Thursday, December 18, 2008

"Any other result is possible"

Last night, my friend Clive lent me some music by John Martyn, an outstanding but little known Scottish singer.  Martyn's obscurity led us to talk about the influence of chance, serendipity, and randomness on success.  Much of what happens in life is influenced by unforeseen (and often unnoticed) events and factors that we do not control.

A nice study by Matthew Salganik and others shows the degree to which musicians' success is hard to predict. The key take away is: "Success was also only partly determined by quality: The best songs rarely did poorly, and the worst rarely did well, but any other result was possible."

Hit songs, books, and movies are many times more successful than average, suggesting that "the best" alternatives are qualitatively different from "the rest"; yet experts routinely fail to predict which products will succeed. We investigated this paradox experimentally, by creating an artificial "music market" in which 14,341 participants downloaded previously unknown songs either with or without knowledge of previous participants' choices. Increasing the strength of social influence increased both inequality and unpredictability of success. Success was also only partly determined by quality: The best songs rarely did poorly, and the worst rarely did well, but any other result was possible.

The full study is here. (Free registration required.) And thanks to Richard Thaler and Cass Sunstein's book Nudge for the tip.

Friday, December 12, 2008

Leadership is about creating a new reality.

What could they have done? For starters, just one of them could have shown up at one of those closely watched investor conferences and stolen the show by giving a strong speech declaring that things were getting out of hand...
That is from Steve Pearlstein's piece in the Washington Post today about the leadership failures in the current financial crisis.  He notes that most of the CEOs involved have either claimed they made no mistakes or that they had no alternative to the path they took.

In my experience, real leadership is about saying "I don't accept that the world has to be like A.   I declare that it can be like B, and I am going to take action to create this new reality."  It is the opposite of following the herd and making excuses.

Fred Smith, founder of FedEx, is a good example of such a leader.  During a period when mail service around the US was highly variable and unpredictable, he declared that it was possible to absolutely, positively deliver something overnight from anywhere to anywhere in the US.  People thought he was crazy.  And indeed he had to go to extraordinary lengths to make good on his promise in the early days (for example, he authorized low-level managers to charter airplanes if they needed one to get a package to a remote area on time.)

Guess what?  Now we take it for granted that we can get a package to or from someone overnight.  Our expectations have shifted.  That's what leadership is all about.

So I was very happy to see that Pearlstein has also launched a new Leadership Section of with an interview with Fred Smith (see video below). Talk about leadership!   

Monday, December 01, 2008

In praise of competition

Who is your competition?
People ask me that a lot. Usually the tone is "Who is out to eat your lunch?" And to be honest, that is the way that I often respond to new entrants into the market, or (especially) to new features introduced by existing organizations.

But the reality is that competition is good. It is good for the development of the online philanthropy market. And it is good for our own progress at GlobalGiving. At this stage, high quality new entrants in the field raise overall awareness - and they increase the size of the pie. The stream of new features that we are seeing forces us to provide better and better service to both donors and recipients.

Two of my favorite GlobalGiving "competitors" are DonorsChoose and Kiva. The three of us constantly vie to have the most compelling websites, the most efficient check-out, the best feedback loops, and the highest impact. Whenever one of us develops a successful new feature, the rest often imitate it. This is a form of collective experimentation and learning that improves our services much faster than if none of us faced competition.

Although we are competitive by nature, we also help each other out, often swapping best practices about back office systems, gift card campaigns, and PR. At GlobalGiving, we once encountered a potential major donor who was interested primarily in US education. Without hesitation, we referred him to Charles Best, the head of DonorsChoose, and he became a major donor there. The donor was happy, DonorsChoose was happy, and the vigor of the overall online philanthropy marketplace was increased.

And DonorsChoose has done the same for us more than once (someone recently told me they were going to donate to GlobalGiving on the recommendation of Charles Best, and said she found it "amazing" he referred her to a competitor ). A month or two ago, I was on the phone talking to Premal Shah at Kiva conferring about some common issues we face. Overall, we find that friendly competition helps us all.

Last year, I was at a conference at Oxford University discussing new ideas for the official aid sector (including the World Bank, UN, and bilateral agencies such as USAID and DFID.) There was much discussion of the need for "partnership" and "elimination of duplication." One speaker passionately called for the aid agencies to "divide up" Africa. USAID would take a few countries or sectors, the Swedes would adopt a couple of countries, the Brits would take some, the Canadians others.

This sounds good until you realize that each recipient country would be stuck with no choice. If the quality of programs offered by one donor were poor, the recipient would have no ability to choose a better alternative. And you can be sure that, without competition, the quality of the services offered by the donors was going to be far below what it should be.

So competition is good. It drives innovation, efficiency and better service to all users. My only complaint about DonorsChoose and Kiva is that they are run by guys who are younger and much better looking than I am. And there is nothing I can do to compete with them there :)