organizational components to be addressed in a redesign (for example, McKinsey’s 7S model, which includes strategy, structure, systems, staff, skills, and so on), every consultant and his brother flogs an organization design model. Dave didn’t advocate any particular design model, just one the leader knows how to employ and one flexible enough to be applied to the range of organizational situations a leader faces in the course of a career.

Once upon a time, “organization design” meant bringing in a slew of consultants to oversee a large-scale organizational restructuring, most often intended to take out big chunks of cost during an economic downturn. Although that kind of redesign is still required periodically, leaders today are more typically confronted with the challenge of how to find cost efficiencies in certain parts of their organization to invest in other parts of the organization that drive growth. As a result, organization design is no longer just a big bang event. Rather it’s an on-going nipping and tucking of organizational resources to achieve both growth and efficiency at multiple levels: the company overall, the operating group level, and even within functional groups like human resources and information technology. So leaders at many different levels need to get in on the act.

If, as Dave suggests, there isn’t any ideal design model, then how does one choose an approach to designing an organization that is robust enough to address the dual goals of achieving efficiency and investing in growth at multiple levels of the organization?

The fundamental task of organization design is, as it always has been, helping a leader move from defining strategy to putting in place an organization that enables the strategy to be executed predictably. An effective organization design model guides a manager in answering five fundamental questions in a thoughtful and well-integrated way.

What is the business’s value proposition and it sources of competitive advantage? Business strategies are lofty, typically long-term oriented, and often aspirational. By contrast a compelling value proposition describes succinctly how the company will compete successfully against its competition—and implies the critical activities around which the organization should be designed. Are you competing on the basis of on-going product or technological innovation? Through low-cost sourcing and manufacturing?  By creating highly customized solutions for target customers? A clear, straightforward answer to this question provides a foundation on which you can design an organization.

Which organizational activities directly deliver on that value proposition—and, by contrast, which activities can the company afford to perform in a way equivalent to competition? When faced with an organization design challenge, many managers rush to grab a cocktail napkin—long the instrument of choice for reorganizing—and sketch out a high-level diagram of boxes and reporting relationships. In doing so, they implicitly accept the way organizational resources and costs are currently deployed and miss opportunities for more creative, effective design. A better course is devoting time to considering what organizational functions truly bring the value proposition to life. As Kreig Smith, founder of design consultancy AlignOrg Solutions, has pointed out, not all work is created equal. Certain activities are crucial to delivering on the value proposition. As a result, they should be owned by the company and given the greatest possible resources.

Conversely, there are functions and activities where an extra dollar of investment doesn’t help the company win in the marketplace. What’s important is to realize that both sets of activities vary with a company’s business strategy. For example, new product development may be the lifeblood of a consumer products company—and thus need to be cultivated and resourced carefully—while in a low-cost producer, or fast follower company, product development may be only a nice-to-have activity. “Get the wash out the door” activities, that is, those where being at par with competition is sufficient, are candidates for cost reduction whether by centralization, automation, outsourcing, or a shared service approach.

Which organization structure should we choose, and how do we overcome its inherent downsides? Many leaders fall in love with the organization structure they’re most familiar with, whether it’s organized according to function, geographic location, customer segment, or through a matrix. In the process they neglect to appreciate the pros and inherent cons of the structure and thus fail to take steps to mitigate the downsides. While a structure organized around customer groups is great for getting close to them and catering to their needs, for instance, it can be costly, and over time interest in product innovation may wane. What’s more, organization structures by definition create boundaries between one part of the organization and others. A successful organization design therefore, as Jay Galbraith of the Center for Effective Organizations pointed out years ago, includes linking or integrating mechanisms, such as an account management function to coordinate activities—creative, design, brand management, and so forth—on behalf of the client within an advertising agency.

What type of leadership and culture are required to achieve the value proposition? For all the table pounding that managers do about culture change, few fully consider the type of leadership and culture required to put a new organization design into gear. Clearly, a low-cost producer strategy demands a ruthless focus on controlling costs while a customer-focused organization needs to encourage deep customer knowledge and internal coordination aimed at creating customer-specific products and services. When a company adopts a significantly different organization design, a critical part of the implementation process needs to include putting in place leaders who lead in a way consistent with the new value proposition and who will take steps to strengthen corresponding cultural norms. For example, when a company moves from an efficiency-based strategy to a customer-focused one, members of the leadership team need to introduce a new reward system to promote a do-whatever-it-takes mentality in responding to customer needs throughout the organization.

Which organizational practices are required to reinforce the organizational intent? Many managers introduce a new strategy and organization structure and declare victory—often at their peril. The reason that cultures are so difficult to change is that cultural values are deeply woven into the policies and practices that govern how people work. As a result, when leaders launch a significantly new organization design, it’s imperative that they revise such practices — how performance objectives are set, the metrics and scorecards that signal success or failure, the type of people to be recruited, and how they are trained. Otherwise, they’ll put in place a shiny new organization structure — but find that people are behaving exactly as they did under the old regime.

As organization structures have become more fluid and organic, organization design is no longer the purview of a handful of senior executives supported by high-priced consultants. Leaders at many levels of the organization are increasingly called on to reallocate organizational resources and redesign their organizations to support more frequent shifts in company strategy. As a result, they need to have a trusty organization design model in their wallets—and know how to use it.

Does Your Company Make You a Better Person?

Does Your Company Make You a Better Person?

by Robert Kegan, Lisa Lahey and Andy Fleming  |   8:00 AM January 22, 2014

When we hear people talk about struggling to maintain work-life balance, our hearts sink a little. As one executive in a high-performing company we have studied explained, “If work and life are separate things—if work is what keeps you from living—then we’ve got a serious problem.” In our research on what we call Deliberately Developmental Organizations—or “DDOs” for short—we have identified successful organizations that regard this trade-off as a false one. What if we saw work as an essential context for personal growth? And what if employees’ continuous development were assumed to be the critical ingredient for a company’s success?

The companies we call DDOs are, in fact, built around the simple but radical conviction that the organization can prosper only if its culture is designed from the ground up to enable ongoing development for all of its people. That is, a company can’t meet ever-greater business aspirations unless its people are constantly growing through doing their work.

What’s it like to work inside such a company? Imagine showing up to work each day knowing that in addition to working on projects, problems, and products, you are constantly working on yourself.  Any meeting may be a context in which you are asked to keep making progress on overcoming your own blindspots—ways you are prone to get in your own way and unwittingly limit your own effectiveness at work.

Whether you are someone who avoids confrontation, hides your inadequacies to avoid being found out, often acts before thinking things through, gets overly aggressive when your ideas are criticized, or are prone to any number of other forms of counterproductive thinking and behavior, you and your colleagues can expect to be working on identifying and overcoming these patterns as part of doing your job well. Together, in meetings, one-on-one sessions, and just during the course of your everyday work, you will also be seeking to get to the root causes of these patterns and continually devising different ways of doing things and seeing what happens as a result.

In a DDO, the root causes almost always are about people’s interior lives—about unwarranted and unexamined assumptions and habitual ways of behaving. And no executive or leader (no matter how senior) is immune from the same analytic process. When it comes to ongoing development, rankdoesn’t have its usual privileges.

In the ordinary organization, every person is doing a second job no one is paying them to perform—covering their weaknesses and inadequacies, managing others’ good impression of them, and preserving a position that would feel more precarious if people didn’t always see them at their best. In a DDO, this is considered the single biggest waste of resources in organizational life.

Imagine if you worked in a place where your inadequacies were presumed not to be shameful but were instead potential assets for continuing growth, where business challenges were new opportunities to test out whether you could take a more effective approach to solving a problem, where no matter how effective you were at your job, you could keep stretching yourself to even greater levels of capability.

Imagine if you worked in a place where the definition of a “good fit” between the person and the job is “she does not yet have all the necessary capabilities to perform the role at a high level, but we will help her to develop them, and when she does she will have outgrown this job, and we will need to find her another.”

An implication of our work for companies that aspire to be high-performing cultures is summed up in this question:  Would you continue to consign the development of your people (and, inevitably, onlya fraction of your people) to one-off training programs, executive coaches, high-potential programs, and the like if you could make your organization’s very operations the curriculum and your company the most compelling possible classroom in your sector?

Being part of such an organization is not always easy, but the environment created by a focus on development in the workplace that is universal (across all ranks and functions in the organization) and continuous (and therefore habitual) unleashes some surprising qualities: compassion alongside tough-minded introspection and organizational solidarity that comes from collective work at self-improvement.  This creates a different kind of vitality at work: a work and life integrated rather than balanced against each other.

With thanks to our research team members, Matt Miller and Inna Markus, who contributed to this piece and to the forthcoming HBR article, “Making Business Personal” (April 2014).  

The Choreography of Design, Treasure Hunts, and Hot Dogs That Have Made Costco So Successful; The Designer of Over 500 Costco Warehouses on What Makes the Brand Such a Trustworthy Business

THE CHOREOGRAPHY OF DESIGN, TREASURE HUNTS, AND HOT DOGS THAT HAVE MADE COSTCO SO SUCCESSFUL

THE DESIGNER OF OVER 500 COSTCO WAREHOUSES ON WHAT MAKES THE BRAND SUCH A TRUSTWORTHY BUSINESS.

BY STAN LAEGREID

Costco, the sixth largest retailer in the world, succeeds because of its adeptness in breaking the rules of retail common sense. Costco has no advertising for non-members, though contained in a vacuous space, they offer no signage, then when you check out they do not bag your purchase. On top of that, the Costco store contains a mere 3,600 SKUs. Supermarkets offer around 25,000 and a typical Walmart can tally 142,000 SKUs under its roof. At Costco, if you want ketchup, you get just one choice, not 12. And all this comes with a membership fee; the shopper has to pay to even enter the store. But it works, and here’s why:

PANORAMIC STORE PLANNING

After transcending those barriers to entry, once you walk through Costco’s doors, the store is clearly set before you. It’s a carefully choreographed movement. The store–a three-acre, 148,000 square foot warehouse–at first glance appears overwhelming. The store layout however, offers a panoramic view of each of its shopping districts.

In comparison, Ikea stores create a circuitous but forcefully maneuvered “yellow brick road.” You survey each Ikea district only at your point of arrival there, whereas at Costco, the consumer can visually survey the entire store at its entrance, taking in the racetrack retail plan that will lead them past each of the Costco shopping districts they have already visually anticipated.

Upon entry, the Costco visitor is met by the “luxe” offerings of televisions, computers, and electronics. Add the unexpected but exotic offerings: a Cartier watch or a Prada handbag, or, on at least one occasion, an original Picasso. They may be for sale at a much reduced price, but likely for only a fleeting moment.

As the customer continues along, the racetrack infield features home, seasonal, and lifestyle selections on low-profile racks that allow for open sight lines across any point of the store. Beyond, floor-to-ceiling racks of hard goods ring the outside of the racetrack while fresh food is found at the racetrack’s far end. The very outside of the track is home to practical staples, including toilet paper, whose location requires consumers to pass many impulse buys.

PERISHABILITY TRIGGERS THE HUNT

Another element of Costco’s magic is the constant, storewide rotation of target staples–such as light bulbs, detergent, and paper towels–referred to as “triggers.” The shopper must search storewide for triggers, which, again, exposes them to a greater number of products. This is a “treasure hunt” in Costco’s parlance.

THE ENSUING SENSE OF URGENCY TO IMPULSE BUY IS STEMMED BY THE FEAR THAT THE ITEM MIGHT BE GONE IF YOU WAIT TO RECONSIDER.

Costco rotates upward of 25% of its hard-goods and its products inside the racetrack as triggers. The result is that, of the 3,600 items for sale, a full 1,000 may be offered only for that particular moment and may not be available upon a future shopping visit. In fashion retail, Zara has mastered this version of perishability, which creates a high turnover of unique and current offerings that, when sold out, are replaced by a new set of fashion looks or unique new offerings. The ensuing sense of urgency to impulse buy is stemmed by the fear that the item might be gone if you wait to reconsider.

A DANCE THAT DEFIES CRITICS

This choreography has resulted in astounding, perennial success: Last June, the Seattle Times ranked Costco as the 10th best company in the Northwest, placing it ahead of Amazon.com, Microsoft, Nordstrom, and Nike. The Times acknowledged that this kind of ranking is relative, but the recognition is still impressive. To qualify the retailer’s success further, we can look at rankings by specific factors, which offer more concrete comparisons.

In this case, it actually produces an even more staggering result: Costco is the fourth largest retailer in the country, and this year it’s No. 22 in the Fortune 500. The Costco private label, Kirkland Signature, is one of the most successful brands in the industry. Jim Sinegal, Costco cofounder and former CEO, just won the National Retail Federation’s Gold Medal Award for 2014, that organization’s highest honor. Since its inception, the company has never posted a negative same-store sales result, and Costco averages among the highest sales figures per sale in the industry.

Despite this success, greed has not overtaken its operation. Costco engenders loyalty among both its employees and members with a strategy that looks out for both. For its members, Costco religiously limits its mark-ups to a maximum of 15%, straining its profit margin compared to the average mark-up of 25% for supermarkets and in excess of 50% for department stores.

For its employees, a full-time hourly Costco worker with customary raises can make upward of $40,000 annually after three to four years. With an average pay approaching twice the minimum wage, Costco also offers health care for upward of 90% of its employees. That results in one of the lowest turnover rates in the industry.

A Costco store, located in Chicago.Photo courtesy of Brian Fritz

FRUGALITY BEGETS SUSTAINABILITY

Costco thrives on a sense of simplicity and sustainability. The store recycles packaging boxes for customers to use instead of bags, and displays are often just stacks of pallets from the loading dock. Costco also recycles tires and grease, and each warehouse uses around 150 individual skylights to provide a majority of the store’s illumination through natural lighting. Customers are unaware of many sustainable strategies, such as advanced heat recovery from the refrigeration system, or the increased introduction of solar panels. These efforts to maximize efficiency, from operations to store design and production, help Costco scale worldwide and still offer the benefits to its customers and employees.

CURATE MY KETCHUP

Costco also serves as a commodity editor that we can trust. There is a sentiment in shopping psychology that we as consumers suffer from a burden of choice and resultant overload anxiety. More than ever, we rely on social editors–people in whom we have faith or institutions whose values we identify with–to make simple decisions for us. Shoppers can freeze at the sight of an entire corridor of breakfast cereals, but Costco pre-selects and makes only one or two offerings. While Costco’s motivation may be efficiency, it ends up offering the customer simplicity and less stress, increasingly valued commodities.

INNOCENCE BELIES STRATEGY

After the checkout, the food court offers–in this case very similar to Ikea–a hot dog at $1.50, the same price since 1985. It’s again indicative of the company’s concerted effort, if not culture, to provide ever more value for its members while holding prices steady–or reducing them. It creates a situation where even the most determined single-item hunter shopper will be persuaded into many additional purchases. This carefully orchestrated layout of temptation and choreography results in an unexpected shopping spree that makes Costco a genius at seducing and catering to its customers at the same time. All this contained in a seemingly innocent warehouse.

—Stan Laegreid, AIA, is senior principal of MulvannyG2 Architecture, Bellevue, WA, which has designed nearly every of Costco’s 648 warehouses and counting, worldwide, since the retailer opened for business in 1983.

About That Morningstar Cover Jinx

About That Morningstar Cover Jinx

By John Rekenthaler | 01-23-14 | 08:45 AM | Email Article

Black Cats and Broken Mirrors
All right, I confess: I cheated with the headline. There’s no longer the sense among industry watchers that Morningstar’s Fund Manager of the Year Award serves as a jinx. This year, I’ve only seen one such article–a blog in U.S. News & World Reportcalled “The Curse of the Morningstar Top Fund Manager”–and even that was a head fake, as the article ended up being more about investor behavior than about the performance of FMOY funds.

But it’s a good excuse to run the numbers.

For all funds with managers who won an FMOY Award since the honor was first given in 1998, I compared the fund’s future Morningstar Risk-Adjusted Return against that of the category average.* The time periods were the following: one year, three years, five years, and 10 years.

 * If the manager ran more than one fund, I chose the largest, most visible fund, rather than double count that manager’s award. 

Below are the following one-year results, sorted into five buckets: 1) the fund’s MRAR was at least 4 percentage points per year higher than the category average; 2) the fund’s MRAR was between 1 and 4 percentage points higher; 3) the fund’s MRAR was between 1 percentage point lower and 1 percentage point higher; 4) the fund’s MRAR was between 4 percentage points lower and 1 percentage point lower; and 5) the fund’s MRAR was more than 4 percentage points lower.

(The cutoffs for the buckets are entirely arbitrary, but choosing different cutoffs does not change the analysis. As always, this analysis is from the perspective of the ongoing investor, so it does not include front-end sales charges but it does include all components of annual expenses.)

  – source: Morningstar Analysts

In the year after the managers won, the FMOY Award funds regressed toward the mean, as one would expect. Overall, though, their performance remained modestly above average, as they were 34 funds making the top two quintiles and 24 funds landing in the bottom two quintiles. At the extremes, four funds out of the 57 in the sample had MRARs of greater than 8%, and five had MRARs of less than negative 8%.

While risk-adjusted performance is the best way to score success, per standard academic theory, it’s worth checking to see if total returns tell a different story. They do not, as shown by the chart below:

  – source: Morningstar Analysts

Extending past one year, the numbers sharply improve. Winners (that is, funds landing in the top two quintiles) outnumber losers (funds in the bottom two quintiles) by an almost 2:1 margin for three years and by 3:1 for the five- and 10-year periods.

  – source: Morningstar Analysts

  – source: Morningstar Analysts

  – source: Morningstar Analysts

This looks to be a straightforward tale. There’s little short-term information in an FMOY Award. Winners perform slightly better than randomly over the next 12 months. Over longer time periods, however, there is a good deal of information. This makes sense as, despite its name, the FMOY Award is something of a career achievement, given to a successful manager who happens to have had a particularly good year.

The effect holds for all three asset classes that receive the award–Domestic Stock, International Stock, and Fixed Income. (Yes, the Domestic Stock group is responsible for the modest one-year success. But I suspect that is luck; I see no reason why Morningstar’s Fund Research team has the ability to identify one-year winners with U.S. stock funds but not elsewhere.)

For example, the five-year results by asset class:

  – source: Morningstar Analysts

  – source: Morningstar Analysts

  – source: Morningstar Analysts

I suspect that whispers of the curse will persist, as by chance three or four FMOY winners each decade figure to post a bottom-decile return the following year, thereby giving periodic opportunity for new anecdotes. There’s nothing to the general claim of a jinx, though, not as far as I can see.

Note: Morningstar’s Kailin Liu and I have each previously written on this topic, using a similar approach and arriving at broadly similar conclusions. Those articles are hereand here.

John Rekenthaler has been researching the fund industry since 1988. He is now a columnist for Morningstar.com and a member of Morningstar’s investment research department. John is quick to point out that while Morningstar typically agrees with the views of the Rekenthaler Report, his views are his own.

John Rekenthaler is Vice President of Research for Morningstar.

How to Read A Book

How to Read A Book

“Marking a book is literally an experience of your differences or agreements
with the author. It is the highest respect you can pay him.”
— Edgar Allen Poe

You already know how to read. I bet you were taught how in elementary school.

But do you know how to read well?

If you’re like most people, you probably haven’t given much thought to how you read.

Are you reading for information or understanding?

While great for exercising your memory, the regurgitation of facts without understanding gains you nothing. A lot of people, however, confuse insightful understanding with the ability to regurgitate information. They think that knowledge of something means understanding.

A good heuristic: Anything easily digested is reading for information.

Consider the newspaper, are you truly learning anything new? Do you consider the writer your superior when it comes to knowledge in the subject? Odds are probably not. That means you’re reading for information.

There’s nothing wrong with that; it’s how most people read. But you’re not really learning anything new. It’s not going to give you an edge or make you better at your job.

Learning something insightful is harder, you have to read something clearly above your current level. You need to find writers who are more knowledgeable on a particular subject than yourself. It’s also how you get smarter.

Reading for understanding means narrowing the gap between reader and writer.

The four levels of reading

Mortimer Adler literally wrote the the book on reading.

His book, How to Read a Book, identifies four levels of reading:

Elementary

Inspectional

Analytical

Syntopical

The goal of reading determines how you read.

Reading the latest Danielle Steel novel is not the same as reading Plato. If you’re reading for entertainment or information, you’re going to read a lot differently (and likely different material) than reading to increase understanding. While many people are proficient in reading for information and entertainment, few improve their ability to read for knowledge.

Before we can improve our reading skills, we need to understand the differences in the reading levels. They are thought of as levels because you can’t move to a higher level without a firm understanding of the previous one — they are cumulative.

1. Elementary Reading
This is the level of reading taught in our elementary schools.

2. Inspectional Reading
We’ve been taught that skimming and superficial reading are bad for understanding. That is not necessarily the case. Using these tools effectively can increase understanding. Inspectional reading allows us to look at the authors blueprint and evaluate the merits of a deeper reading experience.

There are two types of inspectional reading:

Systematic skimming
This is meant to be a quick check of the book by (1) reading the preface; (2) studying the table of contents; (3) checking the index; and (4) reading the inside jacket. This should give you sufficient knowledge to understand the chapters in the book pivotal to the authors argument. Dip in here and there, but never with more than a paragraph or two. Skimming helps you reach to a decision point: Does this book deserve more of my time and attention? If not you put it down.

Superficial reading
This is when you just read. Don’t ponder the argument, don’t look things up, don’t write in the margins. If you don’t understand something, move on. What you gain from this quick read will help you later when you go back and put more effort into reading. You now come to another decision point. Now that you have a better understanding of the books contents and its structure, do you want to understand it?

Inspectional reading gives you the gist of things. Sometimes that’s all we want or need. Too often however people stop here.

3. Analytical Reading

Francis Bacon once remarked “some books are to be tasted, others to be swallowed, and some few to be chewed and digested.” Think of analytical reading as chewing and digesting.

Analytical reading is a thorough reading. If inspectional reading is the best you can do quickly, this is the best reading you can do given unlimited time. At this point you start to engage your mind and dig into the work required to understand what’s being said.

There are rules to analytical reading

Classify the book according to kind and subject matter.

State what the whole book is about with the utmost brevity.

Enumerate its major parts in their order and relation, and outline these parts as you have outlined the whole.

Define the problem or problems the author is trying to solve.

You’ll probably notice that while those sound pretty easy, they involve a lot of work. Luckily the inspectional reading you’ve already done has primed you for this.

When you’ve done this you will understand the book but you might not understand the broader subject. To do that you need to use comparative reading to synthesize knowledge from several books on the same subject.

4. Syntopical Reading

This is also known as comparative reading and it represents the most demanding and difficult reading of all. Syntopical Reading involves reading many books on the same subject and comparing and contrasting the ideas.

This task is undertaken by identifying relevant passages, translating the terminology, framing and ordering questions we need answered, defining the issues and having a conversation with the responses.

The goal is not to achieve an overall understanding of any particular book, but rather to determine how to make the books useful to you.

This is all about you and filling in your gaps.

There are five steps to syntopical reading:

Finding the Relevant Passages
You need to find the right books and then the passages that are most relevant to filling your needs. So the first step is an inspectional reading of all the works that you have identified as relevant.

Bringing the Author to Terms
In analytical reading you must identify the key words and how they are used by the author. This is fairly straightforward.

The process becomes more complicated now as each author has probably used different terms and concepts to frame their argument. Now the onus is on you to establish the terms. Rather than using the authors language, you must use your own.

In short this is an exercise in translation and synthesis.

Getting the Questions Clear
Rather than focus on the problems the author is trying to solve, you need to focus on the questions you want answered. Just as we must establish our own terminology, so too must we establish our own propositions by shedding light on our problems to which the authors provide answers.

It’s important to frame the questions in such a way that all or most of the authors can be interpreted as providing answers. Sometimes we might not get an answer to our questions because they might not have been seen as questions by the authors.

Defining the Issues
If you’ve asked a clear question to which there is multiple answers then an issue has been defined. Opposing answers, now translated into your terms, must be ordered in relation to one another. Understanding multiple perspectives within an issue helps you form an intelligent opinion.

Analyzing the Discussion
It’s presumptions to expect we’ll find a single unchallenged truth to any of our questions. Our answer is the conflict of opposing answers. The value is within the discussion you have with these authors. You can now have an informed opinion.

Become a Demanding Reader

Reading is all about asking the right questions in the right order and seeking answers.

There are four main questions you need to ask of every book:

What is this book about?

What is being said in detail and how?

Is this book true in whole or in part?

What of it?

If all of this sounds like hard work, you’re right. Most people won’t do it. That’s what sets you apart.

Hesitate! Quick decision-making might seem bold, but the agony of indecision is your brain’s way of making a better choice

Hesitate! Quick decision-making might seem bold, but the agony of indecision is your brain’s way of making a better choice

by Steve Fleming 2,500 words

Steve Fleming is a cognitive neuroscientist. He is a postdoctoral fellow at New York University and a blogger at The Elusive Self.

In the autumn of 2007, the then prime minister of the UK, Gordon Brown, was riding on a wave of popularity. He had just taken the reins from Tony Blair, adroitly dealt with a series of national crises (terrorist plots, foot and mouth disease, floods) and was preparing to go to the country for a new mandate for his government. But then a decision to postpone the election tarred him with a reputation for dithering and his authority began to crumble. The lasting impression was not one of astute politicking — it was of a man plagued by indecision.

Whether lingering too long over the menu at a restaurant, or abrupt U-turns by politicians, flip-flopping does not have a good reputation. By contrast, quick, decisive responses are associated with competency: they command respect. Acting on gut feelings without agonising over alternative courses of action has been given scientific credibility by popular books such as Malcolm Gladwell’s Blink (2005), in which the author tries to convince us of ‘a simple fact: decisions made very quickly can be every bit as good as decisions made cautiously and deliberately’. But what if the allure of decisiveness were leading us astray? What if flip-flopping were adaptive and useful in certain scenarios, shepherding us away from decisions that the devotees ofBlink might end up regretting? Might a little indecision actually be a useful thing?

Let’s begin by casting a critical eye over our need for decision-making speed. It has been known for many years that the subjective ease with which we process information — termed ‘fluency’ by psychologists — affects how much we like or value things. For example, people judge fluent statements as more truthful, and easy-to-see objects as more attractive. This effect has consequences that extend beyond the lab: the psychologists Adam Alter and Daniel Oppenheimer, of the Stern School of Business in New York and the Anderson School of Management in Los Angeles respectively, found that if it a company name is easy to pronounce, it tends to have a higher stock price, all else being equal. The interpretation is that fluent processing of information leads people implicitly to attach more value to the company.

Fluency not only affects our perceptions of value; it also changes how we feel about our decisions. For example, if stimuli are made brighter during a memory test people feel more confident in their answers despite them being no more likely to be correct. In a study I conducted in 2009 with the psychologists Dorit Wenke and Patrick Haggard at University College London, we asked whether making actions more fluent also altered people’s sense of control over their decisions. We didn’t want to obviously signal that we were manipulating fluency, so we inserted a very briefly flashed arrow before the target appeared. In a separate experiment we confirmed that participants were not able to detect this arrow consciously. However, it still biased their decisions, slowing them down if the arrow was opposite in direction to their eventual choice, and speeding them up if it was in the same direction. We found that people felt more control over these faster, fluent decisions, even though they were unaware of the inserted arrow.

Fluent decisions, therefore, are associated with feelings of confidence, control, being in the zone. Mihaly Csikszentmihalyi, professor of psychology and management at Claremont GraduateUniversity in California, has termed this the feeling of ‘flow’. For highly practised tasks, fluency and accuracy go hand in hand: a pianist might report feelings of flow when performing a piece that has been internalised after years of practice. But in novel situations, might our fondness for fluency actually hurt us?

To answer this question we need to digress a little. At the end of the Second World War, engineers were working to improve the sensitivity of radar detectors. The team drafted a working paper combining some new maths and statistics about the scattering of the target, the power of the pulse, and so on. They had no way of knowing at the time, but the theory they were sketching — signal detection theory, or SDT — would have a huge impact on modern psychology. By the 1960s, psychologists had become interested in applying the engineers’ theory to understand human detection — in effect, treating each person like a mini radar detector, and applying exactly the same equations to understand their performance.

Despite the grand name, SDT is deceptively simple. When applied to psychology, it tells us that decisions are noisy. Take the task of choosing the brighter of two patches on a screen. If the task is made difficult enough, then sometimes you will say patch ‘A’ when in fact the correct answer is ‘B’. On each ‘trial’ of our experiment, the brightness of each patch leads to firing of neurons in your visual cortex, a region of the brain dedicated to seeing. Because the eye and the brain form a noisy system — the firing is not exactly the same for each repetition of the stimulus — different levels of activity are probabilistic. When a stimulus is brighter, the cortex tends to fire more than when it is dimmer. But on some trials a dim patch will give rise to a high firing rate, due to random noise in the system. The crucial point is this: you have access to the outside world only via the firing of your visual cortical neurons. If the signal in cortex is high, it will seem as though that stimulus has higher contrast, even if this decision turns out to be incorrect. Your brain has no way of knowing otherwise.

But it turns out the brain has a trick up its sleeve when dealing with noisy samples of information, a trick foreshadowed by the British mathematician Alan Turing while in charge of wartime code-breaking efforts at the secret Bletchley Park complex. Each morning, the code-breakers would try new settings of the German Enigma machine in attempts to decode intercepted messages. The problem was how long to keep trying a particular pair of ciphers before discarding it and trying another. Turing showed that by accumulating multiple samples of information over time, the code-breakers could increase their confidence in a particular setting being correct.

Remarkably, the brain appears to use a similar scheme of evidence accumulation to deal with difficult decisions. We now know that, instead of relying on a one-off signal from the visual cortex, other areas of the brain, such as the parietal cortex, integrate several samples of information over hundreds of milliseconds before reaching a decision. Furthermore, this family of evidence accumulation models does a very good job at predicting the complex relationships between people’s response times, error rates and confidence in simple tasks such as the A/B decision above.

Putting these findings together, we learn that there is a benefit from being slow. When faced with a novel scenario, one that hasn’t been encountered before, Turing’s equations tell us that slower decisions are more accurate and less susceptible to noise. In psychology, this is known as the ‘speed-accuracy trade-off’ and is one of the most robust findings in the past 100 years or so of decision research. Recent research has begun to uncover a specific neural basis for setting this trade-off. Connections between the cortex and a region of the brain known as the subthalamic nucleus control the extent to which an individual will slow down his or her decisions when faced with a difficult choice. The implication is that this circuit acts like a temporary brake, extending decision time to allow more evidence to accumulate, and better decisions to be made.

We don’t yet know whether these insights apply to the weighing of more abstract information, such as decisions about restaurants or holiday destinations. But there are hints that a signal detection-like model might explain these choices too. Daniel McFadden, a Nobel Prize-winning economist at the University of California, Berkeley, proposed an influential theory of choice in the 1970s directly inspired by signal detection theory. The core idea is that the values we assign to choice options are themselves subject to random fluctuations. These fluctuations then lead to different choices from moment to moment.

The agonising feeling of conflict between two options is not necessarily a bad thing: it is the brain’s way of slowing things down

In a recent study, researchers at the California Institute of Technology (CalTech) looked for signs of this accumulation of value while undergraduates chose between snack items, such as chips or cookies. During each decision, two items were presented on either side of a computer screen, and the students’ eye movements were recorded. Despite decisions being made within a couple of seconds, the pattern of eye movements belied subtle aspects of the decision process. When the decision was difficult — when the items were equally appealing — the eyes switched back and forth between the items more often than when the decision was easy. How much we flip between decision items, therefore, reveals the accumulation of evidence for decision-making.

In the evidence accumulation framework, indecision has a surprisingly simple interpretation. ‘Activity’ vacillates between two options over a particular time period — milliseconds for sensory A/B decisions, but perhaps minutes or even days for important decisions such as buying a car. Crucially, however, this neural flip-flopping is not something to be avoided. Instead, flip-flopping is an overt behavioural sign of the brain’s weighing of evidence for and against a decision. Anecdotal evidence suggests we are not alone in showing overt signs of indecisiveness. In a pioneering experiment, J David Smith, professor of psychology at the University of Buffalo in New York, trained a dolphin named Natua to press one of two levers depending on whether a sound was low- or high-pitched. After Natua could perform the task on cue, Smith introduced ambiguous tones. Natua vacillated between the two levers, swimming towards one and then the other, as if he was uncertain which one to press.

Some researchers have interpreted these signs of indecision as indicating that the dolphin has awareness of its own uncertainty during the decision. This could be the case, but it does not have to be — it could be that swimming from one option to the other is the dolphin equivalent of humans moving their eyes between options in the CalTech study. Either way, evidence accumulation models tell us that indecision is not a bad thing — the brain is slowing things down for a reason.

The speed-accuracy trade-off indicates that there can be negative consequences from being too decisive. Quicker decisions are often associated with more errors and greater potential for regret further down the line. If we are forced to make a decision quickly, evidence accumulation might not have finished before the decision is executed. By the time our muscles are contracting and we are pressing the ‘send’ button on a rash email, we might have accumulated additional evidence to suggest that this is not a good idea. Such gradual realisation of regret is writ large in Ian McEwan’s novel Atonement (2001) in which one of the characters, Robbie, is ‘seized by horror and absolute certainty’ that the letter he has just sent to his sweetheart is not the one he intended, with consequences that ripple through the rest of his story.

The implication is that sometimes our actions decouple from our intentions, revealing an intimate connection between evidence accumulation, indecision and error correction. Experiments support our intuitions about this: in a simple A/B decision, within only tens of milliseconds after the wrong button is pressed, the muscles controlling the correct response begin to contract in order to rectify the error. For rash emailers, this response even has a modern corrective: Gmail users are now able to set up a 30-second grace period in which to ‘undo’ a previously sent message. In other words, a response can be made, or an email sent, before our decision circuitry has appropriately weighed up all the evidence. Yet only a short time later, when enough evidence has been accumulated, we might become aware of something we should have said or done, the l’esprit de l’escalier of the neurosciences.

Consistent with this idea, a recent study by the neuroscientists Lucie Charles and Stanislas Dehaene at the Neurospin Centre in Paris showed that when subjects make errors under time pressure, a neural signature of the response that was intended but not actually executedcan be identified. Part of your brain seems to know what you should have done, even if the decision was executed too quickly, and too imperfectly, for the right action to have been made. In contrast, when given enough time to operate, intention and action work together in reasonable harmony, minimising the chances of a subsequent change of mind or regret.

Indecision is an inevitable feature of the neural mechanisms that underpin decision-making. With the right experimental set-up, we can observe the vacillations produced by this system in people’s behaviour. Cortico-basal ganglia circuits set the trade-off between speed and accuracy, and exquisitely sensitive mechanisms detect and correct errors even after decisions have been made. Yet decisiveness holds a subjective allure, perhaps because of the illusion of fluency, control and confidence it creates.

How should we reconcile the benefits of accumulating evidence with the costs of feeling disfluent? For simple decisions that take only a few seconds to make — from whether to reply to an email now or later, or which salad to have for lunch — there are some clear guidelines. First, decision-making tends to become more accurate if given a little extra time to operate. We should allow some indecision into our lives. Second, the agonising feeling of conflict between two options is not necessarily a bad thing: it is the brain’s way of slowing things down to allow a good decision to be made. Third, we should not ignore or suppress a change of mind after the fact — it is our brain’s way of using all the available information to correct inevitable errors in a time-limited process.

For important real-world decisions, however, the picture is certainly more complicated. The neuroscience of decision-making is in its infancy. Humans are endowed with the ability to simulate the future, and to use language to weigh up pros and cons — we can argue with ourselves and bounce ideas off others — all of which make such decisions very complex. But consider that important decisions are often the most difficult because they induce a state of indecision. (Charles Darwin even made a list of the pros and cons when deciding whether to marry, eventually deciding the pros outweighed the cons.) In these cases, our current understanding of the delicate balance of decision circuitry suggests we shouldn’t just blink and go with our gut instinct. In Habit (1890), the American philosopher William James said: ‘There is no more miserable human being than one in whom nothing is habitual but indecision.’ Yet enduring a little bracing indecision might be just what we need to navigate a busy, confusing world of choices.

What 16 Successful People Read In The Morning

What 16 Successful People Read In The Morning

ALISON GRISWOLD AND MAX NISEN JAN. 24, 2014, 8:00 AM 116,214 5

Staying informed is a constant struggle for most of us, let alone people with high-profile, high-pressure jobs. There’s usually not time to leisurely read a favorite paper over coffee.

Yet catching up on news is an important part of what’s often a very early morning for many of the world’s most successful people.

Now we would like everyone to read Business Insider in the morning (or the afternoon), but it turns out some very important people have their own favorite sources of news.

Warren Buffett starts his days with an assortment of national and local news.

The billionaire investor tells CNBC he reads the Wall Street Journal, the Financial Times, the New York Times, USA Today, the Omaha World-Herald, and the American Banker in the mornings. That’s a hefty list to get through.

David Cush reads five newspapers and listens to sports radio on a bike at the gym.

The Virgin America CEO told the AP that he wakes up at 4:15 a.m. on the West Coast to send emails and call people on the East Coast. Then he heads to the gym, hops on an exercise bike, listens to Dallas sports radio, and reads his daily papers, which include the New York Times, Wall Street Journal, USA Today, San Francisco Chronicle, and Financial Times.

Bill Gates reads the national papers and gets a daily news digest.

Bill Gates

The Microsoft co-founder gets a daily news digest with a wide array of topics, and he gets alerts for stories on Berkshire Hathaway, where he sits on the board of directors. Gates also reads the Wall Street Journal, the New York Times, and the Economist cover-to-cover, according to an interview with Fox Business.

Dave Girouard reads the New York Times and Wall Street Journal on his Nexus 7, and mixes in some Winston Churchill.

Girouard, CEO of Upstart and former president of Google Enterprise, told Business Insider that he’s a big fan of Winston Churchill’s speeches. He’s currently reading “Never Give In! The Best of Winston Churchill’s Speeches.” For news, he scrolls through the New York Times and Wall Street Journal.

David Heinemeier Hansson flicks through tech blogs.

The Danish programmer and creator of the programming language Ruby on Rails consumes a tech-filled fare each morning. He tells Business Insider that his daily round consists of Reddit, Hacker News, Engadget, the Economist, Boing Boing, and Twitter.

Jeffrey Immelt reads his papers in a very particular fashion.

“I typically read the Wall Street Journal, from the center section out,” the General Electric CEO told Fast Company. “Then I’ll go to the Financial Times and scan the FTIndex and the second section. I’ll read the New York Times business page and throw the rest away. I look at USA Today, the sports section first, business page second, and life third. I’ll turn to Page Six of the New York Post and then a little bit on business.”

Charlie Munger is devoted to the Economist.

When Fox Business asked the Berkshire Hathaway vice-chairman and right-hand man to Warren Buffett what he likes to read in the morning, Munger kept it simple. “The Economist,” he said.

Gavin Newsom starts with Politico’s Playbook email, and then reads each of California’s major papers.

The California Lieutenant Governor told The Wire that he starts by rotating through the morning shows at 7 a.m., then moves to his iPad to read Playbook, the Sacramento Bee, the San Francisco Chronicle, and the Los Angeles Times. Finally, he moves on to the news app Flipboard, through which he checks sites like Mashable and AllThingsD.

Barack Obama reads the national papers, a blog or two, and some magazines.

The President of the United States told Rolling Stone he begins his day with the New York Times, the Wall Street Journal, and the Washington Post. He’s a devoted reader of the Times’ columnists, and also likes Andrew Sullivan, the New Yorker, and The Atlantic.

Jonah Peretti pulls out the business or sports section from the New York Times for the subway ride; his wife keeps the rest.

The Buzzfeed founder and CEO wakes up around 8:30 a.m. and heads into the office with the sports or business section of the New York Times, he tells The Wire. He also takes New York magazine; subscriptions to the New Yorker and Economist fell by the wayside after he had twins.

Still, like many younger leaders, the principle way he discovers information is through Twitter and Facebook.

Steve Reinemund reads the Dallas Morning News and several national dailies.

The former PepsiCo CEO gets up promptly at 5:30 a.m. and heads downstairs with a stack of newspapers, Starwinar.com reports. He goes through the New York Times, the Wall Street Journal, and the Financial Times, as well as the Dallas Morning News.

Howard Schultz has kept his morning reading routine intact for 25 years.

In 2006, the Starbucks CEO told CNNMoney that he gets up between 5 and 5:30 a.m., makes coffee, and then picks up three newspapers: the Seattle Times, the Wall Street Journal, and the New York Times. The habit must work, because he’s stuck with it for more than two decades.

Nate Silver checks Twitter, Memeorandum, and Real Clear Politics pre-coffee in election years.

The FiveThirtyEight editor-in-chief shared his election-year reading habits with The Wire.

He starts with Twitter, Memeorandum, and Real Clear Politics before his coffee. He might hit the snooze button if nothing is breaking. Later come blogs like The Atlantic, Marginal Revolution, and Andrew Sullivan.

Shepard Smith works on TV, but relies on the websites of the New York Post and New York Times.

The Fox News host tells AdWeek that he starts his day with the websites of The New York Post or New York Times. After that comes The Daily Beast, SportsGrid, and sometimes Buzzfeed. Then comes sites relevant to whatever is being covered that day, including lots of local newspapers.

It’s a constant struggle to keep from being overwhelmed, he says. “If media were food, I would be obese,” Smith says.

Chuck Todd catches up with at least one major newspaper from each state on Twitter.

Todd, NBC’s Chief White House Correspondent, is up between 4:30 and 5 every morning, he tells AdWeek, and after catching up with dispatches and email updates, goes on Twitter to catch major news stories from local newspapers.

“Twitter is the 21st century wire,” Todd says. “I remember the first time I got access to the [Associated Press] 50-state wire in 1992, and at that time, there was nothing like it. Now Twitter is the same way. I’ve made my own powerful, worldwide newswire on politics and international affairs.”

He also reads the New York Times, Washington Post, USA Today, Wall Street Journal, and Financial Times on his iPad.

Gary Whitehill supplements the Wall Street Journal with dozens of RSS feeds.

Sixty-three, to be precise. The Huffington Post reports that Whitehill, the founder of Entrepreneur Week, spends the first part of his day reading 40 pages in whatever his current book is, scanning through 63 RSS feeds, and perusing the Wall Street Journal.