Lessons from HBS (Part 3)

Back in 2015, I wrote an essay about what I learned during the required curriculum of Harvard Business School.

HBS is a two year program, and the second year you can take whatever you want. Not every student at HBS takes these classes, but here is a similar list of takeaways. Here was my update from the first semester.

Entrepreneurial Failure

There's a fair amount of debate about if one should study entrepreneurial failure, or only success. I think looking at either as individual cases has downsides. On the success side, it's easy to adopt a culture wholesale (vs. the parts that really mattered) - and with failure it's often so many things that went wrong.

The class pulled out a few themes - bad bedfellows, failure to launch, help wanted, speed trap, and cascading miracles. You can read about all of those in the book.

What really struck me is the point that you never "win" with a startup. Any success is temporary, and even public companies end up in really bad situations.

The way you fail may change, the feeling that you might fail does not.

Entrepreneurial Management in a Turnaround Environment

I really enjoyed this class solely for its focus on a specific moment in the company lifecycle. Each turnaround tends to have four characteristics: financial, strategic, people, and process/operations.

One of my favorite themes was that innovation has diminishing returns. Often companies get to bad situations by continuing to cling to what they started with (a better product).

An easy way to look at this is with razors. At first, the three blade razor was a big innovation and resulted in a smoother shave. Since then, most technological razor innovation has been in adding blades, and at some point the razor is "good enough" for the consumer.

Continuing to innovate won't necessarily fix margins or other financial woes. New products or different models are needed.

Innovation is an early product strategy, not a late one.

Negotiations

The best part of this class was just practicing negotiating in a low-stakes scenario, with a lot of different people.

One of the most interesting academic pieces of the class was research around how demographic information changes things. While we like to say women are less apt to negotiate, it's more true that women don't like to negotiate because they face worse outcomes for the same behaviors.

In particular, people don't like to concede to women. Women with the best options may be apt to end up not reaching a deal.

Women with a high BATNA negotiating with another party with a high BATNA are more likely to reach a “no deal” scenario.

Creation of the Modern Financial System

CMFS was my unusual class for the semester. It's a combination of economics and finance. Most of the cases were spent on new financial and regulatory innovations and events (banks, the stock market, insurance, limited liability, the depression, the 2008 financial crisis).

It is interesting to reflect on how much the financial system is created in a way to react to previous problems (which creates new ones).

That said, my tangible takeaway was how much crises tend to follow periods of overconfidence, and how blips in one asset class can spread to others.

Pay a lot of attention when someone says an asset class "can't go down." Consider what would happen if it did and plan for that scenario.

Corporate Governance

It's difficult to pull out one thing from this class. A few of the big themes were: it's important to compose the board with the right expertise, the chair must make sure the board runs well, governance is very different across countries (a joint CEO-Chariman is very American), once a company is for sale Revlon duties kick in, activist investors seem really annoying.

Overall though, the feeling I got was that boards are underrated and underutilized. Boards have such a deep bench of expertise that being able to surface the right questions and have a well run conversation matters.

A well run board will accelerate company performance.

Authentic Leadership Development

This is one of the classic HBS classes (it's the HBS version of Stanford's touchy feely). Lots of the frameworks in the class are covered in leadership books, so if this area interests you I recommend the 15 Commitments of Conscious Leadership, and The Truth North Fieldbook.

One book we read during the class was Leadership and Self Deception. The core lesson from the book (and for me, the class) was that when you have the instinct to do something for someone else, you should. If you think "I could unload the dishwasher so my spouse doesn't have to," you should. The reason you should is that if you don't, you're apt to make up stories to glorify yourself and demonize the other. This undermines the relationship.

This has worked really well for me in the months I've been using it. It's a nuanced concept and reading the book might help you get the gut feel for how to use it.

The moment you have the instinct to do something for someone else, you should. If you don't, you'll start to make up stories about why you are great and not doing it is the exception, and stories about why the other person is bad and doesn't deserve it.