In How Will You Measure Your Life? business consultant and Harvard professor Clay Christensen shows how economic theories that help businesses succeed can also help individuals make better life decisions. He presents theories and business case studies that show you pitfalls to avoid, and also how to be happy and successful in your career and personal life.
Typical self-help books on how to succeed and be happy are based mostly on anecdotes and on routines that worked for the authors, but that may or may not work for you. In contrast, we know theories work: They’re tested, proven, and can be universally applied. A theory is a statement of cause and effect. Economic theories show the impact on a business of doing certain things; they predict what will happen in the future and what steps managers might take. They can do the same for your personal life.
Christensen, author of The Innovator’s Dilemma, uses business theories to explain:
(Shortform note: Read our summary of The Innovator’s Dilemma here.)
Christensen began exploring these questions after finding that many of his former Harvard Business School classmates had struggled in their personal lives and often didn’t enjoy their work, despite significant professional accomplishments. One, Jeffrey Skilling of Enron, ended up in jail.
Christensen wrote this book to help define a path to both professional and personal success. It’s intended to help you find fulfillment by understanding what’s most important to you, and ultimately answering the question of how you’ll measure your life.
Making good decisions in business and life requires understanding what actions cause what outcomes. The business theories explained in this book will help you see cause and effect. Each chapter highlights a business theory and applies it to a personal challenge.
Operating without a theory is like navigating at sea without directional instruments—you’re relying on the currents (outside forces) and chance. However, good theories point you in the direction of good decisions. From there, it’s up to you. Theories tell you how to think about key decisions, not what to think.
A key decision in life is choosing your job or career, but many people choose them for the wrong reasons. They end up unhappy and resigned to the belief that doing what you love isn’t a realistic option. But you don’t have to settle—the key to finding happiness in your career is creating a strategy for where you want to go and how to get there. A successful strategy involves three components:
When you feel unhappy and stuck in your career or life, it’s usually because what you’re doing isn’t what really motivates you. Many people think incentives are the key to being satisfied at work, and they opt for jobs on the basis of the incentives they offer. But incentives don’t make people happy in their jobs.
Theory of motivation: Incentives (also known as hygiene factors), like compensation, job security, status, work environment, manager practices, and company policies, will leave you dissatisfied with your job if they’re not adequately addressed. But improved hygiene factors won’t make you happy (just less dissatisfied). What makes you happy are motivators, such as challenging work, responsibility, learning, the chance to grow, and the chance to make a meaningful contribution. Motivating factors are mostly inherent in the work itself and in the person doing it, rather than external like hygiene factors.
Application: When seeking a job or career that will make you happy, look beyond whether a job meets basic hygiene factors and ask whether it meets motivational criteria. For instance, ask yourself:
Focus on the factors that really matter to you—those that make you love coming to work each day—and the hygiene factors, after a certain point, will take care of themselves.
After you understand what motivates you, the second strategy piece is balancing your plans with unexpected opportunities that come up. Both companies and individuals must know how to do this in order to thrive.
Theory: Once formulated, every strategy continues to evolve in response to options that develop. There are two types of options:
1) Anticipated opportunities: These are opportunities you identify and choose to pursue as a deliberate strategy.
2) Unanticipated opportunities: These are a combination of problems and opportunities you run into while implementing your deliberate plan. When these unexpected things come up, you must decide whether to stick with the plan, adjust it, or replace it with one of the new options. You may make an outright decision, or an implicit one in which the cumulative impact of daily decisions evolves your strategy. A strategy that evolves this way is an emergent strategy.
Application: To decide when to pursue an option or to stay the course with your deliberate strategy, ask yourself: What assumptions have to be correct for this course of action to succeed? (Often plans are based on assumptions that are incorrect.) Specifically, when considering a job, ask yourself:
Resource allocation is the third component of strategy. Keeping resources in alignment with strategy is a challenge for companies as well as individuals.
Theory: Many interests and priorities compete for resources. Where you spend your resources, intentionally or unintentionally, is your real strategy. It’s the accumulation of your daily decisions and actions. Follow the flow of your resources to determine whether you’re on track for where you say you want to go, or whether an unintended strategy has taken over.
Application: Your personal resources include your energy, time, talent, and wealth. You apply them to various enterprises in your life: your relationship with your spouse, parenting, relationships with others, succeeding in your career, health and personal interests, and contributing to your community. All of these things compete for your attention. In practice, many people allocate fewer resources to the things they say matter the most to them. Much unhappiness stems from prioritizing short-term goals, such as a bonus, promotion, or upscale lifestyle, rather than long-term objectives, such as a good marriage and raising children to be good people.
Many people over-invest in their careers at the expense of their family and relationships. However, your career, by itself, won’t bring you happiness and fulfillment. Your career priorities are just part of a larger set of priorities, including your spouse, children, friends, faith, health, and so on. Like your career, your relationships need consistent attention.
Products often fail because companies develop them based on what they want to sell rather than on what customers need. They make something people don’t want or can’t use. We often treat our relationships the same way misguided companies try to sell products—we focus on what’s important to us rather than what the other person wants. Changing your perspective can change your relationships.
Theory: In his book The Innovator’s Dilemma, Christensen introduced a new theory of marketing and product development: determining the “job to be done.” The idea is that when people buy a product or service, they’re in effect hiring it to do a job for them. Products designed to do jobs customers want done are most successful.
Application: Applying the jobs-to-be-done mindset can help you improve your personal life as well. For each relationship, strive to understand the job you’re being “hired” to do, and then do it well. This will take practice. Understanding what your spouse or partner is hiring you to do requires that you put yourself in the other person’s shoes (listen and practice empathy). This means realizing that the jobs your partner is trying to do, or needs you to do, are not necessarily the ones you think they should be focusing on. Ironically, many marriages in which partners are selfless are actually unhappy, because each is giving what they want to give—or what they think the other wants. They make wrong assumptions and, therefore, aren’t meeting the other’s true needs.
In recent years, many industries have outsourced certain functions and processes as a way of increasing efficiency and reducing costs. Similarly, parents have outsourced certain family functions to teachers, coaches, and other adults. But often, companies and parents outsource the wrong things.
Theory: Before outsourcing anything, companies need to fully understand their capabilities, especially which capabilities are critical to the company’s future. Critical capabilities should never be outsourced. Capabilities derive from three factors: Resources (people, technology, equipment), processes (ways of doing things), and priorities (goals that guide decisions).
Application: Many parents focus on providing their children with resources, but processes and priorities may be more important. It’s critical that children develop processes for solving problems, working with others, and so on, and that they learn values (priorities) from their parents. These are critical capabilities. Parents should give children challenges and problems to solve, and spend time with children to teach their values. If you outsource the job of developing your children’s processes and values, you’ll lose the opportunity to develop them into the kind of adults you want them to be.
Both businesses and families have cultures that guide their members in making decisions in line with established priorities when bosses and parents aren’t around to provide direction.
Theory: Culture is an ingrained way that employees go about their work—it’s a sense of the way a company does things, which becomes so automatic that people don’t think of doing things any other way. This sense develops over time from working together and seeing what works. People instinctively do things in the prescribed way without supervision. Companies need to be proactive in designing their culture—if they don’t, the culture will evolve on its own.
Application: Like a company, parents need to proactively develop a family culture, or way of doing things, so children instinctively do the right thing when you’re not around because they know that “this is the way our family behaves.” Building a culture involves knowing your priorities and designing a culture around them by demonstrating how problems are solved the right way and repeating the process until it becomes embedded. For example, if kindness is a family value, help your child choose kindness in a situation where it’s warranted. Make sure he repeats the decision on subsequent occasions. After that, he’ll be guided by a sense of “this is how we do it” in every situation that requires kindness.
Many people start down a slippery slope by engaging in marginal thinking, which is thinking that focuses on the short-term cost or benefit but fails to grasp the full impact of an action. They make small, seemingly harmless decisions or compromises that lead to more and bigger compromises—with devastating consequences, from business failures to jail terms.
Theory: Businesses decide whether to invest in something by weighing the costs and benefits (revenue). Marginal costs are additional or new costs compared to a company’s fixed costs. When the marginal cost is small, a company may choose to expand on what it’s already making money at doing in the short term, rather than invest in a completely new line of business that will grow the company in the long term. But the long-term cost is losing market share, or going out of business entirely as a result of not keeping up with competition. For example, instead of investing in a new line of business offering online movie rentals, Blockbuster went the cheaper route of expanding its store-based rental business and eventually succumbed to online competition.
Application: Marginal thinking applies not only to company bottom lines, but also to choosing right and wrong. The marginal or short-term cost of doing something morally questionable “just this once” always seems small, but the full cost turns out to be a lot higher. The best way to avoid this is to never compromise your morals—it’s easier to maintain your standards 100% of the time than 98% of the time. You either stand for something, or you don’t. Once you’ve crossed your moral line, it no longer has any power to stop you, and you’ll keep crossing it—so when faced with the temptation, stop, think of the long-term cost, and turn around. For example, Nick Leeson, a 26-year-old trader, covered up a small trading mistake, but couldn’t stop there. He compounded it with further risky trades and coverups, until he finally bankrupted the British merchant bank Barings in 1995.
For a business, having a clear purpose drives executive decisions and keeps employees focused on what's important to the company. Similarly, you need a purpose for your life, against which to weigh decisions.
A company’s purpose provides three things:
1) A model or picture of what the company will look like or be when it has achieved its goals
2) The full commitment of executives and employees to the model they’re trying to create (no one compromises on it under any circumstances)
3) Several metrics the company’s leaders and employees can use to measure progress individually and collectively.
Similarly, you need to choose your own purpose—decide what kind of person you want to be and what you want to achieve in your life, commit yourself to it, and decide how you’ll measure your progress.
Figuring out your purpose in life gives you a framework for making sense of every other decision and circumstance. The theories and knowledge presented in this book can help guide your career, relationships, and ethics, but your purpose is your North Star.
In How Will You Measure Your Life? business consultant and Harvard professor Clay Christensen shows how economic theories that help businesses succeed can also help individuals make better life decisions. He presents theories and business case studies that show you pitfalls to avoid, and also how to be happy and successful in your career and personal life.
Typical self-help books on how to succeed and be happy are based mostly on anecdotes and on routines that worked for the authors, but that may or may not work for you.
In contrast, we know theories work: They’re tested, proven, and can be universally applied. A theory is a statement of cause and effect. Economic theories show the impact on a business of doing certain things; they predict what will happen in the future and what steps managers might take. They can do the same for your personal life.
Christensen, author of The Innovator’s Dilemma, developed this book from a Harvard class exercise, in which he discusses how the business theories presented in the class also apply to personal life choices and questions, including:
(Shortform note: Read our summary of The Innovator’s Dilemma here.)
Christensen began exploring these questions after finding that many of his former Harvard Business School classmates had struggled in their personal lives, and often didn’t enjoy their work despite significant professional accomplishments. A few, including Jeffrey Skilling of Enron, ended up on the wrong side of the law.
Christensen wrote this book to help define a path to both professional and personal success. It’s intended to help you find fulfillment by understanding what’s most important to you, and ultimately answering the question of how you’ll measure your life.
When making decisions, people often try to predict what will happen based on as much data as they can gather; however, data only tells you what happened in the past. Letting it drive decisions is like driving a car by looking in the rearview mirror; you can’t see where you’re going.
Alternatively, you can base decisions on experience, but often, you don’t have time to learn on the job—for instance, to go through a couple of divorces to learn about relationships, or a couple of kids to master parenting.
In contrast, theories are more helpful in making decisions because they tell you what will happen without you having to experience it first. Good theories take the form of “if … then” statements (for example, if you don’t align your resources with your strategy, then your strategy will fail). You can see what actions cause what outcomes and why, then make a wise decision.
For example, developing a theory of lift was the key to humans learning to fly. Prior to this, people failed to fly because they didn’t understand causation. Since creatures with wings and feathers could fly (a correlation), early inventors tried building similar wings and jumping from high places, which failed. They didn’t understand what actually causes or enables flight until 1738, when mathematician Daniel Bernoulli presented a theory that explained how lift makes it happen.
Developing and refining further theories in the form of rules telling pilots what to do under different types of circumstances eventually made flight predictable and reliable.
Similarly, making good decisions and solving problems in life requires understanding what actions cause what outcomes. The theories explained in this book will help you see cause and effect. They’re reliable—they stem from university research, which has been tested in a variety of organizations. Each chapter highlights a business theory and applies it to a personal challenge.
However, to solve a complicated problem, you may need the insights of more than one theory. For example, besides the theory of lift, early aviators also needed to understand the theories of gravity and resistance. So readers will find it useful to examine problems from the perspective of several different theories in the book
Operating without a theory is like navigating at sea without directional instruments—you’re relying on the currents and chance. However, good theories point you in the direction of good decisions in business and life. From there, it’s up to you. Theories tell you how to think about key decisions, not what to think.
(Shortform note: For the sake of coherency, we’ve summarized the book’s prologue and Chapter 1 in the introduction. Consequently, the summary’s Chapter 1 corresponds to the book’s Chapter 2, the summary’s Chapter 2 corresponds to the book’s Chapter 3, and so on.)
We all have ideas as kids about what will make us happy in life, but our dreams give way to compromises when we become adults. As a result, many people pick jobs and careers for the wrong reasons. As time goes on, you settle for what you have, accepting that doing what you love isn’t a realistic option.
But you don’t have to settle—the key to finding happiness in your career is creating a strategy for where you want to go and how to get there. The next few chapters focus on how to build such a strategy.
In business and life, several steps create a strategy:
Your strategy is continuously evolving: As it takes shape, new information, problems, and opportunities come up that you need to incorporate. When you proactively manage this strategy process, you have a good chance of building a career you love. Here’s a closer look at this process:
Priorities: The starting point is setting priorities—identifying the factors or criteria most important to you in a career. This requires understanding motivational theory and how it applies to you, because people’s reasons for choosing a job often don’t align with what really makes them happy (what drives or motivates them). Often, you don’t realize this until you’re stuck.
Opportunities and Challenges: Next, you need an understanding of how to adjust your career plans when unexpected opportunities and challenges come up. Some people have a plan for the next five years, while others just play it by ear. Either way can work, but theory can guide you by indicating when you should be methodical and stick to your plan, and when you should be open to unexpected or emergent opportunities (covered in Chapter 2).
Resources: Finally, to implement your strategy you need an understanding of how to support it with your resources. You’ll have to decide among many demands—people often devote their time to whatever seems most urgent or what delivers the most-immediate rewards, but this gets them off track. You must use your resources in ways consistent with your intentions.
With the right strategy, you don’t have to settle—you can find true happiness in your career. This chapter will focus on the first step of creating a career strategy: determining priorities.
To set the right priorities, you need to understand the theories of motivation. When you feel unhappy and stuck in your career or life, it’s usually because what you’re doing isn’t what really motivates you. Whether you’re motivated (or not) at work affects how you interact with your boss and colleagues, as well as whether you’re happy.
Many people think incentives are the key to being satisfied at work, and they opt for jobs on the basis of the incentives they offer. Similarly, companies offer incentives in hopes of getting employees to do what they want them to. Both employees and employers are likely to be disappointed because incentives don’t make people happy in their jobs.
The first step to figuring out what motivates you is understanding two theories of motivation: the incentive theory and the two-factor motivation theory.
The incentive theory argues that people do what you pay them to do (that is, they do what it's in their financial interest to do). For example, if you want executives to act in the best interests of shareholders, then align their interests with those of shareholders—for instance, tie executive compensation to stock prices so that execs make more money when stock prices go up (making shareholders happy). Executives focus on what their financial incentives tell them to.
This theory of aligning interests with incentives has been the rationale for huge executive compensation packages. Managers often adopt the same approach. It’s appealing because it’s simple—you can basically manage people by a formula.
Even parents often use incentives in an effort to get the behavior they want from kids—for instance, offering money for good grades.
But there’s a flaw in the incentive theory. It can’t explain why people working for nonprofits or serving in the military work hard without incentives or substantial pay. If not money, what motivates them? Another theory explains it.
This theory by Frederick Herzberg argues that certain factors in the workplace cause job dissatisfaction, while other factors cause satisfaction; the two sets of factors work independently of each other.
The first set is hygiene factors: These are things that, if not handled properly, will generate dissatisfaction. They include compensation, job security, status, work environment, manager practices, and company policies. Companies have to address these factors or people will be dissatisfied.
Pay is a hygiene factor (not an incentive). It has to be sufficient to prevent dissatisfaction—however, it won’t create satisfaction. Improving hygiene factors removes dissatisfaction, but it doesn’t make people happier or more satisfied. Dissatisfaction and satisfaction are separate measures, rather than existing on a continuum from unhappy to happy.
The second set of factors—those that create satisfaction—is motivators: These are things that make people love their jobs, including challenging work, responsibility, learning, the chance to grow, and the chance to make a meaningful contribution. The motivating factors are mostly inherent in the work itself and in the person doing it, rather than external like hygiene factors.
(Shortform note: For more on how motivation works, read our summary of Drive, by Daniel H. Pink, here.)
Motivation theory explains why many of Christensen’s classmates were unhappy in their careers—they chose them primarily on hygiene factors like compensation and job security, perhaps for good reasons such as paying off college loans, affording mortgages, and supporting a family.
But they’d gone to business school for reasons driven by motivation factors, not hygiene factors—for example, becoming entrepreneurs or solving social problems. Many people told themselves they’d stay in an unsatisfying job just for a few years until they became established financially. But as their incomes grew and they established commensurate lifestyles, they became dependent on their jobs and began to resent them, knowing they chose the jobs for the wrong reasons.
Money in itself isn’t to blame for professional dissatisfaction—it’s when people make money their highest priority, and continue to focus on making more money as the only goal after hygiene factors have been met. In some professions—for instance, trading—money is an indicator of success (traders make big money when they’re right). But people are nonetheless unhappy when they don’t have other motivators.
The two-factor motivation theory suggests that when seeking a job or career that will make you happy, you should look beyond whether a job meets basic hygiene factors and ask whether it meets motivational criteria. For instance, ask yourself:
It’s easy to fixate on the perks of success—salary, title, office—thinking they’ll make you happy, especially when friends and family see them as indicators that you’re a success. But focusing on hygiene factors beyond a basic level triggers a never-ending quest for more.
Don’t confuse correlation with causality in considering whether you’ll be happy in a job—hygiene factors such as money may correlate with a job you like, but they’re not what generates happiness; they’re more of a byproduct.
Focus on the factors that make you love coming to work each day—and the hygiene factors, after a certain point, will take care of themselves. When you love coming to work, you have an advantage over people just putting in their time: You’ll be motivated to do your best, and you’ll excel at what you do.
People choose jobs based on 1) hygiene factors (money, status, perks, security, working conditions), or 2) motivating factors such as having challenging work, responsibility, learning, the chance to grow, and the chance to make a meaningful contribution. The motivators rather than hygiene factors are what make you happy.
What factors made you choose your current job? Which were hygiene factors (money, perks, security, working conditions) and which were true motivators? Which were most important in your decision?
How do you feel about your job now? (Do you love or just tolerate it?)
What factors will you prioritize in choosing your next job?
Understanding what motivates you is the first piece of a strategy for career happiness. The second is balancing your plans with unexpected opportunities that come up. Both companies and individuals must know how to do this in order to thrive.
Once formulated, every strategy continues to evolve in response to options that develop. There are two types of options:
1) Anticipated opportunities: These are opportunities you identify and choose to pursue. When you create a plan based on opportunities you see, you’re pursuing a deliberate strategy.
2) Unanticipated opportunities: These are a combination of problems and opportunities you run into while implementing your deliberate plan. They essentially compete for resources (money, time, attention) with your deliberate plan. When these unexpected things come up, you must decide whether to stick with the plan, adjust it, or replace it with one of the new options. You may make an outright decision, or an implicit one in which the cumulative impact of daily decisions evolves your strategy. A strategy that evolves this way is called an emergent strategy.
A strategy isn’t static—it continues to develop as events warrant. The trick is deciding when to adjust your original plan and when not to: The new option might sap momentum from your plan while it’s succeeding, or if you’re too focused on your plan even when it’s failing, you could miss out on a better opportunity.
Many companies have succeeded by adopting an emergent strategy (and converting it into their deliberate strategy). Walmart is an example: Founder Sam Walton originally planned to build a large store in a city (Memphis). But due to extenuating circumstances, he ended up building it in a smaller town, Bentonville, Arkansas, where he already had another store. This evolved into a strategy of putting big stores in small towns, to forestall competition from other discount retailers.
Honda’s experience introducing motorcycles into the U.S. illustrates in more detail how problems and unanticipated opportunities can change strategy.
In the 1960s, Honda introduced a motorcycle into the U.S. market in an effort to compete with Harley-Davidsons and European imports. But Honda’s bike had expensive mechanical problems (which U.S. dealers lacked the capacity to fix), and it didn’t sell. However, Honda initially stuck to its plan of trying to sell the motorcycle.
Meanwhile, they had shipped some smaller bikes called Super Cubs to the Los Angeles area; these bikes were popular in Japan as vehicles for making deliveries in crowded streets. Honda employees in the U.S. used them the same way at work, but also took them into the hills on weekends for off-road adventures.
This sparked wider interest and demand for the Super Cub as a recreational “dirt bike,” so Honda began importing and selling more of the bikes. Its sales mitigated Honda’s losses on the larger bike, and the company eventually realized selling the Super Cub to a new niche customer—the off-road biker—was a better strategy than selling a large motorcycle.
Young people often think they should plan out their careers step by step for the next five years, then stick to their plan. But things change—your career path will constantly present new options and choices.
Here are a few guidelines for deciding what to do when new problems or opportunities come up:
You’re unlikely to come up with a fully formed strategy by sitting down and thinking until one pops into your head. It will develop from a combination of planned and unplanned options.
Christensen’s career path illustrates how unplanned options can become your strategy. He originally aspired to be the editor of the Wall Street Journal. But while he was studying for an MBA at Harvard, a consulting firm offered to help pay the costs if he took a job with them when he graduated. He accepted the offer (an emergent strategy), and he loved consulting work.
After five years there, he and a friend started their own consulting business; investors eventually fired him and installed their own CEO. However, even before being fired, he’d begun considering academia as another potential career. So he entered a Ph.D. program. Becoming a professor became his deliberate strategy (he dropped the idea of becoming the Wall Street Journal editor).
When you’re open to emergent opportunities, you still need a way to decide when to pursue an option and when to stay the course with your deliberate strategy. The best way is to ask yourself a question when you’re thinking of going a certain direction: What assumptions have to be correct for this course of action to succeed?
In deciding their strategy, businesses rarely ask this question. Instead, they proceed based on initial projections without testing whether the projections are accurate. As they go along, they keep adjusting projections and assumptions to fit what’s happening, getting themselves in deeper when the projections turn out to be off base.
Here’s an example of how this flawed strategy works:
Disney’s attempt to launch a theme park near Paris failed because its assumptions about visitor behavior based on the other parks were wrong for the Paris plan. No one asked what assumptions had to be right for the plan to work. A big assumption that turned out to be wrong was that people would book lodging and stay for an average of three days at the park (as they did at other Disney parks), even though the new park had only 15 rides versus 45 at a typical Disney park.
Here’s a better way for a company to determine what’s going to work and what isn’t before sinking a lot of money into a project.
1) Acknowledge that the initial financial projections are iffy. Make a list of the assumptions they’re based on.
2) Ask which have to be right for the projections to pan out. Rank the assumptions by importance and probability—from the most important/least certain to the least important/most certain.
3) Come up with a quick, cheap way to test the most important assumptions.
4) With an understanding of whether the important assumptions are likely to be accurate, the company can decide whether to invest.
With this process, teams focus on what it will take for the projections to be realized, instead of just massaging numbers until they look good.
Like companies that put their faith in untested assumptions, it’s easy for people to commit to a job or travel too far down a career path before realizing it’s not working out. To avoid this, when considering a job, ask yourself:
People often commit to a job or career path before realizing it’s not working out. To avoid this, before accepting a job, question your assumptions about the job. Ask yourself which assumptions have to be right for you to be happy in the job.
When you accepted your current job, what were your assumptions about it?
Which assumptions proved to be accurate and which were wrong? How important were your main assumptions to your happiness and success in the job?
What questions will you ask yourself before accepting another job?
You can have a life strategy, understand your priorities and what motivates you, and adjust your plans for unexpected opportunities. But your stated strategy isn’t the one shaping your life unless it’s where you’re putting your resources—your energy, time, and money.
Resource allocation is the third component of your strategy: Where you spend your resources, intentionally or unintentionally, is your real strategy. It’s the accumulation of your daily decisions and actions. Follow the flow of your resources to determine whether you’re on track for where you say you want to go.
Keeping resources in alignment with strategy is a challenge for companies as well as individuals. There are many ways an unintended strategy can take over in a company, including:
1) Companies undermine their own strategy by incentivizing the wrong employee behaviors.
2) Short-term interests with immediate rewards take precedence over a company’s long-term success strategy.
3) Employees act independently of company strategy.
Resource allocation works the same way in your life and career as it does in companies. Your personal resources include your energy, time, talent, and wealth. You apply them to various enterprises in your life: your relationship with your spouse, parenting, relationships with others, succeeding in your career, health and personal interests, and contributing to your community.
All of these things compete for your attention, requiring countless daily allocation decisions—for instance, should you stay an extra hour at work because you have momentum on a project, or do something your family needs your help with?
You’ll allocate your resources unthinkingly unless you pay attention to your strategy and manage your resources accordingly. How you allocate them may make the difference between a life of fulfillment or one of frustration.
Much unhappiness stems from prioritizing short-term goals, such as a bonus, promotion, or upscale lifestyle, rather than long-term objectives, such as a good marriage and raising children to be good people. In trying to earn more to provide more for their families, some people neglect to spend time with them. In practice, they allocate diminishing resources to the things, like their relationships, which they say matter the most to them. They’re implementing a different strategy than the intended one. If the way you use your resources doesn’t reflect the person you want to be, you won’t be that person.
Where you apply your resources (time, talent, energy, money), intentionally or unintentionally, is your real strategy. It’s the accumulation of your daily decisions and actions. Follow the flow of your resources to determine whether you’re on track for where you say you want to go.
List the main things or pursuits in your life that compete for your attention and resources. What percentage of your time and money do you allocate to each in a given day or week?
How does this allocation align with your beliefs about what’s most important in your life?
Is there anything you would like to change? Why or why not?
The chapters in this section of the book show how personal relationship challenges are similar to the problems many businesses face. The same theories that apply to businesses can help you strengthen and nurture your relationships, whether you want to be a better spouse, parent, or friend.
As we discussed in Chapter 3, many people over-invest in their careers at the expense of their families and relationships.
However, your career, by itself, won’t bring you happiness and fulfillment. Your career priorities are just part of a larger set of priorities, including your spouse, children, friends, faith, health, and so on. Work can be rewarding, but it doesn’t compare to the deep happiness you experience in relationships.
Like your career, your relationships need consistent attention. But two things work against this:
The good money/bad money theory of focusing on immediate versus long-term rewards explains why you need to nurture your relationships from the start.
Generally, investors have two goals: growth and profit. According to the theory of good and bad capital:
Here are two examples of how good and bad capital affect companies:
Like investors who prioritize short-term growth over long-term sustainability, people often take a bad money approach in their personal lives, opting to invest in immediate rewards.
For example, you might devote all your attention to a demanding job you enjoy, to the point that work becomes your identity. You skip vacation or work while on vacation, and you check your phone constantly. You expect family and friends to understand that your work takes precedence. You forget family members’ birthdays and neglect to return emails and calls from friends. As a result, you’ll experience the same consequences as a business does that fails to invest in the future—your relationships will erode and eventually fail.
While your intended strategy may be to have strong relationships, the strategy you implement is one that creates shallow relationships and problems. When you don’t invest, you don’t get returns; you have to invest in your relationships well before you need them, like planting a tree long before you expect it to produce shade. In their later years, many people regret not keeping in touch with friends and family, who then aren’t there as they face struggles.
People who are achievement-driven often mistakenly believe they can sequence their investment in their personal lives, especially when it comes to children. For example, you might think you can focus on your career when your kids are small, then shift your attention to them when they’re older and start interacting more with adults.
However, if you wait until they’re older, you’ll have lost critical developmental time that you can’t get back. It’s crucial that parents devote time to children from the earliest months of life. Research shows that parental interaction is particularly important in cognitive development. The first year of life is the most important time for children to hear words. The number of words they hear earlier in life correlates with later school performance on vocabulary and reading comprehension tests.
The way parents speak also matters, according to research. Simple directions like “finish your milk” have little effect on cognitive development. However, face-to-face conversations in adult language, commenting on what you’re doing or asking questions, have a huge impact. Such conversations play a bigger role in children’s cognitive development than income, ethnicity, or parents’ education.
Parents who don’t invest early in their children’s intellectual development miss a critical opportunity to give them an edge when they start school. You can’t defer investing in your children and relationships and expect to make it up later.
Products often fail because companies develop them based on what they want to sell rather than on what customers need. They make something people don’t want or can’t use.
We often treat our relationships the same way misguided companies try to sell products—we focus on what’s important to us rather than what the other person wants. Changing your perspective can change your relationships.
In his book The Innovator’s Dilemma, Christensen introduced a new theory of marketing and product development: determining the “job to be done.” The idea is that when people buy a product or service, they’re in effect hiring it to do a job for them. Products designed to do jobs customers want done are most successful.
(Shortform note: For more on the jobs-to-be-done theory, read our summary of The Innovator’s Dilemma here.)
Marketing efforts often focus on targeting products to demographic segments, but we don’t buy things because of our demographics, although demographics may correlate with some buying decisions. What happens is that a job or need comes up, and we look for a way to address it. If there’s a product out there that can do the job, we buy it. If not, we find a way to make do. What causes us to buy is having a job and determining that a product will help us get it done.
Here are some examples of companies or products that succeeded by figuring out what jobs customers needed to have done and doing them well.
Applying the jobs-to-be-done mindset can help you improve your personal and professional life. In each situation, strive to understand the job you’re being “hired” to do, and then do it well. Thinking of your marriage from this perspective can be transformative.
It will take practice; most people can't articulate the jobs they’re trying to do, let alone the jobs they and their spouse are hiring each other to do for them.
Understanding what your spouse or partner is hiring you to do requires that you put yourself in the other person’s shoes (listen and practice empathy). This means realizing that the jobs your partner is trying to do, or needs you to do, are not necessarily the ones you think they should be focusing on. Ironically, many marriages in which partners are selfless are actually unhappy, because each is giving what they want to give—or what they think the other wants. They make wrong assumptions and, therefore, aren’t meeting the other’s true needs.
For example, when a husband gets home from work, he notices the kitchen is a mess. He assumes that this indicates his wife had a hard day, and that she could use some help. So he cleans everything up and starts dinner. But this isn’t the “job” she wants him to do; what she wants is a listening ear. Her day has been rough because of spending hours with small children, not because of chores. While he focuses on cleaning up instead of listening, she feels ignored.
Working to understand, rather than assuming, your partner’s needs is the way to build a strong marriage. Couples who are the most trusting and devoted to each other are doing the jobs each person needs to have done. In contrast, marriages in which one or both people define the relationship in terms of getting what they want often end in divorce.
Understanding your partner’s jobs-to-be-done strengthens the love and commitment you have for each other. The extent to which each of you sacrifices for the other’s happiness and success is the glue that holds your relationship together.
Sacrifice strengthens commitment not only in marriage but also in other relationships: among family members, close friends, organizations, and cultural groups. For example, Marines are deeply committed to their fellow Marines, the Corps, and the country, as a result of sacrificing for their peers during grueling training.
Your family is worth sacrificing for. Ask yourself what job your partner needs you to do, then devote your efforts to doing it. Let your partner and children sacrifice for you in turn, and you’ll strengthen your commitment to each other.
Applying the jobs-to-be-done theory in your relationship means figuring out what “jobs” your partner needs you to do (not assuming you know what the other person wants and needs), then doing those things as well as you can.
Describe a time when you did something for your partner and they didn’t seem to appreciate it. How did you react and why?
Putting yourself in your partner’s shoes, why do you think they reacted as they did?
What jobs do you think your partner most wants you to do? How can you find out?
In recent years, many industries have outsourced certain functions and processes, including the pharmaceutical, auto, oil, information technology, and semiconductor industries. Investors, consultants, and academics have encouraged this as a way of increasing efficiency and reducing costs. Similarly, parents have outsourced certain family functions to coaches, teachers, and other adults.
While outsourcing can be a benefit, it can also undermine companies and families when decision-makers delegate the wrong things. The way to determine what the wrong things are is to understand and apply the theory of capabilities.
Before outsourcing anything, companies need to fully understand their capabilities, especially which capabilities are critical to the company’s future. Capabilities derive from three factors:
1) Resources: These include people, technology, equipment, brands, designs, information, money, and relationships with suppliers, distributors, and customers. Resources are usually visible and measurable. Employees create value for companies when they convert resources into products and services.
2) Processes: These are the ways employees communicate, coordinate, and make decisions.
Unlike resources, processes don’t appear on a balance sheet. But while less visible, processes facilitate the use of resources to solve problems. Processes include:
Strong processes work regardless of who performs them (employees doing them are more or less interchangeable).
3) Priorities: This may be the most important of the three factors determining capabilities. Priorities guide a company’s decisions, including what the company invests in and chooses not to invest in. Leaders need to communicate clear company priorities so employees make decisions aligned with the company’s priorities and strategy.
In applying the theory of capabilities to determine when outsourcing makes sense, a company must do two things:
1) Understand that your suppliers’ capabilities can and will change; to get a sense of how they might change, watch what your suppliers are striving or aspiring to do in the future.
2) Understand what capabilities your company will need to succeed in the future. Always keep these capabilities in-house; otherwise, you’re giving away your future.
Understanding the value of capabilities differentiates a good CEO from a poor one. Here are two examples of outsourcing gone awry:
In the same way companies weigh their capabilities, you can assess your own and your family’s capabilities—your resources, processes, and priorities.
In considering your own capabilities, you’ll find strengths, as well as areas you wish you’d done more to develop. You can’t make up lost opportunities (nor could Dell), but as a parent, you can help your children make the most of their capabilities.
In the context of your resources, processes, and priorities, think about what your children will need to be able to do, given the challenges they’re likely to face:
1) Resources are the first factor determining how a child’s capabilities develop. These include financial and material resources, talent, knowledge, experience, and relationships.
2) Processes are the second factor determining how a child’s capabilities develop. Processes are ways a child uses her resources to do or create something new. Processes include how she thinks, questions, solves problems, works with others, and so on; they’re unique to the child.
Resources and processes work differently: Knowledge provided to a child in class is a resource she can use—for instance, to get a better grade on a test. However, when the child takes what she’s learned (the resource) and applies it to doing an experiment or creating an app, she’s using a process.
3) Priorities are the third factor determining how a child’s capabilities develop. Children’s priorities mirror those of adults (for example, school, sports, family, work, and faith). As with adults, their priorities guide their decisions—including what gets the most attention, what they procrastinate on, and what they ignore.
Here’s how the three components of capability work together: Resources are what a child uses to do something; processes are the way she does it; her priorities are why she does it.
It’s critical that children develop processes for doing things. However, our society and families are increasingly limiting children’s ability to do so by outsourcing—much as Dell outsourced its process capability for developing personal computers.
A generation ago, more U.S. families involved children in work, such as gardening, caring for animals, preserving food, and doing sewing and repairs. Children developed processes for solving problems and getting these things done. Wealthier parents have outsourced much of this home-maintenance work today. In its place, parents go overboard in providing resources for children—youth sports, music and art lessons, summer camp, and semesters abroad.
While these opportunities (resources) allow some children to apply what they learn, the activities don’t resonate with or engage many others. This is because the opportunities tend to involve things parents think their children will like, or that reflect the parents’ ambitions rather than the children’s interests. Another issue is that the activities may be too scripted.
Along with providing opportunities, parents need to ensure the experiences challenge children to take responsibility, do difficult things, and create or invent things. These help children develop the processes they’ll need in the future, as well as the self-esteem that comes from accomplishment.
A focus on showering children with resources has resulted in a disproportionate number of young adults lacking the capabilities, especially processes, necessary for employment. Parents should start early with providing problems for their children to solve.
In addition to process capabilities, children need to learn their parents’ priorities and values. You convey your values, often without realizing it, while doing things with your children.
Kids pick up this information when they’re ready to learn it—you can’t predict when that will be, which is why it’s important to “be there” for them as much as possible. If you’ve filled your children’s time with activities you’re not involved in, they’re likely to pick up the values of the other adults around them when they’re ready to learn.
While providing children with resources is part of a parent’s job, so too is developing their capabilities through chances to develop processes and values. If you outsource this, you’ll lose the opportunity to develop your children into the kind of adults you want them to be.
Parents need to ensure that the experiences they provide challenge children to take responsibility, do difficult things, and create or invent things. These help children develop processes they’ll need in the future.
List the two to three most important experiences/activities you are providing to your children (for example, music lessons, church activities, chores, or sports). Why did you choose these activities?
What are some process capabilities your children need for the future? Processes are ways a child uses her resources to do or create something new. Processes include how she thinks, questions, and solves problems.
Do the experiences listed above help your children build process capabilities? If so, how? If not, what specific experiences can you provide to help your children build process capabilities?
When businesses hire people, especially for key positions, they often prioritize talent: They look for people with the “right stuff.” But when people succeed, it isn’t because of innate talent, but because they learned to handle pressure and setbacks through experience. Employers make better hires when they look for the right experiences rather than promotions and awards.
This “schools of experience” theory of hiring can guide your career, and also help you prepare your children for success. The key is to seek out jobs that provide key experiences relevant to the job you ultimately want. Similarly, in your family, create experiences for your children that build key skills.
In the 1979 book The Right Stuff, Tom Wolfe described the competitive world of test pilots, where those who were chosen had a unique combination of talent and fearlessness: the “right stuff.” NASA adopted the formula for choosing the first astronauts.
Similarly, many companies look for the right stuff, or innate talent, in hiring key executives. They look for candidates with a string of successes and an upward trajectory. However, talent doesn’t predict success—it’s common for executives who were successful in one company to fail in the next.
A better approach to hiring decisions is the “schools of experience” theory developed by Morgan McCall of the University of Southern California and described in her book High Flyers. The model focuses on process capabilities—whether a candidate has handled situations like those he would face in the new position.
Successful leaders develop their abilities through “courses” they take in the schools of experience: failures, challenges, or experiences doing something new. For example, Nolan Archibald, CEO of Black & Decker, decided early on that he wanted to become a CEO. But instead of seeking a fast-track executive training position, he started out working in an asbestos mine. Throughout his career, he continued to ask himself what experiences and problems he needed to master so he’d be capable of becoming a CEO.
You can build your career the same way by “signing up” for important experiences, instead of looking for jobs with pay and prestige or a fast track to promotion. Determine which experiences you’re likely to need in the future and master those “courses” before you need them.
Similarly, parents should determine what experiences their children will need to be successful as they grow, and create those experiences. Help them learn important lessons early in life.
Encourage children to aim high and keep trying if they fail. Also, resist the temptation to solve children’s problems for them—don’t bail them out by helping with or doing a project they left until the last minute. Otherwise, you’re teaching them to take shortcuts and expect others to save you. Let them learn from the consequences of their mistakes.
Often it’s easier to do things for kids—for instance, to plan their scout camping trip—but when you let children do it themselves, they learn about planning, organization, and teamwork. If a child doesn’t learn what you’re trying to teach from one experience, try something else. Preparing children for the future is one of the more important things you can do for them.
Both businesses and families have cultures that guide their members in making decisions in line with established priorities when bosses or parents aren’t around to provide direction. This chapter examines how cultures work and how to create a family culture.
People often think that perks and policies, such as casual dress, free food, company T-shirts, and bringing kids or dogs to work, define a company’s culture. While these may reflect office culture, a culture itself is less visible.
Organizational expert Edgar Schein of MIT defined culture as an ingrained way that employees go about their work—it’s a sense of the way a company does things, which becomes so automatic that people don’t think of doing things any other way. This sense develops over time from working together and seeing what works (the first time something works, others repeat the process and it becomes the way to do it). Together, employees reach an understanding of the company’s priorities and the processes for implementing them.
Managers don’t need to supervise everything because the organization essentially runs on its own. People instinctively do things in the prescribed way. Another way to define culture is as the combination of an organization’s priorities and processes.
The animation studio Pixar is an example of a company with a strong culture. Its creative process differs from that of other studios. Instead of a development group assigning ideas to directors to pursue, Pixar helps film directors refine their own ideas. Nearly everyone in the company provides no-holds-barred feedback on each film; the timetable takes a back seat to quality. The processes and priority of creating top-quality films have become a unique creative culture.
Many companies proactively create a culture, writing it down and talking about it frequently. For example, Netflix posts key elements of its culture online, including:
According to Schein of MIT, a company can create a culture by following these steps:
If leaders define a culture but don’t embody or enforce it, the company will evolve a different culture based on the priorities and processes that have worked and become embedded.
For example, the energy company Enron had a “vision and values” statement articulating four values: respect, integrity, communication, and excellence. However, starting with its leadership, Enron failed to live by these values, and the company collapsed amid scandal.
To determine whether you have a healthy company culture, ask yourself whether, when faced with making a decision, your employees have made the ones you wanted them to make (and whether you followed up with feedback). If leaders and managers are inconsistent or inattentive, poor decisions can evolve into a culture.
Like a company, parents need to proactively develop a family culture, or way of doing things, so children instinctively do the right thing when their parents aren’t around because they know that “this is the way our family behaves.”
Building a culture involves knowing your priorities and designing a culture around them by demonstrating how problems are solved the right way and repeating the process until it becomes embedded.
For example, if kindness is a family value, help your child choose kindness in a situation where it’s warranted. Make sure he repeats the decision on subsequent occasions; if he doesn’t choose to be kind, discuss how he should have acted differently. Next time, he will be guided by a sense of “this is how we do it.” For example, Christensen and his wife Christine helped their son be kind to a bullied classmate, and praised him when he did it.
Of course, parents need to live by the priorities they articulate. For example, Christensen and his wife wanted their children to love work, so they created opportunities for their children to work with them on home remodeling projects. The kids not only had fun and learned a value, but also developed a sense of accomplishment from the work they did—for instance, they took pride in the rooms they’d helped paint.
You have to build the culture you want and reinforce it so it becomes automatic. If you don’t dictate the standard, negative behaviors will form the culture.
Most people believe they’re ethical, and they can easily identify right and wrong. But integrity depends on small everyday decisions made over time, rather than one big decision where there’s a red flag.
Many people start down a slippery slope by engaging in marginal thinking, which is thinking that focuses on the short-term cost or benefit but fails to grasp the full impact of an action. They make small, seemingly harmless decisions or compromises that lead to more and bigger compromises—with devastating consequences, from business failures to jail terms.
The key to making ethical decisions is to recognize and avoid marginal thinking in your professional and personal life. This section examines the theory of marginal versus full thinking, how to avoid marginal thinking, and therefore, how to live a life of integrity.
Businesses decide whether to invest in something by determining the marginal costs and benefits, or revenue. Marginal costs are additional or new costs compared to a company’s fixed costs, such as buildings and equipment. In economic terms, the marginal cost is the cost of producing one additional unit of something using your existing capabilities; marginal revenue is the additional revenue generated from the sale of an additional unit.
Analyzing the marginal or additional costs and revenue of a potential investment or action is referred to as marginal thinking, but more broadly, marginal thinking means determining whether something is worth doing, given the additional cost or benefit. Both businesses and individuals make this calculation. However, marginal thinking can get businesses and people in trouble if they don’t also look beyond the marginal cost, which is short-term, to what a decision might end up costing them down the road.
Whether a business decision hinges on marginal costs or marginal revenue, it can result in bigger long-term costs or problems. Here are two examples of marginal thinking that led to worse consequences later:
In both examples, marginal thinking that didn’t consider the full picture (both short-term and long-term effects) had a devastating long-term cost: It hurt or destroyed the company’s competitiveness.
Marginal thinking applies not only to company bottom lines, but also to choosing right and wrong. The marginal cost of doing something morally questionable “just this once” always seems small, but the full cost turns out to be a lot higher.
It’s easy to convince yourself that it’s OK to do something you wouldn’t normally do because in this instance, there are extenuating circumstances. And the cost seems small because you're not looking ahead.
Countless numbers of people have ruined their lives and those of others by making this mistake, whether on Wall Street, in politics, or in sports. For example, Nick Leeson, a 26-year-old trader, bankrupted the British merchant bank Barings in 1995. Leeson made a small trading mistake that he didn’t want to admit because he wanted to be seen as a success—so he hid the loss in an obscure trading account. He made more risky trades to pay back the loss, and kept on losing. He lied and forged documents to hide mounting losses. Ultimately, his trading losses soared to $1.3 billion, the bank collapsed, and 1,200 employees lost their jobs. Leeson was sentenced to six-and-a-half years.
If you cross a moral or ethical line once because of seemingly justifiable circumstances, you’ll keep crossing the line. The best way to avoid this is to never compromise your morals—it’s easier to maintain your standards 100% of the time than 98% of the time. You either stand for something, or you don’t. Once you’ve crossed your moral line, it no longer has any power to stop you—so when faced with the temptation to cross it, stop, think about the long-term cost, then turn around.
Many people start down a slippery slope by engaging in marginal thinking that fails to grasp the full impact of their actions. They make small, seemingly harmless decisions or compromises that lead to more and bigger compromises—with devastating consequences.
Describe an instance where you applied marginal thinking at work or at home (that is, you decided to do something morally questionable “just this once”—for example, “fudging” on your expense report or taking a shortcut on a task). Afterward, how did you feel about your decision?
What were the short-term consequences of this decision? What were the long-term consequences?
The next time you face a situation where you’re tempted to do something “just this once,” what will you do?
The theories in this book won’t be of any use to you unless you have a purpose, or an understanding of what you’re trying to achieve in your life. For the theories to help you make decisions by predicting outcomes, you need a basis for weighing potential outcomes.
For a business, having a clear purpose drives executive decisions and keeps employees focused on what's important to the company. Similarly, you need a purpose for your life, against which to weigh decisions.
A company’s purpose provides three things:
1) A model or picture of what the company will look like or be when it has achieved its goals
2) The full commitment of executives and employees to the model they’re trying to create (no one compromises on it under any circumstances)
3) Several metrics the company’s leaders and employees can use to measure progress individually and collectively
Companies that want to have an impact need to choose a purpose deliberately—it won’t just materialize—then pursue it with a strategy that accommodates both a deliberate plan and emergent opportunities.
Similarly, you need to choose your own purpose (decide what kind of person you want to be and what you want to achieve in your life), and pursue it with an evolving strategy. The same elements that comprise a company’s purpose—a model, commitment, metrics—should be part of your purpose.
As an example of how to do this, here’s how Christensen applied the formula:
Christensen based his answer for who he wanted to become on his values of family and faith:
Deep commitment to the above values guides Christensen’s daily priorities—what he chooses to do and not do.
This metric is the yardstick you’ll use to measure your life. Christensen decided to measure or assess his life by the number of people he helps to grow and become better people. This metric leads him to constantly look for ways to help others.
Figuring out your purpose in life gives you a framework for making sense of every other decision and circumstance. The theories and knowledge presented in this book can help guide your career, relationships, and ethics, but your purpose is your North Star.
(Shortform note: For more on defining your own and your company’s purpose, read our summary of Start With Why, by Simon Sinek, here.)
For a business, having a clear purpose drives decisions and keeps people focused on what's important to the company. Similarly, you need a purpose for your life, against which to weigh decisions. The three components of a purpose are: a model for who you want to be, commitment to that goal or value, and a metric by which you’ll measure your life.
Write out a statement describing the kind of person you want to be and what you want to achieve in your life.
How will your commitment to becoming this person drive your daily decisions?
How will you measure whether you’re living up to your standard?