Management Tools & Trends: Bain’s regular survey. [via Rita McGrath]
Gena Gorlin: “As a builder, you approach your life as the ultimate project you are in charge of shaping and overseeing (i.e., building), by your own efforts and according to your own chosen vision and values, with yourself as its ultimate owner and beneficiary. If you wanted to assess the extent to which you’ve been in a builder’s mindset in the past week, you might ask yourself: how much of it have I spent choosing to do things based on how I thought they would serve and advance my life?”
Arnold Kling: “Neoclassical economists said that your wage as a worker will be set equal to the marginal revenue of what you produce. If an additional hour of your work enables the firm to produce 10 more widgets, and widgets sell for $2 each, then your wage will come to $20 an hour. In the twenty-first century, marginalism does not apply to pricing or to wage-setting. To understand the contemporary economy, we have to think in terms of overhead. Real-world business is often dominated by overhead. Overhead, or fixed cost, is all of the cost that a firm incurs even if it sells no output. You need to pay for tax compliance. You need a business license. You have advertising and marketing expenses. You need to develop and refine your product. You need IT infrastructure. As you get bigger, you need middle managers, a human resource department, finance and accounting, a legal department, janitorial staff, security guards, and on and on…Marginalism is an interesting theoretical construct, worth learning. And there may be some situations in which it provides a decent approximation for research purposes. But the real world of business is increasingly dominated by overhead. Economists should more fully embrace The Overhead Revolution.”
Brian Chesky: “I always believe that the best loyalty program is people loving your product and if they love your products, they come back.” More from WSJ on loyalty programs: “Loyalty programs with tiers or earning mechanisms can provide companies with considerable increases in sales and gross profits, according to a 2019 study in the Journal of the Academy of Marketing Science that Voorhees co-wrote. The key, he says, is the feeling customers get from reaching a level of loyalty status. “It’s not so much about earning them the first time, but once you have them, you don’t want to lose them,” he says.”
FT: “Moullakis and Wright’s book The Millionaires’ Factory, told in anecdotal style and based on a healthy level of access to older generations of Macquarie bankers, charts its rise from a handful of Harvard Business School graduates working on advisory mandates in Sydney to become the pioneer of infrastructure as a separate asset class for long-term investors, and today, one of the world’s biggest financial traders in commodities. So why did Macquarie prosper when many others did not? The authors show Macquarie’s culture was far more important than any particular business deal, strategy or innovation, with several of its peculiarities going back to the bank’s early days. The philosophy of David Clarke and Mark Johnson, who built Hill Samuel Australia in the 1970s, “was to give employees as much latitude as possible, while remaining consistent with safety and controls”. Throughout Macquarie’s history there has been little top-down strategy or capital allocation. Instead, the company empowers entrepreneurial individuals to evolve new business lines, from 24-hour foreign exchange dealing in Sydney, to gold bullion arbitrage with London, cash management trusts, cross-border leasing and later ideas in infrastructure and commodities.”
