Exchange Networks, Not Markets

Why is the real world made up of exchange networks rather than markets? In a word: trust.

Relationships in an exchange network quickly become stable (we go back again and again to the person who gives us the best deal), and with stability comes trust, i.e., the expectation of a continued valuable relationship. This is different than in a typical market, where a buyer may deal with a different seller every day as prices fluctuate. In exchange networks, buyers and sellers can more easily build up the trust that makes society resilient in times of great stress. In markets, one must usually rely on having access to an accurate reputation mechanism that rates all the participants, or to an outside referee to enforce the rules.

Social Physics: How Good Ideas Spread, by Alex Penland

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Changing Your Mindset May Be the Key to Success

Do you have a growth mindset or a fixed mindset?

The question didn’t even make sense until I read Mindset: the new psychology of success by Carol S. Dweck, Ph.D. Dweck’s thesis is that internal beliefs about one’s and other’s ability to learn is the key to lifelong success. Do you believe that people are born smart or that high achieving people worked hard to attain their position? Do you believe that with time and effort any person can improve themselves? Do you believe that athletic talent is something you are born with? These types of questions reveal your mindset.

In parenting, praising the outcome instead of praising the effort seems like the natural thing to do. Who wouldn’t be proud of Johnny for his straight A’s, and who wouldn’t call him smart? Who wouldn’t want to brag about Jane’s incredible and natural appetite to devour books well beyond her grade level? However, these things can indirectly convince our children that their success is based on how they were born instead of how they worked. This can inadvertently lead to a “fixed mindset” and a fear to take on new challenges because the limits of their natural abilities may be discovered if they fail. The book offers incredible insights about underachievers and some significant insights into bullying and our nation’s epidemic of school shootings.

The most insightful chapter to me was about leadership in business. Several well-known CEOs were studied to see if they have the growth mindset or the fixed mindset. Fixed mindset CEOs tend to think they are smarter and better than their employees. Growth mindset CEOs recognize that people can grow and learn throughout their careers and that tapping into that potential helps their organization shine. In both cases, the CEOs did quite well for themselves. However, the difference in the organizations is stunning.

America has a wide-spread performance culture. Accomplishments certainly matter but we all need to be careful in how we honor them. True greatness rarely comes from either effort or talent alone, but on a person’s ability to honestly understand their strengths and weaknesses and their willingness to take the effort needed to rise above them, with the belief that they can rise above them. Much of what we celebrate reinforces the idea that people will only be as good as their natural-born abilities allow them to be. This thinking is detrimental to our children, our businesses, our competitors, and our relationships. Changing how we view ourselves and others is paramount to achieving our true potential.

I highly recommend Mindset. This has been the most influential book I’ve read in a decade.

p.s. A parenting guide by another author is available. For parenting help only, check out Mindsets For Parents: Strategies to Encourage Growth Mindsets in Kids.

The E-Myth Revisited

The E-Myth Revisited has changed my perspective on owning and growing a small business.

There are parts of the book that are an obvious advertisement for Michael’s consulting business, but who can blame him for that? He’s on to something.

Thinking of myself in terms of the Technician, the Entrepreneur, and the Manager has been insightful. I started Blue Ridge Solutions as a reluctant entrepreneur. There was an immediate need to supplement my cash flow and a shortage of available high-tech jobs in Western NC. Thus, I created an environment where I could pursue my craft.

At some point the transition was made from the Technician (a highly skilled web developer) to Manager directing a team of qualified developers personally recruited. It was a good transition and allowed the company revenue to grow well beyond that of a single person.

Later, the transition to Entrepreneur occurred, though I’m not quite as conscious about when that happened. Instead of managing my team, I was implementing processes (Systems, per Gerber) so that the team knew what was needed whether I was present or not. During this time, I definitely experienced the Entrepreneurial Seizure and experimented with different management styles somewhere between delegating and abdicating responsibilities.

Many of these ideas were brought to my attention as I went through the ScaleUp program. Sometimes it’s hard to see what’s directly under your nose, especially in the crisis and busyness of the moment. I wish I had read this before I started a business. The lessons learned will definitely apply throughout the rest of my career.

Pick up The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It before going out on your own!