How That Vicious Inner Critic Can Be Your Closest Ally

TMT1There’s something about optimism. Nothing in business is quite as powerful in motivating people to believe in a mission as a leader who undoubtedly believes. The energy that radiates from a passionate entrepreneur is engaging, uplifting, and inspiring. When we hear someone tell us he or she is following their muse, boldly pursuing a personal dream, we want to root for them. We want to become a part of it. We want to hitch our cart to their wagon. We want to step out of the ordinary and get onboard the outrageous.

A leader who won’t be deterred can bring purpose to a business enterprise.

A leader who rises above petty criticism and backstabbing naysayers can turn a hundred dollars into a hundred million dollars.

A leader who is “all-in” and won’t be dissuaded from a cohesive, organic vision can literally change the world.

Over and over we hear the speechifying that tells us never to give up, that resilience is all that matters, that we should forget the critics and ignore the naysayers.

Already doing that? Great. But there’s a catch.

Walt Disney was told he was no good as an illustrator, that his characters would never be popular. Steve Jobs got fired from his own company for being difficult, and refusing to compromise his ambitions. They were never dissuaded. They were resilient and persevered. They could not have cared less what their critics were saying.

Walt and Steve are held up as classic examples of rejecting rejection. They maintained an uncompromised vision and carved their place in history because of it. Detractors who called out “their folly” could do them no sustained harm. Walt and Steve evidenced a form of courage that set a new high water mark for leading teams beyond the fog to unbridled innovation. They remain heroes to those who aspire to transcend the ordinary.

So what’s the catch? You want to be That Leader, right? Or maybe you just want to sign on with That Leader? What’s the missing element that is most likely to take you down?

Is it that the odds against a startup succeeding are enormous?

Nope. Most entrepreneurs know this long before they quit their day jobs. Many are wacky, but few are stupid.

Is it that capital is very hard to raise, especially for a first time entrepreneur?

Nope. Most entrepreneurs discover this lesson the first time mom or dad says, “What!? Are you kidding me? You’re not a CEO… you can barely manage to get matching socks on your feet!” They secretly know that mom and dad are just negotiating their share of the deal for the seed round.

Is it that it’s nearly impossible to get super-talented people to work for deferred or limited pay for the long runway until a business is cash flow positive?

Nope. Most entrepreneurs are confident that if they articulate an exciting enough plan, the right people will get with the program no matter what, and the ones who said no just saved the entrepreneur the pain of having to fire them later for their mediocrity.

Then what is it? What is the Achilles Heel of the resilient? What is the repelling force that stands counter to the success of leaders brave enough to shake off a world that tells them No No No when all they hear in their heads is Yes Yes Yes?

Presume for a moment this entrepreneur is You. Get your highlighter ready. You’ll want to make note of this for the rest of your career.

The problem might be YOU.

Don’t highlight that. I haven’t gotten to the important part yet. The part you need to highlight is this:

If you’re not going to listen to the critics who will tell you every reason in the world why you are going to fail—and believe you absolutely must tune them out in order to be a renowned, world-class leader—you are going to have to be the hardest critic in the world on yourself.

Yes, in order to earn the privilege of ducking all the pessimists trying to steer you away from your dream, you must beat yourself up in ways they can’t even imagine. There is no luxury in resilience. There is only a level of self-critique so necessary that the pain it will cause you as a lone wolf makes child’s play of the third-party negativity you will never hear. What you hear in your head must be far more thundering—and far more impactful.

The real reason most startup leaders fail

It’s not because of a lack of devotion, or a lack of passion, or even because of a lack of talent.

They fail because of a lack of self-critique.

Does this apply to you? Have you actually established yourself as your own toughest critic? I don’t mean a little tough. I mean vicious, brutal, send yourself into a tailspin tough. Sorry to break the news, but that’s why Walt and Steve were often perceived as miserable. They were always very, very tough on themselves, an order of magnitude more thrashing than what any bleacher critic was or even could have been.

I have had the privilege to lead a handful of creative companies and I have had the privilege to be a published author. In all cases I was told innumerable times why I would not be successful. I didn’t hear a word of it. I didn’t need to hear a word of it. In all cases I was already way ahead of the peanut gallery, working and reworking the scenarios of why I wouldn’t be successful.

I study product features like I study word choices. I might tell you that no one on the market has anything like this, but before you’ll hear me utter those words, I have done the homework to assure myself this is worth defending. No one else can do that as stridently as I can. I say “no” to a sentence a hundred times before I let you see it. I edit it, erase it, rewrite it, rework it, change it, question it, then pick it apart word by word until I have exhausted all its failures. Same with a product. Same with a service.

I can only ignore the amateur naysayers because I am my own best professional naysayer.

Let’s take it deeper, to a place you may not want to go. Here’s another reason why startup leaders fail: they doggedly champion a product that is no good. It’s not because the naysayers are right. It’s because the startup leader doesn’t embrace the radical discipline to relentlessly question themselves and, by extension, their product.

If running out of time and money don’t apply as explanations, most entrepreneurs fail for a very simple reason: their idea was not good enough to create a category defining product or service. Too often we dupe ourselves into believing the ordinary is extraordinary. We fall in love with an idea because we gave birth to it, and rather than beating that idea into something exceptional—or dumping it, learning from it, and finding the fortitude to reinvent it into something else—we tell ourselves we will not be dissuaded and we go to market with mediocrity. That’s when we get walloped.

Once again, the tough love, get out the highlighter:

The only way you can defy the odds and ignore the critics is if you have a massive built-in crap filter. If you don’t want someone else to tell you your product is crap, you better be willing to tell yourself it’s crap or you’re going to blow a lot of time and money on nothing.

Artists and inventors have a crap filter no matter how successful they are. Walt did. So did Steve. Walt was told that audiences would never want to see a feature-length animated motion picture. He didn’t hear it, because Snow White and the Seven Dwarves was already worked out in his head, after he had rejected every possible way to make it something people would never want to see.

Steve was told there would never be a market for something as intimidating as home computing. He didn’t hear it, because the Apple II was already worked out in his head, after he had rejected every possible way that it would intimidate people.

Both of these visionaries agonized over perfection and were never satisfied. When they were starting out they were never satisfied. When they were at the bottom they were never satisfied. When they were at the top of their game they were never satisfied. The critics failed to resonate with them because they were lightweights in comparison to their own pounding criticism.

Are you embracing this burden of innovation?

Why do I need you to hear this? Why is this so desperately important to everyone who wants to make a difference and change the world? Because too many hopeful leaders are embracing the rhetoric of “going their own way” without embracing this burden of innovation. Every single day someone shows me a derivative app and begs me to believe in them. It’s a minimum viable product, they tell me, they will build on it and make it great later.

Right, after customers have yawned.

You really think they’ll give you another chance? So yours is 12% faster than your competition? So what? So yours addresses a tiny niche with a quirky set of differentiating features that matter mostly to you for pitching on demo day… So what? Get your eyes off the IPO listings and back on the shelf where the war for customers is lost or won. Don’t be Happy. Be Grumpy.

Incrementality is toxic. Don’t tell me how all your competitors have slightly weaker products than what you’re proposing. Convince yourself you can blow my mind with something that leapfrogs the entire market if not in one product cycle then over a generation. If you don’t want me to tell you that your app is crap then be sure you’ve asked yourself a hundred times before you ignore me. If you don’t know that your app is crap because you aren’t being honest with yourself then you haven’t earned the right to ignore the naysayers.

That’s the secret sauce—knowing when you are ready to play and when the cards you hold are not worth playing. Be that critic and you’ll never need another. When you stand up onstage and tell your story of success, it will undoubtedly be preceded by the chapters of failure that led you to your day in the sun. I want to come to that speech and applaud. I want to see you do it again and again. I want to see you tell the naysayers to jump off a peer.

Are you ready to take on the responsibility of being your own toughest critic? Wield your inner critic in such a way that it allows you to do the best work of your life. Then yeah, tell us all to bugger off and let’s get to work changing the world.

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This article originally appeared on The Modern Team.

Photo Image: Courtesy of Exclusive Collections Gallery (Fabio Napoleoni)

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Act Two Begins When You Say So

F Scott Fitzgerald“There are no second acts in American lives.”

  • F. Scott Fitzgerald, The Last Tycoon, 1941

“I once thought that there were no second acts in American lives, but there was certainly to be a second act to New York’s boom days.”

  • F. Scott Fitzgerald, My Lost City, 1932

Like many everyday admirers of American literature, I grew up only hearing the first use of Fitzgerald’s famous quote, which in fact was published posthumously. And like many people who misinterpreted that quote due to a lack of context, I grew up confused, conflicted, and even angry every time I read it. Fitzgerald the social observer worried about the American Dream, but he also celebrated idealism and courage. Would he want to be remembered for an inaccurate observation that is not only untrue but damaging? I doubt it.

Without diving into a diatribe on American literature, let’s just lift from the earlier interpretation of Fitzgerald’s quote and bury the latter forever. To the complete contrary, I assert with full confidence that it is entirely the DNA of American lives to reignite with second acts—in many cases, multiple second acts. In fact you can have as many acts as you want. Your life’s work can be singular, dual, multifaceted, multithreaded, a sine curve of milestones, or a pastiche of overlapping landmarks. If anyone tells you otherwise, run away as far as you can as quickly as you can and clear your mind of the naysayer’s rub.

Our economy is a place that celebrates reinvention. Our democracy is a place where resilience triumphs over cynicism. I believe these things not because I am a Pollyanna motivator (quite the opposite if you know me), but because I see these traits in winners who repeatedly defy the odds. Entrepreneurs, respected leaders, creative professionals who challenge the status quo—they all have to be good at what they do, but they all get knocked down for believing that change has to happen. They seldom bring change to the world on their first try, and when they win, they seldom win once. Why is that? Because before Act One is over, Act Two is in the works, and probably Act Three.

There is only one thing that can prevent an Act Two curtain from rising: Your own decision that a failure is too much to bear. The Information Age has turned that notion wholeheartedly on its head. As long as there is learning extracted from failure, failure is a pit stop, not an endpoint. As long as risk is sufficiently mitigated to bypass a cataclysmic wipeout of resources, you are not failing if you are learning. You are on a path to where you need to go. You are on your way to Act Two.

Read Walter Issacson’s biography of Steve Jobs. We all know Jobs founded Apple. Then he got kicked out of his own company for being an uncontrollable rebel, the very thing that put Apple on the map. Jobs gets fired around p.206 in Chapter 17. He is personally devastated, emotionally crushed. That’s when his Act Two begins. The book ends on p.571 in Chapter 42. Through it all, Jobs’s Act Two is fueled by a spirit of resilience and a commitment to personal reinvention. He lives an arc that resonates.

Read Neil Gabler’s biography of Walt Disney. Disney Bros. loses control of Oswald the Lucky Rabbit around p.109 in Chapter 3. Mickey Mouse is born in Chapter 4. Snow White and the Seven Dwarves—which simultaneously almost crushed Disney’s financial interests and then put the Disney name into American lore forever—arrives in Chapter 6. Disneyland doesn’t even make an appearance until Chapter 10. The book continues until Chapter 11 is finally exhausted on p.633. If you’re looking to count second acts, start early.

Reinvention does not only apply to the famous. When I personally decided to return to writing after a twenty-five year hiatus, a lot of people made snide remarks, both to my face and behind my back. I had enjoyed a respected career in management at the intersection of entertainment and technology, but I never wanted to consider that my whole story. Starting over and writing a novel with a half-century under my belt seemed absurd to almost everyone around me. I would be competing with established authors who had amassed a lifetime of credits. I would be doing it for a fraction of the income I earned previously. There was absolutely no way to predict critical or commercial success of any kind. Critics can be harsh, public evaluation even more ominous. It was a challenge filled with possibility, a path to sharing ideas with authenticity and voice that was mine. That sounded like a decent Act Two to me. I wonder what Act Three will be.

In my new book, Endless Encores, a seasoned CEO spends an entire evening stranded in an airport executive club talking with a rising young manager who is about to hit the wall on his first failure. The less experienced leader is terrified that all he has ever wanted to achieve is about to be lost in a single product cycle. It’s a business parable, with only a few simple plot points, yet it encompasses a Socratic dialogue around what it means to learn from failure. Daphne, the veteran, has survived a seemingly infinite number of product launches, enough of them successful to keep her in the game. Paul, the rookie, comes to learn what it means to embrace resilience and reinvent himself to form a career of linking “acts” that over time reveal the arc of his personal development.

Neither Daphne nor Paul would ever buy into the idea of a terminal Act Two, let alone Act One. That’s a driving factor in the purpose that underlies their lives. Products have to sell, but more importantly, teams have to work well together and values have to emerge as shared conduits to satisfaction. Few of us get this right the first time. No one gets it right every time. You don’t have to get it right every time. You just have to know that potential for improvement always exists, recognize the aspiration for excellence as a mandate, and approach the ideal with unbridled enthusiasm. The curtain goes up on Act Two when you commit the passion to ensuring that it happens.

Don’t misquote or misunderstand Fitzgerald. Don’t tell me there are no second acts in our lives. As long as you are learning and readying yourself for what comes next, you can start anew any time you want. The courage to pursue that can only come from you.

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This article originally appeared on The Good Men Project.

Dreaming and Doing

Some people focus on dreaming. Some focus on doing. The ones who find a way to bridge the gap make change happen. Every once in a while, as Steve Jobs would say, they put a dent in the universe.

Many people elicit feedback. A few of them take something away from that feedback and apply it to what they are dreaming and doing. Yet too many solicit the feedback and then bat it away, a check mark on their roadmap to convince themselves they are not building in isolation. They have no interest in taking their vision to another level if it means wandering a bit from a too rigidly determined path.

The combination of dreaming and doing creates the flint and steel of innovation. Without both the status quo rules.

The combination of listening and interpreting is what hones an idea and an action plan, shaping and molding it into a viable product.

Walt-Disney-2Walt Disney said, “If you can dream it, you can do it.” For decades I’ve been trying to decipher what he really meant by this. What I do know is that this calling is aspirational. It is incredibly difficult to meet this challenge. Walt defines a promise, then delivers the promise. This has taught me that when I make a promise to customers, I must be fully committed to delivering on that promise. If I allow a gap to remain between dreaming and doing, the dream becomes cynical. Failure is okay if it’s part of the path of learning, but a cynical promise is never okay. That’s when words become hollow, and customers abandon a brand.

Recently on a cross-country flight I saw the movie Jobs.  I don’t know if it’s a great movie, but it did remind me clearly of Steve’s near maniacal obsession with perfection, with making excellence a reality, with getting everything right. That’s a standard that will surely break the mediocre and inspire those who want to be inspired. He was a dreamer, he was a doer. In his own weird way, he was also a listener. You had to listen closely to hear where he was hearing, but Steve was always listening.

Walt Disney was always listening as well. He would sit in the center courtyard at Disneyland and listen to the people around him. He never stopped dreaming. He never stopped doing. He never stopped listening,

Over the past few years I have worked with several emerging companies, to help them craft and realize their articulated strategies. I have seen magnificent dreams get stuck either because they were too unformed to realize or because the dialogue around the table became stunted by poor interchange. When you travel a great deal and interact with a wide range of customers, you begin to see the difference between actual listening and pretending to listen. You also see the results—who is gaining ground and who is stuck at the table. In my observation, the people stuck at the table might still be dreaming instead of doing because they are not listening.

As a team grows, the voices on that team expand, none more important than the voice of the customer. Does that mean a powerful vision should be diluted into compromise so everyone’s voice is incorporated? Of course not! I have written about that many times before, secure in my belief that product development is not democratic. A big idea is almost always pure, and consensus is not the same as compromise. Yet I have also sat in the room when the small spark needed for bringing dreaming into doing was snuffed out time and again. No matter how many times it was said, it was not heard. Thick heads prevailed. The status quo ruled. An ordinary idea was dressed up as something extraordinary only to be exposed as counterfeit when stared down by paying customers.

The bigger the dream, the harder it is to get it right.  Listening, editing, sifting through, and interpreting feedback is your path. That’s how you build engagement. That’s how you build momentum. That’s how you build loyalty.

Big dreams are rallying cries; small dreams are not. Incremental dreams do not put a dent in the universe. Dreams that overcome entrenched hierarchies fire up those around you and fire up your customers. The fire starts with a spark. The spark? Listening.

Business is pragmatic. Say what you are going to do and then do it, otherwise your brand promise will be empty and your customers will abandon you.

Dream big, but understand that once you share a dream, you must be committed to bringing it to life.  That is a dream worth dreaming, worth fighting for, worth sacrificing for, worth celebrating.  Hold people accountable for their role in the dream and cause them to own a share in its success.  That is a much more worthy endeavor than just doing a job.

And listen.

The end of each year is a great time for personal reflection. What can you do next year that you weren’t able to do this year? Are you dreaming it or doing it? And as you embark on doing it, make a point of listening to those you need to hear. Then make the hard calls, just like Steve Jobs, just like Walt Disney.

Elon Musk Blows My Mind

I don’t know Elon Musk. I wish I did. This guy knows stuff. He’s the real deal.

MuskIf there is a possible next Steve Jobs or Bill Gates, it could be him. He’s not goofing around with thin stuff that’s going to come and go. He already did consumer software engineering as his opening act as a cofounder of PayPal. With the massive payday he got from eBay for the sale of his companya company that continues to operate as such an important platform it could someday be spun off again as an independent entityhe could have taken the path of least resistance and become an elder statesman of the industry, a board member, an investor, a wise individual of counsel. Not Elon Musk. He started not one subsequent company, but twoTesla Motors and SpaceXand leads both as CEO. He is also the CTO of SpaceX and the chief product architect of Tesla. Not exactly a path to retirement. He’s really, really changing the world.

I don’t know if he’s a nice guy. Like I said, I have never met him. But he is truly impressive and worth studying. Here are some perhaps not so obvious reasons why:

A real track record of repeat innovation.

A lot of people talk about being serial entrepreneurs. Elon Musk has pioneered three immensely important companies. The ability for an innovator to find repeat success in entirely new ventures is perhaps the rarest of proven attributes. Edison did it. So did Walt Disney and Steve Jobs. Musk made a mark in digital payment systems, then battery-powered automobiles and low-cost rocket propulsion. He didn’t start life as a rocket scientist, but he challenged himself to become one. Try to find a resume like his anywhere. I don’t think you can. He not only articulates a clear, bold vision, he leads from the front lines as a player-coach. He is simultaneously a thinker, a doer, and a peer-respected personal risk-taker with real skin in the game. He makes disruption make sense. That’s how you fire up a team and get results.

The work he does is important.

It was not clear to everyone in the first dot-com bubble that digital payments would be essential to our economy. Heck, most of us were lucky if we had a phone that could do email back then. PayPal opened our eyes. People have been betting against alternatives to fossil-fuel powered automobiles since the first suggestion of battery power on our roads. No matter how many failures it takes, we know that we can’t rely on the limited resource of petroleum forever. Space travel has been massively expensive, the province of federal bureaucracy and a very few goliath government contractors to date. We no longer have the luxury to spend endlessly on going into orbit and beyond, yet we know it is human destiny to explore our universe. All of this matters big time. Musk is actively pursuing a broad but selective set of challenges that he decides warrant his time and focus. This is real turf with lasting impact. It creates sustainable, well-paying jobs. Even when it fails, it moves the ball forward.

He is courageous and daring, but not reckless.

Earlier this year when Elon Musk was profiled on 60 Minutes, he said he was an engineer first. I do think he believes that, which is part of what makes him great, but even more than an engineer, even more than innovator, he is a pioneer. To be a pioneer in technology doesn’t just mean you have interesting ideas. It means you stand by your ideas and will them into being. Musk said in the 60 Minutes piece that with SpaceX he went “past strike 3 to strike 4,” not just betting the farm in failure, but staying with his conviction to the last test he could fund, even if it meant losing everything. He knew he was right, and if he wasn’t right, he needed to exhaust every resource at his disposal to make the case that he should have been right. When Musk recently faced a roadblock in submitting a competitive bid for a government contract controlled by Lockheed Martin and Boeing, he sued the federal government for the right to compete at substantially lower cost. Imagine the guts, to take on his own customer in a public forum, risking financial ruin for a principle. He won an injunction from a federal judge. Whether he ultimately prevails in winning the contract (and I think he will), there is little question that the price of that contract is coming down. Want to know how to get the government to think smarter about our tax money? I like this way.

He walks the walk, with standards that matter.

So much of what I write about on this blogideas like “good enough is not good” and “eat your own dog food”are very hard to understand unless you have lived them. If you’re lucky in your career, you get to work for someone for a while who grinds this stuff into your brain until you literally cannot act any other way, no matter the stakes, no matter the challenges. If you don’t get a boss who inserts that chip into the back of your spinal cord, study Elon Musk. You can’t cut corners on quality with the work he tackles, or people die. Of course you’re going to say, Well, in automobiles and rockets, people do die. Sadly in the march of progress where new machinery does fail, there is no way around that no matter the commitment to extraordinary quality, but the question is, what is the ethos at the core of an enterprise? Is it profit first, a love letter to Wall Street with lip service to safety and excellence? Or is it a standard of safety and excellence that exists a priori to all other decision-making that of itself creates value? When I see Musk discuss failure or success in any public setting after something has gone wrong or right, I don’t worry that his statement has been pureed by a publicist. I see an engineer who knows winning means perfection, and as elusive as perfection remains, he is never self-satisfied, never standing on his laurels. What do you really need to say about a reusable rocket that leaps sideways and then lands on its launchpad? The Grasshopper speaks for itself.

Why write about Elon Musk?

In this never-ending discussion of whether we are in a tech bubble, I have grown weary of broad generalizations. If all we are worried about is whether the stock market is due for a correction, then we are wasting brain cycles on an inevitable head fake we cannot control, so why bother? Our world has an abundance of trendy apps, head-bobbing diversions, and flavor-of-the-month prognostications of what at the moment constitutes cool. You know what’s cool? Stuff that lasts, stuff that can have a lasting impact on growing our economy, stuff that makes scientific dreams into tangible realities, and stuff that in doing so makes investment capital make sense. Musk is doing that, which to me looks like real leadership, and it feels good to applaud him. I don’t care that he is a billionaire. I care that he is a creative leader, with half his life likely still ahead of him to teach us things we don’t know and take us places we couldn’t otherwise find.

As Andy Grove taught us decades ago, Only the Paranoid Survive. Somewhere along the ride, Elon Musk must have gotten the memo. He is probably rewriting it with some form of ink yet to be discovered.

Don’t Fear the Fad

As an investor, can you ever know for certain if that newfangled gizmo come to market is the real deal or a fad?

Let’s try it a different way—perhaps everything is a fad, until it’s proven otherwise.

Bread, most likely not a fad. But organic fair-market nine-grain soft crust, probably a fad.

Cars, probably not a fad. But eight-cylinder 130 mph muscle mobiles with no back seats could be a fad.

AM radio, possibly a fad, but one that has enjoyed a long shelf life—and now with news and sports retransmitted over the internet to mobile devices, probably a decent bit of runway left in the broadcast machine.

Farmville, Mafia Wars, and their brethren? You tell me.

Our attention spans are surely fickle, but just because something is a fad does not necessarily make it a bad investment. I am not certain internet keyword search will last forever, but the last decade and a half have proven pretty rewarding, at least for one company that currently commands better than 70% market share. Games? That’s where they come and go in a coughing breath—if you are going to bet at that crap table, come with a lot of chips and a jug of Pepto-Bismol.

The question of whether it makes sense to bet on a fad in a commercial, accelerated, low-loyalty, short-attention-span, vastly diverse, market-driven global economy seems moot. People have bet against railroads, phones, airlines, television, personal computers, and even guitar bands as fads—and that was before they had customers! Even after these “fads” had momentum, there were endless naysayers who said they were on their way out as fast as they’d found their way in. With that kind of outlook, eventually you have to be right, but you may be staring up at daisy roots when you finally win your bet.

There is tremendous Monday morning quarterbacking now about the dive in Web 2.0 companies, from Facebook to Zynga to Groupon to Pandora. Maybe they are all fads, but let’s separate the fad of stock market performance from the fad of consumer adoption as two separate issues. The shine may be off the stock, or the shine may be off the company’s products, but those are very different things. High-growth speculative stocks like these are most often valued on future earnings potential, not current performance, so if the stock is out of favor, that does not de facto mean the product or service has gone out of favor. Plenty of people are enjoying these consumables at the moment, though it is safe to say that they won’t all be in vogue for eternity. Styles change, tastes change, brand loyalties change. We know that to be Creative Destruction, an ever-present cycle, so when we criticize either an equity or a product as being a fad, let’s be careful to make the distinction, and even more careful not to level broad sweeping judgment that could lead to missed opportunity.

Can a company make money riding the wave of a fad? Seems to me that is more norm than anomaly. Can an investor make money owning the stock of a company that rides the wave of a fad without volatile exposure to market timing? Again this seems perfectly reasonable, depending on the window. Think Intel with micro-processing chips during the PC revolution, Electronic Arts with the rise of sports-based video games led by Madden NFL, and today’s True King of All Media, Apple. Equity markets in the long run reward smart risk and punish reckless risk, just as commercial markets reward desirable consumer offerings and reject cynical ones. There has to be risk for there to be reward or no one would invest, so the question is not whether something is a fad, but whether that fad represents some potential form of continuity recognized by visionary management as one in a string of ventures that together comprise opportunity.

Intel’s legendary former CEO Andy Grove clearly taught us, “Only the Paranoid Survive.” He knew at any strategic inflection point the difference between a fad and a trend was largely the expanse of the product life cycle. More importantly, he worried about management culture as the path to product culture, where innovation means never-ending creativity, not tossing the dice and getting lucky on a good roll. I don’t worry whether a company is profiting from a fad, I expect companies to be opportunistic. I worry whether the company is a one-trick pony, whether it has created a learning culture where success and failure are both studied. A company that has learned to learn, that can read data and understand how fads are perpetuated as trends that constitute periodically sustained disruptions—that is a company that can extract true shareholder value from a fad, foremost by surprising and delighting customers repeatedly with that which they never expected was possible.

I have a lot of criticism about this year’s poor performing new entries in the NASDAQ, but that criticism has nothing to do with whether those companies were beneficiaries of identified fads now assessed by pundits to be in decline. My own career has been the beneficiary of any number of fads that came and went—computer games that sold millions and now barely qualify as second round questions on Jeopardy, once immensely cool websites that scored millions of visits that no longer can be found, virtual communities that ranked with the best in loyalty and now would be lucky to make the card draw on Trivial Pursuit. Does that mean they weren’t good businesses that added significant value to their owners? To the contrary, in their useful lives they added exceptional shareholder value in earnings and lifetime contribution. We worked the brand promises as long as we could, but when their time was done, we moved on.

That’s why a sweeping statement like “don’t invest in fads” makes little sense, because if virtually everything is a fad with varying sustainability, there is no choice but to invest in fads. What I worry about is management vision, how the brand stewards of a company are migrating from one fad to the next, how maneuvering through Creative Destruction is an art and science unto itself. Edison did it over a very long period of time. So did Steve Jobs. The folks who run television networks have to do it, because no show lasts forever and formats are cyclical; yesterday’s Variety Shows are today’s Reality Shows, half-hour comedy goes in and out of style, so does one-hour drama. Walt Disney famously bet the ranch on 2D feature animation, clearly a fad, although one he created and that lasted more than 50 years—but that wasn’t the only trick he had in the magic shop, not even close. To invest wisely in the likelihood that originators can capitalize on a string of fads through creativity and experimentation is very different from investing in one hot rocket that goes straight up with full knowledge that gravity will send it back down with equal and opposite thrust.

As the contemplative George Harrison reminds us, All Things Must Pass. That doesn’t mean windows of opportunity aren’t always in abundance. Watch the fad-makers, not the fads themselves, and the game changes significantly. While even the best fad-makers can’t call winners forever, those longer windows leave plenty of room for upside, especially when you bet the full spectrum of an index rather than trying to call the hits in isolation. If you bet on a one-trick pony and lose your bait, that was most likely your mistake, not that you bet on a fad.