Persuasion

Why People are Afraid to Think

August 26, 2022 By Nagesh Belludi Leave a Comment

Men fear thought as they fear nothing else on earth—more than ruin, more even than death. Thought is subversive and revolutionary, destructive and terrible; thought is merciless to privilege, established institutions, and comfortable habits; thought is anarchic and lawless, indifferent to authority, careless of the well-tried wisdom of the ages. Thought looks into the pit of hell and is not afraid. (Bertrand Russell, Why Men Fight: A Method of Abolishing the International Duel (1916,) pp. 178–179)

Laziness and inability usually coerce people to reject thinking. But, as Russell contends, fear is a non-obvious inhibitor of thought. Not just because meticulous reasoning is demanding but because thinking may occasion an undermining—even revaluation—of our long-held convictions about all sorts of matters—notably religion and ethics.

People reject thinking because we fear it may challenge our equilibrium—how we make sense of the world. We’ll be coerced to see the world anew. As I’ve emphasized previously, once a belief is added to our corpus of viewpoints, we indulge in “intellectual censorship.” We cling to our ideas rather than objectively reassessing and questioning them.

Idea for Impact: Life should alter you. Through conscientious thinking, your worldview can—and should—reflect that growth.

Competitive vs Cooperative Negotiation

August 24, 2022 By Nagesh Belludi Leave a Comment

Does a competitive person make a better negotiator than a cooperative person? Wharton professor G. Richard Shell’s insightful Bargaining for Advantage: Negotiation Strategies for Reasonable People (2006) contends there isn’t a straightforward answer.

Competitive people don’t mind interpersonal friction and thus initially have the upper hand over less aggressive personalities with little appetite for friction. However, competitive people generally lack skills in managing relationships, which gives cooperative people an advantage in situations where interpersonal trust over the long term is crucial. It’s easier to negotiate against someone who has a similar personality. Negotiation gets dicier when different personality types mix.

How to improve your results? Practice. Prepare through information-gathering and setting achievable but optimistic targets for the negotiation process.

Listen and Involve

August 22, 2022 By Nagesh Belludi Leave a Comment

All too often, leaders live in a culture of telling. They see their role as instructing others what to do, to plow through by compliance. But true leadership is eliciting commitment.

People want their thinking to count. If there’s a better way to carry out a task, they want to be able to identify it and put it into action. They’re more spurred to prevail at a challenge if they have a commitment to their work by their own volition. Hence, leaders should engage their people in choosing the goals the group needs to accomplish.

Idea for Impact: Leaders who play a participative management style derive enormous rewards in efficiency and work quality. Find opportunities to have direct conversations with individual employees and teams about what can be done to improve effectiveness.

The Loss Aversion Mental Model: A Case Study on Why People Think Spirit is a Horrible Airline

August 11, 2022 By Nagesh Belludi 1 Comment

When Spirit Airlines pivoted to competing on price in the late 2000s, it quickly gained a reputation not only for operational inefficiencies but also for its in-your-face, take-it-or-leave attitude towards customer service.

Where other airlines charged by-the-package fares for the flight experience, Spirit pared back service and introduced an a la carte pricing model. Charging for the “ancillaries”—i.e., everything optional, including water—allowed Spirit to keep ticket prices down and appeal to price-sensitive travelers willing to sacrifice the usual amenities for a lower ticket price.

In the ensuing years, the unconventionality of this business model did not go down well with customers. Much of the flying public’s frustration with Spirit had to do with Loss Aversion. That’s the notion that the emotional disappointment of a loss is more extreme than the joy of a comparable gain. If finding a cheaper fare on Spirit felt delightful, giving up some—or all—of the savings to purchase ancillaries and surrender the savings felt utterly miserable.

Passengers felt ripped off by these seemingly hidden fees, especially when the true cost of flying Spirit ended up greater than what the initial ticket price led them to believe.

Spirit became quickly convinced that there was a perception problem—its customers didn’t fully understand how its fares work. Particularly, first-time customers blindly presumed that Spirit Airlines works the same way as other airlines. In reality, there were no hidden or excessive fees, and passengers could only pay for what they need or want. In 2014, the airline introduced its “Spirit 101” campaign to educate customers and alter their perceptions. With time and the increased adaptation of the “Basic Fare” model and curtailed customer service by every other airline, passengers’ expectations have since been right-sized. Spirit Airlines has come a long way, and its customer service has improved vastly.

Further studies on loss aversion have shown that a cascade of successive fees is worse than the cumulative: i.e., three ancillary fees that add up to, say, $70, feel a lot worse than a single $70 fee. Appropriately, Spirit offers a “Bundle it Combo” package.

Why Investors Keep Backing Unprofitable Business Models

July 29, 2022 By Nagesh Belludi Leave a Comment

Investors have heaped billions into Q-Commerce—especially the rapid grocery startups—hoping to hook consumers on the convenience of groceries that would turn up immediately, sometimes in minutes.

I’ve never really fathomed how the small-basket orders of low-margin groceries can endlessly compensate for the labor costs and overheads, even after discontinuing the generous referral bonuses, discount codes, and freebies enticing customers. The prospects may evolve if these startups subsist on ever more funding and develop massive businesses with efficiencies from scale. But then they’re right in Amazon’s wheelhouse.

Idea for Impact: Some business models are never created to be profitable, and investors should be wary of encouraging—and funding—loss-making propositions. The lure of backing an initial entrant, capturing market share, and then selling out to a more determined fool isn’t viable! Who needs goods delivered in such a rush for such charges, anyway?

Is The Customer Always Right?

July 14, 2022 By Nagesh Belludi Leave a Comment

No matter how finicky or rude a customer is, many businesses make employees treat bad customers with unquestioned respect or risk reprobation—even getting sacked.

Per the well-worn business adage, is “the customer is always right?” No, they’re not. Sometimes they’re wrong, and they need to be told so.

Your goal should be to do business with people that you enjoy doing business with. Some customers simply aren’t good customers. They don’t follow directions and complain irrationally. They have unreasonable expectations, and they treat your people rudely.

Idea for Impact: A prudent maxim is, “the customer is usually right.” Put the customer first, but don’t get mistreated by them. Putting the customer first doesn’t mean putting employees second. As a business, you must let customers be wrong with respect and dignity; but employees should be authorized to caution some customers, “After due consideration, we believe your actions are unacceptable. Persist, and we’d choose to lose your business.” Some bad customers are just bad for your business.

Almost always, though, unhappy customers are your greatest source of learning; they can especially offer an honest assessment of the expectations you’re setting. Customer satisfaction with a transaction depends on their expectations going into it.

The #1 Learning from Sun Tzu’s Art of War: Avoid Battle

July 11, 2022 By Nagesh Belludi Leave a Comment

The Art of War, Chinese strategist-philosopher Sun Tzu’s treatise on military strategy, is studied not so much for the advice it gives but for the state of mind it encourages. Developed in only six thousand Chinese characters and 25 pages of text, this way of thinking has held vast sway in such fields as military planning, strategic management, and negotiating. “Every battle is won or lost before it is fought.”

Something exceptional about the Art of War is the extent to which it’s devoted to methodically avoiding battle altogether. War isn’t something to be entered rashly or for petty reasons. “A sovereign should not start a war out of anger, nor should a general give battle out of rage. While anger can revert to happiness and rage to delight, a nation that has been destroyed cannot be restored, nor can the dead be brought back to life.”

Nor is war’s dominant purpose to cause physical destruction to an enemy. Instead, the pinnacle of military skill is to conquer one’s opponent strategically—by penetrating his alliances, rattling his plans, and coercing him diplomatically—without ever resorting to armed combat. “Why destroy,” Sun Tzu poses, “when you can win by stealth and cunning? To subdue the enemy’s forces without fighting is the summit of skill.”

Sun Tzu’s insistence that an enlightened strategist can attain victory without fighting echoes the foundational Taoist doctrine of “non-action (Wu-Wei.”) Armed conflict, therefore, is the last resort. War in itself represents a significant defeat. As a matter of course, Sun Tzu allocates a good chunk of the Art of War to the line of combat and attack. A savvy general must, however, take every accessible measure to gain victory swiftly, with minimal casualties and suffering for both sides. “The best approach is to attack the other side’s strategy; next best is to attack his alliances; next best is to attack his soldiers; the worst is to attack cities.”

Again and again, through implication, Sun-Tzu’s war document posits peace and restraint—the avoidance of battle—as the utmost victory. To fight at all, Sun-Tzu insists, is already a substantial loss, much worse than losing in war.

Idea for Impact: The Art of War is a worthy course on conflict management because avoiding confrontation requires more remarkable skill than winning on the battlefield.

What if Something Can’t Be Measured

July 4, 2022 By Nagesh Belludi Leave a Comment

During a September-2021 Airlines Confidential podcast (via Gary Leff’s View from the Wing,) former Spirit Airlines CEO Ben Baldanza told an exciting story about the airline industry’s systematic approach to reckon if potential new routes are economically feasible:

For the most part, airlines rely on data—required and reported by the Bureau of Transportation Statistics—on ticket purchases that show the number of people flying a given route and what price. For example, New Orleans, which is home to one of the largest Honduran populations in the U.S., has not had direct service to Honduras. Spirit Airlines will therefore analyze data from Sabre Market Intelligence for 2019 showing O&D (Origin and Destination) traffic between New Orleans and Honduras.

Sometimes, though, there’s no data on historical demand on a route, such as when Spirit Airlines was considering service to Armenia, Colombia. There hadn’t ever been a U.S. carrier flying into the airport, so there wasn’t available traffic data Spirit could access. Instead, Spirit looked at telephone data and migrant remittance statistics to get a sense of ties between the U.S. and the Latin American city. Spirit studied the frequency with which people were calling friends and relatives and how much money and how frequently money was being remitted as a reliable metric to determine if the new route was viable.

Spirit Airlines relies heavily on leisure bookings, especially visiting friends and relatives (VFR) traffic. In the absence of historical yield data for a route being considered, Spirit used fund transfers to Latin America as a stand-in variable.

A surrogate metric or proxy metric is exactly that—a substitute used in place of a variable of interest when that variable can’t be measured directly or is difficult to measure. For example, per-capita GDP is often a proxy for the standard of living, and the value of a house is a stand-in for the household’s wealth. Freight tonnage is often a proxy for economic activity.

Idea for Impact: Relying on intuition for sound decision-making isn’t sustainable, so folks need a systematic approach to making those decisions. Use meaningful proxy and surrogate metrics in your decisions to help overcome inherent biases with what can’t be measured.

Don’t Manage with Fear

June 16, 2022 By Nagesh Belludi Leave a Comment

The ability to rouse fear has forever been an essential tool of management. Fear can be an effective mobilization tool in the short term. But fear breeds complicity, not commitment.

Instead of fear-based tactics, try soft power. Build trust and gain influence using these methods.

Develop an inspiring vision. Work hard to follow through on implementing that vision and celebrate even little accomplishments along the way.
Communicate expectations. Ask, “How can I help you do your job better?” Follow up. No need to keep everything too close to the vest. You needn’t tell everything you know, but what you say and do has to be true.
Solve problems quickly. Push for results. Set aside some time for review and create options or actions that are apt for your team’s situation. Be tough where you must be, kind where you can be.

Idea for Impact: Don’t take the fear approach with employees. With motivation, fear works—up to a point. Understand how your people view your leadership style and ensure your behavior doesn’t cross the line between pushing them hard and pushing them away.

Nuts! The Story of Southwest Airlines’ Maverick Culture // Book Summary

May 30, 2022 By Nagesh Belludi Leave a Comment

Kevin & Jackie Freiberg’s Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success (1996) is a popular tome about the history and culture of Southwest Airlines and the fun-loving antics of its colorful co-founder and CEO Herb Kelleher (see my tribute.)

Despite its Pollyannaish tone and repetitive narratives, Nuts| is a very enjoyable cheerleaders’ account of how an underdog overcame roadblocks and thrived in a competitive industry.

Nuts| focuses on the people-oriented culture that Herb and his secretary Colleen Barrett established based on Herb’s well-known dictum, “The business of business is not business. The business of business is people.” To Herb, Southwest was a cause—never just a company. The Freibergs write,

If there is an overarching reason for Southwest Airlines’ success, it is that the company has spent far more time since 1971 focused on loving people than on the development of new management techniques. The tragedy of our time is that we’ve got it backwards. We’ve learned to love techniques and use people. This is one of the reasons more and more people feel alienated, empty, and dehumanized at work. Many organizations today would be surprised at how much more people would be willing to give of themselves if only they felt loved.

Nuts| is dreadfully out-of-date. Southwest and the airline industry have changed a lot since the mid-90s. Southwest even stopped handing out peanuts to protect passengers from peanut-related allergies.

The miracle at Southwest Airlines could keep on only so long. As long as Herb was the CEO, employees would go the extra mile for the sake of Herb. Until his retirement in 2001, Herb preserved Southwest’s unique cost structure and work rules. Kelleher’s successor, Jim Parker, presided over mounting labor tensions and quit after just three years. CFO Gary Kelly replaced Parker in 2004. Bob Jordan became CEO in 2022.

The going has not been smooth for Kelly. Southwest has become more like the other carriers regarding employee relationships and cost structure. The rehabilitated legacy airlines and a new breed of ultralow cost carriers have chipped away gradually at many of Southwest’s apparent competitive advantages. Yes, customers still rave about Southwest’s friendly staff, unpretentious service, and flexibility in travel planning. However, Southwest hardly ever has the lowest fares on most routes. In fact, Southwest’s average fares have outpaced the industry by 12% since 2009.

Recommendation: Speed-read Nuts! … it’s full of original insights, upbeat stories, and concrete suggestions for principle-centered leadership and how to inspire people to achieve incredible results. Here are the key takeaway lessons:

Even a little respect goes a long way. Give employees responsibility and entrust them to take that responsibility.
Set the ground rules—and let employees be creative. “Culture is one of the most precious things a company has, so you must work harder at it than at anything else.”
Give your employees some skin in the game, and they’ll go the distance. Southwest claims, “We have credibility because we tell people what we’re going to do and then we do it.”
Empower workers to make decisions at the customer level. Employees who feel they have leeway in their jobs to make the “right decision” depending on circumstances are happier, more confident, and more productive. They’ll even give extra—because they believe their work has special meaning and is not just a job.
Make sure people feel they can be themselves and have opportunities to express individuality.
See yourself as a motivator and a positive force. When things go wrong, accentuate the positive and focus on a path to a solution. It’s an approach that employees will admire and want to emulate.
Build a sense of community. Foster the feeling of a “family” in which employees can count on each other professionally and personally.
Recognize that employees have lives outside of work. Celebrate every milestone to establish and strengthen relationships. The walls of Southwest’s headquarters are covered with pictures and commemorative plaques of picnics, community service awards, customers’ commendation letters, service employee milestones, and tributes to important cultural events.

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