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Business Lessons From an MIT Mathematician

Gian-Carlo Rota was mathematician, teacher, and philosopher who spent most of his career at MIT, teaching functional analysis, probability theory, phenomenology, and combinatorics. He was the only person ever to be appointed Professor of Applied Mathematics and Philosophy.

He was respected by his peers and loved by his students. Late in his career, he wrote a series of lectures and essays about what he’d learned over the years, lessons that I found in reading them to apply not just to teaching but to business and almost every realm of endeavor.

Some examples:

Dr. Rota: “The most brilliant students will invariably work out all the problems and let other students copy, and I pretend to be annoyed when I learn that this has happened. But I know that by making the effort to understand the solution of a truly difficult problem discovered by one of their peers, students learn more than they would by working out some less demanding exercise.”

The business lesson: 80% of the best work ideas will come from 20% of your employees.

 

Dr. Rota: “Half a century ago, the philosopher Gilbert Ryle discussed the difference between knowing-how courses [mathematics, the exact sciences, engineering, foreign languages, playing a musical instrument, sports] and knowing-what courses [history, the arts, the humanities, social sciences]. At MIT, knowing-how classes are more highly regarded…. And yet knowing-what courses are often more memorable. A serious study of the history of the United States Constitution or King Lear may well leave a stronger imprint on a student’s character than a course in thermodynamics….

“It is a fact, confirmed by the history of science since Galileo and Newton, that the more theoretical and removed from immediate applications a scientific topic appears to be, the more likely it is to eventually find the most striking practical applications.”

The business lesson: When hiring, give preference to those with a good theoretical knowledge of how your industry works rather than those with good pragmatic knowledge of how to do a particular job.

 

Dr. Rota: “Many freshmen students enter MIT as naïfs and leave, after four vigorous years of education, just as naïve….

“More than a few MIT graduates are shocked by their first contact with the professional world after graduation. There is a wide gap between the realities of business, medicine, law, or applied engineering, for example, and the universe of scientific objectivity and theoretical constructs that is MIT.”

The business lesson: Be careful about hiring directly from the “ivory tower.”

 

Dr. Rota: “You don’t have to be a genius to do creative work. The idea of genius elaborated during the Romantic Age [late 18th and 19th centuries] has done harm to education. It is demoralizing to give a young person role models of Beethoven, Einstein, and Feynman, presented as saintly figures who moved from insight to insight without a misstep….

“The drive for excellence and achievement that one finds everywhere at MIT has the democratic effect of placing teachers and students on the same level, where competence is appreciated irrespective of its provenance. Students learn that some of the best ideas arise in groups of scientists and engineers working together, and the source of these ideas can seldom be pinned on specific individuals.”

The business lesson: Genius matters, but not as much as common sense, ambition, and persistence.

 

Dr. Rota: “Some students arrive at MIT with a career plan. Many don’t, but it actually doesn’t matter very much either way. Some of the foremost computer scientists of our day received their doctorates in mathematical logic, a branch of mathematics that was once considered farthest removed from applications but that turned out instead to be the key to the development of present-day software.

“The skills the market demands, both in research and industry, are subject to capricious shifts. New professions will be created, and old professions will become obsolete within the span of a few years. Therefore, the best curriculum to follow is one that focuses less on current occupational skills than on those fundamental areas of science and engineering that are least likely to be affected by technological changes.”

The business lesson: Don’t feel compelled to follow a particular career plan. Stay flexible. Allow your career to find you.

From My Work-in-Progress Basket

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“Change is vital, improvement the logical form of change.” – James Cash Penney

If It Ain’t Broke… Fix It Anyway!

How to Aim Your Business After It’s Been Started

If you want your business to grow quickly and easily, commit yourself to giving your customers as much as you possibly can. Give them full value for what they paid for on the first sale, and then give them more than they expect with every subsequent purchase.

Don’t settle for building a base of satisfied customers. Shoot for happy, thrilled, and even astonished fans of your business that will help you grow your business over time.

The Ready, Fire, Aim strategy is about starting off with a good and fair relationship with your customers and building on that by giving them more and more.

By resisting the urge to over-analyze the business plan and over-refine the product prior to the launch, Ready, Fire, Aim gives you more cash and (just as important) more flexibility for “aiming” the business and improving the product line thereafter.

Put differently, by launching your business when it’s “good enough” but not yet “perfect,” you give yourself extra time and money and customer feedback to make it perfect later on. And you do that without sacrificing your chances of success.

If your launch succeeds, you roll it out, bringing in more new customers and cash flow every day. The rollout itself is fairly easy from a marketing perspective: mostly more of the same with some testing to “tweak” the offer.

Meanwhile, you flow those new customers through what I used to call a gauntlet of free benefits and services, as well as a separate gauntlet of new product offers that you are developing as you go.

If, as I said, they are more than satisfied with their experience of your company, if they are happy and impressed or even astonished, they will become not only loyal, long-term customers, they will become unpaid advertisers for your business and its products by recommending you to friends and family, and by giving you positive ratings on the internet.

To ensure that your customers are always happy with your products and services, you cannot leave well enough alone. You have to give more. You have to set higher standards. You have to establish a companywide policy of incremental improvement – regularly upgrading your products and customer service by small degrees. And you must do that even when there is no evidence that your customers are in any way unhappy.

 

The Ongoing Process of Incremental Improvement 

Incremental improvement involves collecting feedback from your customers every day. Not just passive feedback (i.e., complaints and questions) but also active feedback. You must reach out to them and ask, “How can I make our relationship better?”

Once or twice a year, you should get together with your product development team and figure out how to incorporate all that feedback into making your products (and your customers’ experience of buying them) easier, more useful, and more enjoyable.

None of what I’m saying is meant to deny the importance of making a profit. Keeping your business profitable is the best and only way to ensure that it can continue to pursue its mission, which is to provide your customers with increasingly better products over time.

In making improvements, you should promote them to your customers. You should remind them, in every way you can, that you are in business to make their lives better. By communicating your commitment, you will engender in them gratitude and the need for reciprocity. And those feelings will spur them to reward you with more of their patronage.

 

How to Create Great Products That Keep Getting Better 

For our purposes, “broke” means the product is not selling well, as in your customers are not buying it. If your customers are not buying it, you should not fix it. This advice runs contrary to what most business experts will say. But I have found, over and over again through the years, that it is almost impossible to make a bad (weak-selling) product good (strong-selling) by improving it incrementally. It is much smarter to drop it, go back to the drawing board, and come up with something significantly different.

Let me say that again to emphasize my point: If the product fails to sell well, trash it. If it does sell, improve it.

There are no proven rules about how to improve products. Everything I recommend to my clients is based on instinct and intuition (which, of course, is based on experience). My policy is to improve best-selling products as much and as often as we possibly can, and to let our customers know that they are always getting better.

Products that sell moderately well should be improved too, but only after the top-selling ones have been taken care of.

To avoid putting your employees through incremental-improvement hell, you should come to an agreement about how to deal with ideas for product improvement – how to determine if they are actually better, how to calculate their potential costs and benefits, and how to schedule them into production so you don’t overburden the system.

I have become such a compulsive product improver that most of the CEOs I deal with have developed ways to manage my constant suggestions. I recognize that not all of my ideas will actually improve things, so I never insist on any particular improvement. I make suggestions and have faith that over the long run things will get better.

 

How Often Should You Make Improvements? 

Several of the businesses I work with hold yearly meetings to brainstorm and plan product improvements. Several others do this once every two years, and one works on a once-every-five-years schedule. In contrast, my clients who are in the business of selling digital information products via the internet are able to improve their products almost instantaneously.

How often you improve the product depends on how much hardware the product has. As a general rule, the more fixed parts it has, the less frequently you can improve it.

But the main rule is: Improve your products as often as you can.

 

How Big Should the Improvements Be? 

Again, there is no science to this, but my preference is to make small changes incrementally. Since I have made many mistakes about whether certain changes would be seen as favorable, I shy away from radical moves. My preference, when working with a product that is selling well (and is, therefore, good) is to change one thing at a time, and then to see how customers respond to it.

Incremental changes can easily be rescinded. Fundamental transformations cannot. I want the quality of my clients’ products to be always angling upward. We don’t need sharp upward movements. I’d rather have a gradual incline.

I think our customers like that approach. It allows them to see constant improvements and feel that they are in a relationship with a business that is always one step ahead of them. Constant, incremental improvements allow for more frequent communication with your customers, too. And experience proves that the more contact you have with them, the more sales you will enjoy.

Car manufacturers have long understood the perceived value of incremental improvements. With every new improvement in the steering function or the dashboard, they enjoy an additional opportunity to distinguish their product from the competition and get past customers to exchange old models for new ones.

 

How Should You Communicate Those Changes? 

If you make it a policy to continually improve your products incrementally, you will have many wonderful, ongoing opportunities to speak to your customers about the great new changes you are working on. Making product improvements transparent to customers (and even competitors) might seem foolish to the businessperson who sees the value of any improvements as limited. But as a businessperson who believes that wealth can be infinitely improved, you will be happy to share next year’s improvements with the rest of the world, because you know that as soon as you get them into the pipeline you will be working on some others.

The product goal is constant, never-ending improvement, because the business goal is constant, never-ending sales.

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Buster Keaton’s “Special Effects” 

A few weeks ago, I shared a video of Buster Keaton’s greatest stunts.

Readers wrote to ask: How much of that was real?

Turns out, there weren’t any “safety nets” in place. Stunts that looked dangerous really were dangerous. (Garry Moore once asked Keaton how he took all those falls, only for him to open his jacket to reveal a thoroughly bruised body.) And as for “special effects,” Keaton relied on camera angles, timing, and a technique called “undercranking” (which slowed the film speed and, for example, made a car appear to be moving faster than it actually was).

Keaton famously had one rule: Never fake a gag. Which isn’t to say that he never used a stunt double. He was forced to do it while he was signed with MGM (from 1928-1933) and towards the end of his career/life due to diminishing health. But everything I’ve read about the “The Great Stone Face” has only made me appreciate him more. He will forever be, as Orson Welles put it, “the greatest of all the clowns in the history of cinema.”

Postscript

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The Inn at Rancho Santana has been featured in the March issue of Travel + Leisure as one of the 500 best hotels and resorts in the world. You can read the article here.

Saturday, March 13, 2021, Rancho Santana, Tola, Nicaragua


Notes From My Journal

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The Question of Tax Increases

When people say they are in favor of increasing taxes, what they generally mean is that they favor increasing taxes on “others” that make more or have more than they do. Recently, I challenged a friend who told me he was in favor of doubling the maximum income-tax bracket to 80% to help solve problems with economic inequality, global climate change, etc.

I asked him if he’d be willing to pay twice the income tax he’s paying now.

“That wouldn’t be fair,” he said. “I work hard for my money. The increased tax should be on the 1%. They can easily afford it, and they should be paying their fair share.”

What about extending it to the 2%?

He didn’t like that. You see, he makes about $400,000 a year, which puts him in the 2%. Why should he – a mere 2 percenter – have to dig deeper in his pockets when there are thousands of 1 percenters to go after?

When I was young and poor and dumb, I was all about making the greedy rich pay for all the social programs I was positive our country needed. Back then, most college students (like me) got their economic views from their sociology teachers.

Here you can see college students struggling with this same issue…

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3 Facts, 3 Numbers, 3 Thoughts 

THE FACTS

* Prohibition helped make Walgreens the giant it is today. While prohibition made alcohol sales illegal from 1920 to 1933, “medicinal” alcohol was still perfectly legal. Anyone with a doctor willing to write them a prescription could score a pint of otherwise unobtainable whiskey. In 1919, Charles R. Walgreen had about 20 pharmacies in Chicago. In 1929, there were more than 500 in several states.

Question: Which businesses today will benefit most from legalization of the natural drug industry? (Not just pot. Psychedelics too!)

* No guns were recovered from those arrested during the January 6 breach of the Capitol Building, according to the FBI. Though many news sources reported “shots fired” during the riot and it was, thus, believed that there was an exchange of gunfire, it seems this may not have been the case. Asked at the March 3 Senate hearing if any firearms were recovered or if any of the  300+ people arrested faced firearms charges, FBI counterterrorism official Jill Sanborn said, “To my knowledge, none.”

* A Russian physicist was zapped in the head by a high-energy beam of radiation and lived. Back in 1978, while doing some troubleshooting, Anatoli Bugorski stuck his head inside a particle accelerator, not knowing it was on. A focused beam of protons entered the back of his skull and exited through his nose, burning a hole in his brain. He miraculously recovered with only paralysis on the left side of his face and loss of hearing in his left ear. Bugorski, who is still alive, couldn’t say anything about his ordeal for years because of the Soviet Union’s policy of secrecy on nuclear power-related issues.

 

THE NUMBERS

* $69.3 million – the sales price of “Everydays – The First 5000 Days” at a Christie’s auction, a new high for a piece of art that exists only digitally. The piece, a collaged JPG file, is composed of images that the artist known as Beeple has been posting online every day since 2007. It was not only the first purely digital NFT (nonfungible token) sold by Christie’s, it was the first time the 255-year-old auction house offered to accept digital currency as payment.

I’m finalizing a book I’ve been writing (for years) on how to invest in art. This is exactly the sort of insanely volatile market sector I tell everyone – other than hedge fund managers who would likely spend their gazillions on even stupider things – to avoid.

* $99 billion ‒ the amount of money spent by US pet owners last year on such things as pet food/treats, supplies/OTC medicine, veterinarians, and services (walking, grooming, etc.), according to a survey by the American Pet Products Association. This is up from $95.7 billion in 2019, an increase that coincides with the increase in pet ownership during the pandemic. An estimated 11 million households reported getting new pets.

About 10 years ago, I urged a relative – who loved pets – to get into this business. I gave her a plan for selling into this trend that would have resulted in a multimillion-dollar business now. She didn’t take me up on it. That’s fine. But I can’t help but wonder if she ever thinks about that when she sees reports like these.

* 700 ‒ the number of unaccompanied migrant children that were apprehended by border patrol on Wednesday alone. This week, border patrol has arrested an average of 450 children daily –  up from 340 last week. According to The New York Times, the number of detained unaccompanied migrant children has tripled in the last two weeks.

 

THE THOUGHTS 

* “Face the demands of life voluntarily. Respond to a challenge, instead of bracing for catastrophe.” ‒ Jordan Peterson

* “Poetry might be defined as the clear expression of mixed feelings.” ‒ W.H. Auden

* “The best way to save time is to spend it wisely.” ‒ Michael Masterson

Postscript

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I missed Toni Basil when she was at her dancing prime. But last night I saw this…

At 74, she can hold her own with dancers less than half her age!

 

Friday, March 12, 2021, Rancho Santana, Tola, Nicaragua


Notes From My Journal

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The “For the People Act”

After Daniel Ortega was elected as President of Nicaragua, legally in 2006, the Sandinista party went to work modifying election laws to secure its preeminent position in government and improve its chances for reelection. In 2016, he was reelected, along with his wife as Vice President.

After anti-government protests led to violence and crackdowns in early 2018, other legal controls were put into place to ensure the continued electoral hegemony of the party.

This is a very good thing in the view of Nicaraguans that trust and support the Sandinistas. If you ask them why, they’ll tell you that the Sandinistas are “the party of the people.”

On March 3, Democrats in the US House of Representatives passed the first Congressional Resolution of the Biden Administration. The Bill, H.R. 1, is called the “For the People Act of 2021.”

If passed by the Senate, the “For the People Act” would radically change the way federal elections take place, in a way that most Republican leaders and conservative commentators believe will solidify the current Democratic control of not just the House and the Senate, but also the Executive Office.

Judge for yourself…

Notes From My Journal

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“The difference between a democracy and a dictatorship is that in a democracy you vote first and take orders later; in a dictatorship you don’t have to waste your time voting.” – Charles Bukowski

Power to the People? 

Some of the key provisions of H.R. 1:

* Gives the federal government authority to administer elections. 

Although the US Constitution gives states the authority to run their elections as they see fit, H.R. 1 states, “Congress finds that it has broad authority to regulate the time, place, and manner of congressional elections under the Elections Clause of the Constitution, Article I, section 4.”

* Mandates automatic voter registration (AVR) in all 50 states. (19 states currently have AVR.) 

Any person that has given information to designated government agencies, such as the Department of Motor Vehicles, a public university, or a social service agency, would be automatically registered.

* Mandates no-fault absentee ballots. 

This provision would do away with witness signature or notarization requirements for absentee ballots. Additionally, it would force states to accept absentee ballots received up to 10 days after election day.

* Prevents election officials from removing ineligible voters from registries or confirming the eligibility and qualifications of voters. 

The bill would make it illegal to verify the address of registered voters, cross-check voter registration lists to find individuals registered in multiple states, or remove registrants, no matter how much time has elapsed.

* Restores the Voting Rights Act. 

This provision would require states to obtain approval from the federal government before implementing any voting rules changes. It would also criminalize “hindering, interfering, or preventing” anyone from registering or voting.

* Bans state voter ID laws. 

This would force states to allow individuals to vote without an ID. They could merely sign a statement in which they claim they are who they say they are.

* Requires registration for those under 18 and allows same-day voter registration. 

Included is a clause that requires same-day voter registration to be implemented in time for the upcoming elections in 2022.

* Prohibits the publication of “misleading information” about elections. 

The bill makes it a federal crime to “communicate or cause to be communicated information” that is knowingly false and designed to discourage voting, carrying with it a sentence of up to five years.

* Mandates early voting and legalizes nationwide vote-by-mail. 

This provision requires states to provide for absentee vote-by-mail in elections for federal offices. They “may not require an individual to provide any form of identification as a condition of obtaining an absentee ballot.”

* Requires states to accept ballots 10 days after election day. 

The bill requires states to accept any mailed ballots postmarked before or on election day if they arrive within 10 days of the election. It allows states to expand that deadline.

* Requires “Campus Vote Coordinators” at higher institutes of learning. 

The bill would require colleges and universities to hire an official whose responsibility would be to inform students about elections and encourage voter registration. It would incentivize voter registration by giving grants to institutions that have a high registration rate.

* Mandates that states must make absentee voter boxes and curbside voting available for any election for federal office. 

The secured and clearly labeled drop boxes would be “available to all voters on a non-discriminatory basis” and “during all hours of the day.”

* Makes changes to oversight of campaign contributions. 

The bill mandates new restrictions for corporate participation in elections. It further suggests that “the Constitution should be amended so that Congress and the States may regulate and set limits on the raising and spending of money.”

* Makes changes to the composition of the FEC. 

The bill would decrease the number of the Federal Elections Commission (FEC) members from six to five. Four members can be associated with a particular political party, making the fifth member “independent.”

* Changes “conflicts of interest” rules for the president and vice president. 

H.R. 1 would require the president and vice president to divest all financial interests that could pose a conflict of interest for them, their families, or anyone with whom they are negotiating or who is seeking employment in their administration. It would also require presidential candidates to provide their tax returns.

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