The Millionaire Next Door: The Surprising Secrets of America’s Wealthy [Book Review & Summary]

'The Millionaire Next Door' by Thomas Stanley, William Danko (ISBN 1567315682) The Millionaire Next Door summarizes anthropological research from the ’90s on the attributes of unassuming wealthy Americans. The authors, marketing professors Thomas Stanley and William Danko, offer unique insights into millionaires’ lifestyles and their buying habits. They explain that, in contrast to today’s earn-and-consume culture, the many ordinary folks who accumulate wealth live modestly and prize frugality.

When first published in 1996, The Millionaire Next Door generated widespread enthusiasm for its core message: that anybody could become rich by living below their means, efficiently allocating funds in ways that build wealth, and ignoring conspicuous consumption. Consequently, the book sold millions of copies and stayed on the New York Times bestseller list for three years.

A bulk of The Millionaire Next Door focuses on rejecting the stereotypical view of the wealthy; the authors write, “Most people have it all wrong about wealth in America. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”

The authors discuss the fancy trappings of wealth and the high cost of maintaining social status. They explain that wealthy individuals prioritize financial independence over a high social status. Further, they did not receive sizable financial support from parents, and raise their own children to be economically self-sufficient adults.

The Millionaire Next Door is a definitive example of books that present simple concepts by reiterating them ad nauseam with an overabundance of statistics, tables, charts, and anecdotes to attain a respectable book length. For instance, a tedious 31-page chapter discusses how the wealthy purchase cars and includes statistics for average price-per-pound of popular cars.

Recommendation: Skim. The Millionaire Next Door defends the timeless values of thrift, disciplined spending, and prudent accumulation of wealth. However, the book overemphasizes penny-pinching and the merits of hoarding money. The book feels dated (it was first published in 1996) and engages the reader in crude generalizations and oversimplifications.

Lessons from Dwight Eisenhower: Authentic Leaders Demonstrate Accountability

In a previous article about how you can control just your efforts and not the outcomes of those efforts, I detailed Dwight Eisenhower’s weather-induced dilemma on the eve of the Allied invasion of Normandy in June 1944.

The Success of the Normandy Invasion Was Not Entirely in Eisenhower’s Control

Despite a year of intense planning and preparation under Eisenhower’s leadership, the Allied invasion’s success ultimately depended on the weather across the English Channel. Their landings hinged on suitable weather—something entirely beyond their control.

General Eisenhower addressing American paratroopers on 5-June-1944 before the Battle of Normandy.

Eisenhower tentatively planned to send his troops across the English Channel on 5-June. On 4-June, however, the troops predicted cloudy skies, rain, and heavy seas that threatened the invasion. Although the following day’s weather was not necessarily ideal, it was comparatively more suitable than the 5-June, so Eisenhower postponed the invasion by a day. If he did not invade on 6-June, the tides would not favor an invasion for another two weeks, which would possibly give the Germans enough time to get wind of the Allies’ plan.

Early in the morning of 5-June, Eisenhower gathered his advisers’ and military officers’ opinions on whether to launch the attack despite the less-than-suitable weather. He sat quietly in deep contemplation. One of his advisers later recalled, “I never realized before, the loneliness and isolation of a commander at a time when such a momentous decision has to be taken, with full knowledge that failure or success rests on his judgment alone.”

After five minutes, Eisenhower gazed at his advisers and said, “Well, we’ll go!”

With those words, Eisenhower launched the D-Day invasion of Europe on 6-June. After issuing those marching orders, events passed from Eisenhower’s control. He then realized that the invasion’s success was no longer in his hands. Its outcome depended on 160,000 allied troops, thousands of commanders, and hundreds of lieutenants. Eisenhower had done everything in his power to coordinate their efforts and create conditions conducive to the mission’s success. After issuing his orders, all he could do was let those conditions come to fruition on their own terms. After all his efforts, he could not control the outcomes—he let go of the outcomes.

An Authentic Leader in Action: Eisenhower’s Character, Responsibility, & Accountability

That evening, on his way to visit American and British paratroopers (pictured above) who were headed into battle that night, Eisenhower told his driver, “I hope to God I’m right.”

Just before he went to bed at night, Eisenhower scribbled a note and tucked it into his wallet. He thought he would use this letter if the invasion went wrong. (Eisenhower mistakenly dated the note July 5 instead of June 5.)

Our landings in the Cherbourg-Havre area have failed to gain a satisfactory foothold and I have withdrawn the troops. My decision to attack at this time and place was based upon the best information available. The troops, the air and the Navy did all that bravery and devotion to duty could do. If any blame or fault attaches to the attempt it is mine alone.

Dwight Eisenhower's note to use if the Normandy Invasion went wrong, 5-June-1945

Observe that Eisenhower crossed out “This particular operation” and wrote “My decision to attack.” This demonstrates Eisenhower’s assertive and responsible leadership in action. He wrote, “any blame or fault … is mine alone” and underscored the phrase “mine alone.” He did not use passive language or try to camouflage failure with phrases like, “as fate would have had it,” “unaccommodating weather,” “forecast not met,” “mistakes were made,” or “we tried really hard, but ….”

Eisenhower was an authentic leader in action—a leader who was ready and willing to accept unshrinking responsibility for his actions and their results.

Eisenhower won his wager with the weather. The invasion of Normandy was successful and proved to be a turning point in World War II. Eisenhower never used the note he had prepared on the eve of the attack. It is now on display at Dwight D. Eisenhower Library and Museum in Abilene, Kansas.

Authentic Leaders Demonstrate Accountability

As exemplified by Dwight Eisenhower’s leadership as the Supreme Allied Commander during World War II, authentic leaders recognize the accountability that comes with their roles. They accept absolute responsibility for the expected outcomes—both good and bad—no matter what the situation is. They don’t blame unfavorable circumstances, the external environment, employees, superiors, customers, or anybody else.

Inspirational Quotations #618

To know that which before us lies in daily life, is the prime wisdom; what is more is fume, or emptiness, or fond impertinence, and renders us, in things that most concern, unpracticed and unprepared.
John Milton

I have used these weeks to revalue values. Do you understand this expression?. When you come right down to it, the alchemist is the most praiseworthy of men: I mean the one who changes something negligible or contemptible into something of value, even gold. He alone enriches, the others merely exchange. My task is quite singular this time: I have asked myself what mankind has always hated, feared, and despised the most.
Friedrich Nietzsche

Not being able to govern events, I govern myself, and apply myself to them, if they will not apply themselves to me.
Michel de Montaigne

Answered prayers cover the field of providential history as flowers cover western prairies.
Theodore L. Cuyler

I put all my genius into my life; I put only my talent into my works.
Oscar Wilde

Some desire is necessary to keep life in motion; he whose real wants are supplied, must admit those of fancy.
Samuel Johnson

We are all exceptional cases. Each man insists on being innocent, even if it means accusing the whole human race, and heaven.
Albert Camus

At the center of our agency is our freedom to form a healthy attitude toward whatever circumstances we are placed in.
Neal A. Maxwell

Serendipity and Entrepreneurship in the Invention of Corn Flakes

In previous articles about Johnson’s Baby Powder and Picasso’s Blue Period, I discussed serendipity as a rich phenomenon that is central to entrepreneurial and artistic processes. In this article, I will discuss another case study of ideas born by chance and reinforced by casual observation and customer input.

One of America’s Favorite Cereals was Invented by Fortuitous Accident

Will Keith Kellogg invented corn flakes in 1894 at a sanitarium in Battle Creek, Michigan Will Keith Kellogg invented corn flakes in 1894 at a sanitarium in Battle Creek, Michigan. Will worked there as an assistant to his brother Dr. John Harvey Kellogg and helped research patients’ diets.

One day, while making bread dough at the sanitarium, Will accidentally left boiled wheat sitting out overnight unattended. When he returned to roll the wheat into dough, he discovered that it had dried out and was flaky. Interested to see what would happen, Will passed the flaky dough through the bread rollers and baked them to create a crunchy snack. He seasoned the flakes with salt and fed them with milk to the sanitarium’s patients. The wheat flakes were an immediate hit. Indeed, after some patients left the sanitarium, they ordered Kellogg’s flakes by post.

Will Kellogg’s Entrepreneurial Ingenuity

Serendipity and Entrepreneurship in the Invention of Kellogg Corn flakes Will Kellogg then tinkered his recipe for wheat flakes and ultimately settled on using corn in place of wheat as the flakes’ main ingredient.

In 1906, Will Kellogg launched “The Battle Creek Toasted Corn Flakes Company.” In addition to inventing corn flakes, Kellogg had a genius for business and marketing. He was a pioneer in testing markets, sampling products, using multi-color print advertisements, and developing innovative marketing campaigns.

Kellogg was keen on using slogans to promote his company’s products. In 1907, he introduced a marketing campaign that declared, “Wednesday is Wink Day in New York.” Every woman who winked at her grocer on a Wednesday received a free packet of corn flakes. Corn flakes sales skyrocketed.

Will Kellogg was also a prominent philanthropist and, in 1934, started the W. K. Kellogg Foundation.

The company Will Kellogg founded eventually became Kellogg Company, a prominent cereal and convenience foods multinational.

Ten Rules of Management Success from Sam Walton

Sam Walton (1918–1992,) the iconic founder of Walmart and Sam’s Club, was arguably the most successful entrepreneur of his generation. He was passionate about retailing, loved his work, and built and ran Walmart with boundless energy.

'Sam Walton: Made In America' by Sam Walton (ISBN 0553562835) “Made in America” is Walton’s very educational, insightful, and stimulating autobiography. It’s teeming with Walton’s relentless search for better ideas, learning from competitors, managing costs and prices to gain competitive advantage, asking incessant questions of day-to-day operations, listening to employees at all levels of Walmart, and inventing creative ways to foster an idea-driven culture. “Made in America” is also filled with anecdotes from Walton’s associates and family members—in fact, some of their opinions are less than flattering.

Former CEO of General Electric Jack Welch once said, “Walton understood people the way Thomas Edison understood innovation and Henry Ford, production. He brought out the very best in his employees, gave his very best to his customers, and taught something of value to everyone he touched.”

Here are ten insightful management ideas from “Made in America” with the relevant anecdotes from Walton or his associates.

  1. When hiring employees, look for passion and desire to grow. Having the right skills and qualifications is no doubt essential in a potential employee, but a better predictor of long-term success and career advancement is his/her passion for learning new things, commitment to a task, and a drive to get things done. A former Walmart executive recalls, “Sam would take people with hardly any retail experience, give them six months with us, and if he thought they showed any real potential to merchandise a store and manage people, he’d give them a chance. He’d make them an assistant manager. They were the ones who would go around and open all the new stores and they would be next in line to manage their own store. In my opinion, most of them weren’t anywhere near ready to run stores, but Sam proved me wrong there. He finally convinced me. If you take someone who lacks the experience and the know-how but has the real desire and the willingness to work his tail off to get the job done, he’ll make up for what he lacks.”
  2. Delegate and follow up. Delegation is indispensable; yet it remains one of the most underutilized and underdeveloped managerial skills. One element of effective delegation is consistent follow-up. Far too often, managers will delegate a task and then fail to follow up to see how things are going. Such failure to follow-up is tantamount to abdication of accountability for results, which still lies with the manager. Former Walmart CEO David Glass recalls, “As famous as Sam is for being a great motivator … he is equally good at checking on the people he has motivated. You might call his style: management by looking over your shoulder.”

Management Ideas from Sam Walton

  1. Persist and rally people to the cause. Passionate managers demonstrate the energy and drive needed to rally their teams around a shared vision. They engage their employees with the same messages over and over, escalate their sense of urgency, and get their vision implemented quickly. Former Walmart CEO David Glass recalls, “When Sam feels a certain way, he is relentless. He will just wear you out. He will bring up an idea, we’ll all discuss it and then decide maybe that it’s not something we should be doing right now—or ever. Fine. Case closed. But as long as he is convinced that it is the right thing, it just keeps coming up—week after week after week—until finally everybody capitulates and says, well, it’s easier to do it than to keep fighting this fight. I guess it could be called management by wearing you down.”
  2. Mentor, critique, and inspire employees. Mentoring employees is an effective way to improve employee performance and build trust and loyalty. Effective mentoring is not merely telling employees what to do. It is helping them broaden and deepen their thinking by clarifying their goals and asking the right questions. Effective mentoring is also about supporting employees as they learn and practice new skills and habits. Walton writes, “I’ve been asked if I was a hands-on manager or an arm’s-length type. I think really I’m more of a manager by walking and flying around, and in the process I stick my fingers into everything I can to see how it’s coming along. I’ve let our executives make their decisions—and their mistakes—but I’ve critiqued and advised them.”
  3. Invest in frontline employees for better customer relationships. Much of customers’ opinions about a business come from the myriad interactions they have with customer-interfacing frontline employees, who are the face of any business. If a business doesn’t get these customer experiences right, nothing else matters. Walton writes, “The way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising. Satisfied, loyal, repeat customers … are loyal to us because our associates treat them better than salespeople in other stores do. So, in the whole Wal-Mart scheme of things, the most important contact ever made is between the associate in the store and the customer.”
  4. Treat employees like business partners and empower them by sharing information. Effective managers foster open communication by treating employees as co-owners of the business and sharing operational data regularly. Managers empower employees by helping them understand how their contribution makes a difference, discussing opportunities and challenges, and encouraging them to contribute to solutions. Walton writes, “Our very unusual willingness to share most of the numbers of our business with all the associates … It’s the only way they can possibly do their jobs to the best of their abilities—to know what’s going on in their business. … Sharing information and responsibility is a key to any partnership. It makes people feel responsible and involved …. In our individual stores, we show them their store’s profits, their store’s purchases, their store’s sales, and their store’s markdowns.
  5. Never be satisfied. There’s always room for improvement. Effective managers never rest on their laurels and are persistently dissatisfied with the status quo. They possess a pervasive obsession for discovering problems and improving products, services, and people. Home Depot founder Bernard Marcus recalls, “If you ask Sam how’s business, he’s never satisfied. He says, ‘Bernie, things are really lousy. Our lines are too long at the cash registers. Our people aren’t being helpful enough. I don’t know what we’re gonna do to get them motivated.’ Then you ask some of these CEOs from other retail organizations who you know are on the verge of going out of business, and they brag and tell you how great everything is. Really putting on airs. Not Sam. He is down to earth and knows who he is.”

Insightful Management Ideas from Sam Walton

  1. Appreciate employees and give honest feedback. A key determinant of employee engagement is whether employees feel their managers genuinely care. Do the managers provide regular, direct feedback, both appreciative and corrective? Do they coach employees in their learning and career growth? Walton writes, “Keeping so many people motivated to do the best job possible involves … appreciation. All of us like praise. So what we try to practice in our company is to look for things to praise. … We want to let our folks know when they are doing something outstanding, and let them know they are important to us. You can’t praise something that’s not done well. You can’t be insincere. You have to follow up on things that aren’t done well. There is no substitute for being honest with someone and letting them know they didn’t do a good job. All of us profit from being corrected—if we’re corrected in a positive way.”
  2. Listening to employee’s complaints and concerns could be a positive force for change. Effective managers provide their employees the opportunity to not only contribute their ideas, but also air concerns and complaints. By fostering an environment of open communication, managers who handle employee opinions effectively not only boost employee motivation, performance, and morale, but also benefit from learning directly about problems with teams, organizations, and businesses. Walton writes, “Executives who hold themselves aloof from their associates, who won’t listen to their associates when they have a problem, can never be true partners with them. … Folks who stand on their feet all day stocking shelves or pushing carts of merchandise out of the back room get exhausted and frustrated too, and occasionally they dwell on problems that they just can’t let go of until they’ve shared it with somebody who they feel is in a position to find a solution. … We have really tried to maintain an open-door policy at Wal-Mart. … If the associate happens to be right, it’s important to overrule their manager, or whoever they’re having the problem … . The associates would know pretty soon that it was just something we paid lip service to, but didn’t really believe.”
  3. Learn from the competition. Effective managers understand that keeping tabs on competitors, copying their innovations as much as possible, and reaching out to customers the way competitors do is a great strategy for growing business. Sam Walton’s brother Bud recalls, “There may not be anything (Walton) enjoys more than going into a competitor’s store trying to learn something from it.” A former K-Mart board member recalls, “(Walton) had adopted almost all of the original Kmart ideas. I always had great admiration for the way he implemented—and later enlarged those ideas. Much later on, when I was retired still a K-Mart board member, I tried to advise (K-Mart) management of just what a serious threat I thought he was. But it wasn’t until recently that they took him seriously.”

Inspirational Quotations #617

Distinction is the consequence, never the object, of a great mind.
Washington Allston

The best hearts are ever the bravest.
Laurence Sterne

The world does not have to change … The only thing that has to change is our attitude.
Gerald Jampolsky

Timely service, like timely gifts, is doubled in value.
George Macdonald

We do not see nature with our eyes, but with our understanding and our hearts.
William Hazlitt

Just as much as we see in others we have in ourselves.
William Hazlitt

Mankind differs from the animals only by a little and most people throw that away.
Confucius

Fear clogs; Faith liberates.
Elbert Hubbard

The secret to success is constancy to purpose.
Benjamin Franklin

Many concerns now make part or the whole of their dividends from by-products that formerly went to waste. How do we, as individuals, utilize our principal by-product? Our principal by-product is, of course, our leisure time. Many years of observation forces the conclusion that a man’s success or failure in life is determined as much by how he acts during his leisure as by how he acts during his work hours. Tell me how a young man spends his evenings and I will tell you how he is likely to spend the latter part of his life.
B. C. Forbes

We know but a few men, a great many coats and breeches.
Henry David Thoreau

Lying, a telling of beautiful untrue things, this is the proper aim of art.
Oscar Wilde

Success Conceals Wickedness

Biographies of Steve Jobs (by Walter Isaacson,) Jeff Bezos (by Brad Stone,) and Elon Musk (by Ashlee Vance)

Two common themes in the biographies of Steve Jobs (by Walter Isaacson,) Jeff Bezos (by Brad Stone,) and Elon Musk (by Ashley Vance) are these entrepreneurs’ extreme personalities and the costs of their extraordinary successes.

The world mostly regards Musk, Jobs, and Bezos as passionate, inspiring, visionary, and charismatic leaders who’ve transformed their industries. Yet their biographies paint a vivid picture of how ill-mannered these innovators are (or were, in the case of Jobs). They exercise ruthless control over every aspect of their companies’ products but have little tolerance for underperformers. They are extremely demanding of employees and unnecessarily demeaning to people who help them succeed.

  • Steve Jobs was renowned for his cranky, rude, spiteful, and controlling outlook. Biographer Isaacson recalls, “Nasty was not necessary. It hindered him more than it helped him.” Jobs famously drove his Mercedes around without a license and frequently parked in handicapped spots. For years, he denied paternity of his first daughter Lisa and forced her and her mother to live on welfare. He often threw tantrums when he didn’t get his way and publicly humiliated employees.
  • In a 2010 commencement address at Princeton, Jeff Bezos recalled his grandfather counseling, “Jeff, one day you’ll understand that it’s harder to be kind than clever.” Still, according to Brad Stone’s biography, Bezos often imparts insulting rebukes and criticisms to employees: “I’m sorry, did I take my stupid pills today?” “Are you lazy or just incompetent?” “Why are you wasting my life?” and “Do I need to go down and get the certificate that says I’m CEO of the company to get you to stop challenging me on this?”
  • According to Ashlee Vance’s biography, when an executive assistant asked for a raise, Elon Musk asked her to take a two-week vacation while he contemplated her request. When the assistant returned from vacation, Musk fired her.

“Success covers a multitude of blunders”

The great Irish playwright Oscar Wilde once remarked, “No object is so beautiful that, under certain conditions, it will not look ugly.”

The other great Irish playwright George Bernard Shaw wrote, “Success covers a multitude of blunders.”

British politician and historian Lord John Dalberg-Acton famously said, “Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it. That is the point at which … the end learns to justify the means.”

Ethics Violations by NBC News Anchor Brian Williams

Ethics Violations by NBC News Anchor Brian Williams In 2015, NBC suspended prominent news anchor Brian Williams after internal investigations revealed no less than 11 instances where he either embellished facts or bent the truth. Members of his team and NBC staffers who knew about these ethics violations chose to overlook because he was powerful. According to The New York Times,

Mr. Williams has been drawing 9.3 million viewers a night, and his position seemed unassailable. Even as the stature of the nightly newscast faded in the face of real-time digital news, Mr. Williams was one of the most trusted names in America … He was powerful. Williams had the ear of NBC boss Steve Burke. He was a ratings powerhouse. And he spent years overseeing TV’s most watched newscast. He was a winner, for himself, those around him and those above him—until it became clear the man who is supposed be among the most trusted in America had issues with telling the truth.

Power Corrupts the Mind

Brilliant men and women engage in morally wrong conduct simply because they can. They can get away with extreme pride, temper, abuse, and other disruptive behaviors because their spectacular success can and does cover many of their sins, even in the eyes of those at the receiving end of their crudeness.

Our high-achieving culture adores the successful, the powerful, and the rich. And part of this adoration is the exemption we grant these celebrities from the ordinary rules of professional civility.

Idea for Impact: The more people possess power and the more successful they get, the more they focus on their own egocentric perspectives and ignore others’ interests.

Facts Alone Can’t Sell: Lessons from the Intel Pentium Integer Bug Disaster

Facts Alone Can’t Change Minds

In my previous article, I discussed Aristotle’s framework for persuasion and argumentation: to persuade people on a particular point of view, it is necessary to appeal to ethos (credibility,) pathos (emotion,) and logos (logic and reason.) Some people are swayed by logic, others by appeals to emotion, and yet others defer to those who seem to possess authority, expertise, and credibility.

In this article, I give a case study of the “Intel Pentium Integer Bug Disaster” to illustrate that facts (logos) alone sometimes don’t have the power to change minds. Many people are adept at those elements of persuasion that Aristotle characterized as logos: i.e., they are proficient at making their case logically and rationally to their audience. But they may not recognize the need for the pathos aspects of persuasion and may struggle to emotionally connect with their audiences.

Mathematical Errors by the Pentium chip

Intel Pentium Chip Intel endured one of the most painful episodes in its history soon after it launched the Pentium processor. It was ridiculed by customers and the media for a flaw in the Pentium chip. Intel’s handling of the crisis was even worse than the bug itself. The Pentium flaw and its aftermath eventually led Intel to undertake large-scale product replacements that resulted in a $475 million write-off on its balance sheet.

In June 1994, about a year after Intel launched the Pentium microprocessor with much fanfare and a massive advertising campaign, some Internet newsgroups started discussing a flaw in the Pentium’s floating point unit. This error caused occasional mathematical errors in the chip’s advanced number-crunching component.

Intel knew about the problem. Internal investigators had established that the error “caused a rounding error in division once every nine billion times … an average spreadsheet user would run into the problem only once every 27,000 years of spreadsheet use.” Consequently, Intel’s executives concluded that the error was insignificant and didn’t pay much attention.

Much to Intel’s astonishment, some trade publications caught wind of the online discussions. In November 1994, CNN aired a nasty report about the Pentium flaw. Other media outlets pounced on Intel; The New York Times published an article titled “Flaw Undermines Accuracy of Pentium Chips.” As a direct result of all the negative publicity, Intel’s customers were up in arms and flooded Intel’s customer service lines with customer complaints. By then, Intel (through IBM, Compaq, HP, Dell, Gateway, and other computer OEMs) had shipped two million Pentium chips.

Intel Decided Stuck to Its Guns and Refused to Replace All Pentium Chips

Former Intel CEO Andy Grove Throughout this crisis, Intel’s leadership underestimated the scale of customer reaction because they believed that facts were in their favor. Intel’s illustrious CEO Andy Grove decided to set the record straight and issued a memo in which he acknowledged the Pentium fault, but declared that it affected only “users of the Pentium processor who are engaged in heavy-duty scientific/floating-point calculations.”

Back then, microprocessors were not yet a commodity product and consumers had paid a premium to buy computers with Pentium chips instead of those with the discounted previous-generation 486 processors. Justifiably, Intel’s customers were enraged and started demanding that Intel send them replacement chips.

In response, Intel decided to stick to its guns, because management believed in the persuasive ability of their facts. Intel’s leadership declared that they would not replace the chips unless consumers would individually call and establish that their chips would be used for advanced math calculations. At the company’s toll-free customer service line, customers had to endure a protracted interview process for Intel to deem them worthy of receiving a corrected chip. Customers who couldn’t convince Intel that they may encounter the bug in their daily computer-use didn’t make the cut.

In December 1994, all hell broke loose for Intel when IBM stopped shipments of all Pentium-based computers. Grove later recalled, “The phones started ringing furiously from all quarters. The call volume to our hotline skyrocketed. Our other customers wanted to know what was going on. And their tone, which had been quite constructive the week before, became confused and anxious. We were back on the defensive again in a major way.”

Ignoring Customer Sentiment (Pathos) Aggravated the Intel Pentium Crisis

Eventually, Intel caved in. Grove reflected, “After a number of days of struggling against the tide of public opinion, of dealing with the phone calls and the abusive editorials, it became clear that we had to make a major change.” Intel reversed its policy, established a huge customer service operation, and announced that it would replace the Pentium chip for any customer who wanted it replaced. The crisis came to pass only after Intel replaced hundreds of thousands of Pentium chips at a cost of $475 million.

The Intel Pentium Bug is a textbook example of how not to handle a delicate situation and hurt a product’s image. A good deal of this mismanagement could be attributed to an engineering-driven corporate culture within Intel, shaped in part by Grove’s attitude that facts alone could—and should—sell. He believed in the no-nonsense way of doing business: all through the crisis, Intel stuck with the facts, refused to bow before pressure, and told customers to get on with the flawed Pentium processor.

Amazingly, the Pentium Crisis Did Not Affect Intel’s Brand

Intel Inside Marketing Campaign Fortunately, Intel not only survived the Pentium crisis, but its brand recognition increased and Intel even appeared on Fortune magazine’s list of most admired companies. In the two years prior to the Pentium launch, Intel had embarked on an aggressive marketing campaign to build up the Intel brand. The “Intel Inside” slogan was plastered on billboards in all major markets and TV commercials repeatedly blared the renowned “Intel Inside” jingle.

Another upshot of this crisis was that the attention Intel and Pentium received brought microprocessor chips bang into the public consciousness. With the August 1995-release of Microsoft’s Windows 95, the “Wintel” partnership between Microsoft and Intel ushered a wave of consumer demand that brought inexpensive personal computing to the masses around the world.

Lessons from the Intel Pentium Disaster: Just Being a Truth Teller May Not Be Enough

'Only the Paranoid Survive' by Andrew S. Grove (ISBN 0385483821) It is fallacious to assume that logic, reason, and facts are all potent and that rationality will triumph over irrationality. During the Pentium crisis, Intel had assumed that an honest appraisal of facts of the Pentium bug would have the strength to change customer’s minds. However, sticking to facts alone backfired.

Following Aristotle’s ethos-pathos-logos framework, Intel had logos right: Intel’s assessment that the Pentium errors would not affect most people’s use of their computers was accurate. As the CEO of Intel, Grove had ethos right: his engineers were the prevalent authorities on microprocessor technology and Intel was the dominant producer of computer chips. But Intel got pathos wrong: by just presenting facts (logos) with authority (ethos) and ignoring customer sentiment (pathos), Intel’s arrogant stance was not only ineffective but also aggravated the whole Pentium crisis.

Idea for Impact: During Argumentation, Ignore Pathos At Your Own Peril

When persuading others of your ideas, don’t assume that logos alone has the power to change their minds. Don’t arm yourself with just bulletproof facts, scientific evidence, logic, and rationality and expect logos to sway others to your point of view. Recent research suggests that emotion plays a significant role even in situations where logic seems to be the dominant driver of decision-making.

Decision-making isn’t just logical, it’s emotional too. Remember, “When the heart pulls, the head tends to follow.”

Inspirational Quotations #616

We cannot overstate our debt to the past, but the moment has the supreme claim.
Ralph Waldo Emerson

It is a good thing to laugh, at any rate; and if a straw can tickle a man, it is an instrument of happiness. Beasts can weep when they suffer, but they cannot laugh.
John Dryden

Besides the general infusion of wit to heighten civility, the direct splendor of intellectual power is ever welcome in fine society, as the costliest addition to its rule and its credit.
Ralph Waldo Emerson

A homely face and no figure have aided many women heavenward.
Minna Antrim

The sum of wisdom is that time is never lost that is devoted to work.
Ralph Waldo Emerson

Knowledge is the most democratic source of power.
Alvin Toffler

He surely is most in need of another’s patience, who has none of his own.
Johann Kaspar Lavater

It is by its promise of a sense of power that evil often attracts the weak.
Eric Hoffer

Next to love, sympathy is the divinest passion of the human heart.
Edmund Burke

We never desire strongly, what we desire rationally.
Francois de La Rochefoucauld

The essence of justice is mercy.
Edwin Hubbell Chapin

Our conscience is not the vessel of eternal verities. It grows with our social life, and a new social condition means a radical change in conscience.
Walter Lippmann

Necessity does everything well.
Ralph Waldo Emerson

He who has no faith in others shall find no faith in them.
Laozi

This Manager’s Change Initiatives Lacked Ethos, Pathos, Logos: Case Study on Aristotle’s Persuasion Framework

Persuasive Manager

In my previous article, I reviewed Aristotle’s framework for persuasion and argumentation: to win over others to a particular point of view, it’s necessary to appeal through ethos (credibility,) pathos (emotion,) and logos (reason.) In this article, I give a case study of organizational initiative that lacked ethos, pathos, and logos.

Consider the case of a young mid-level manager I coached last year. Helen (name changed for anonymity) recently joined the finance department of a capital-goods company. Two months into her job, she was bothered by her lack of initial success in bringing about change at her workplace.

Helen was smart, driven, and had a great professional track record. During her interviews, she had impressed her supervisors by her hard work, drive, and creative ideas. They recruited her to implement rigorous audit processes.

Just a few weeks after joining, Helen drew from her previous experience and generated many new and creative ideas to overhaul the financial audit processes. Her supervisors had given her all the responsibility and authority to bring about the necessary changes. However, she quickly encountered a problem: her peers and team members would not buy into her ideas.

In meetings where Helen spoke of her vision for change, her peers and team members would politely pay lip service to her ideas, but when it came to actually implementing her suggestions, nothing seemed to happen. Helen received a 360-degree feedback exercise about how her peers and team members perceived her and her ideas.

How to be More Persuasive

Helen was startled by the feedback she received. In response, she decided to improve her approach to selling her ideas by working on all three dimensions of Aristotle’s persuasion framework.

  • Ethos: Helen lacked ethos among her peers and her team members. She possessed ethos in the eyes of her superiors who’d recruited her and granted her authority to bring about the necessary change, but not with her peers and team members. She realized that she needed to prove herself and her ideas’ credibility.
  • Pathos: Helen had failed to elicit pathos and never took the time and effort to involve her peers and team members in the decision-making and convince them of the need for change.
  • Logos: Helen assumed that the problems she had faced at her previous employer were the same problems her new employer faced. Without learning about the corporate culture and the existing audit processes by interviewing her peers and team members, Helen had made all her recommendations for change based on things she had seen work in other settings. Her suggestions found no resonance for her new colleagues—to them she seemed to be trying to fix problems that did not exist.

Idea for Impact: To persuade others to your point of view, you must understand what truly moves your audience and then appeal through all the elements of Aristotle’s ethos-pathos-logos framework.