10 Pivotal Lessons From the Best Business Books of 2014

I’ve read a ton of business books this year (so you don’t have to).

Just kidding.

Here are the top 10 most actionable tips, techniques, and strategies from the year in books.

10 Lessons Learned From the Best Business Books of the Year

My long-time readers know that I’m a voracious reader.

It’s no secret that I set a personal goal of reading 150 books every year. I’m well on my way to hitting that mark again in 2014 (I’ve read 143 books this year as of this writing).

I hope you’re closing in on your reading goal this year too. If not, here’s 10 of my favorite lessons from 10 of the best business books of 2014 to get you inspired.

Lesson #1: What Do People Really Need From You?

George Clooney almost gave up acting

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George Clooney spent his first years in Hollywood begging casting directors for a shot in front of the camera—and getting rejected. He could have wallowed in hurt feelings, rejection, and shame. He could have gotten angry, blamed the system, and quit being an actor.

Instead, he switched his perspective. What was it that casting directors and producers really needed from him?

[Clooney] realized that casting is an obstacle for producers, too—they need to find somebody, and they’re all hoping that the next person to walk in the room is the right somebody. Auditions were a chance to solve their problem, not his.

Clooney changed his approach. He needed to be the right man for the job and not just another actor. In other words, he had to demonstrate “[t]hat he understood what the casting director and producers were looking for in a specific role and that he would deliver it in each and every situation, in preproduction, on camera, and during promotion.”

The right perspective changes everything.

Recommended From — The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph by Ryan Holiday

Lesson #2: The Downside of “Disruptive” Startups

There can be value to setting yourself up as David to your competitor’s Goliath. Motivation can come from feeling like the underdog with you against the world.

But this attitude can also easily backfire:

If you think of yourself as an insurgent battling dark forces, it’s easy to become unduly fixated on the obstacles in your path. But if you truly want to make something new, the act of creation is far more important than the old industries that might not like what you create. Indeed, if your company can be summed up by its opposition to already existing firms, it can’t be completely new and it’s probably not going to become a monopoly.

Remember that for legendary entrepreneur and VC Peter Thiel, becoming a monopoly is a good thing. And startups that define themselves in opposition to a reigning incumbent probably won’t make the grade on that assessment.

You can be the big fish in a Blue Ocean, or chum in a red one. Choose wisely.

Recommended From — Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel with Blake Masters

Lesson #3: Beware the Cobra Effect

The Cobra Effect: Beware perverse incentives

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During the British occupation of India, one British lord in Delhi thought there were far too many cobras in the region. He offered a cash bounty for anyone who brought him the skin of a dead cobra.

The incentive worked. The people of Delhi began to bring him tremendous amounts of cobra skins.

Did the Indians of Delhi get better at capturing wild cobras because of the financial incentive in place? No, of course not. They simply began to farm cobras—breeding, raising, and finally slaughtering the animals for their lucrative skins.

The British lord eventually rescinded the bounty. The cobra farmers had no choice but to free the snakes they had bred—exacerbating the problem that the cash incentive was meant to resolve.

The Cobra Effect, as it came to be known, still thwarts the ambitions of too-clever policymakers today.

The UN sought to incentivize the manufacture of HCFC-22, a common refrigerant that produces a waste gas called HFC-23. The UN offered a bounty in the form of carbon credits for every ton of HFC-23 that was destroyed instead of released into the air.

How do you think the factories responded? They produced more HCFC-22 so they could destroy its byproduct, HFC-23, and hoard up the carbon credits. The average factory during this period earned $20 million a year with this scheme.

The UN angrily modified its program to close the loophole. Unfortunately, all those excess tons of HFC-23 are still sitting in factories in China and India. If they release the gas into the atmosphere, then the UN will have directly paid polluters to pollute.

Financial incentives often don’t work. But worse than that, they sometimes backfire.

Long-term solutions require long-term thinking—paying somebody cash money to change their behavior rarely induces that long-term thinking.

Recommended From — Think Like a Freak by Steven D. Levitt and Stephen J. Dubner

Lesson #4: Adapt Techniques From Kindergarten

Kindergarten Techniques: Green, Yellow, Red Light System

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If you’re talking about “controlled chaos,” no one has a better handle on it than schoolteachers. Their techniques even work in business contexts. To wit:

One big success was the “traffic light system” invented by the lab branch [of Sberbank] in Norlisk—a Russian mining town north of the Arctic Circle. In response to the CEO’s call for reduced customer waiting times and better sales and service, the branch experimented with “varying standard procedures depending on how many customers were waiting in line.”

What they came up with was a green light, yellow light, and red light system. They started with a paper version that you can find in any kindergarten in America.

A green light meant tellers could take their time with customers, explain things thoroughly, and do a bit of cross-selling.

Yellow meant speed it up.

Red meant all hell has broken loose—no cross-selling, direct customers to brochures to answer standard questions.

The system worked. Customers were pleased with the faster service. Waiting time was reduced by 35% at peak times. The innovation was quickly rolled out to the rest of Sberbank, saving the company millions a year.

Recommended From — Scaling Up Excellence: Getting to More Without Settling for Less by Robert I. Sutton and Huggy Rao

Lesson #5: Quickly Estimate Opportunity Costs With Mortgage Math

It can be hard to figure out if a new project is worth your time.

Blogger and entrepreneur Chris Brogan came up with a technique to quickly get a read on this situation. He estimates the expected benefit as a multiple of his mortgage payment—what he calls “Mortgage Math.”

I have a lot of little calculations I do when it comes to money. For instance, when I launched the opportunity for people to advertise in my newsletter, I decided there would be three slots for $500 each at launch—$1,500 per issue times four issues a month equals $6,000. If I sell all the spots, I can pay four times my mortgage every month (around $1,400). Similarly, if I’m pursuing something that becomes a hassle, I ask whether it’s worth the money—and I use my mortgage math to think about it. This can help you plot some of the rabbit holes you choose to visit in a given day.

You can generalize this technique to anything really—rent, monthly expenses, student loan payments, etc.—but the idea is to compare the opportunity with a mental-math-friendly number that relates to your everyday life.

“Mortgage Math” is about grounding abstract dollars in real experience.

Recommended From — The Freaks Shall Inherit the Earth: Entrepreneurship for Weirdos, Misfits, and World Dominators by Chris Brogan

Lesson #6: Eliminate Mediocre Options With the 90% Rule

One day, Greg McKeown and his co-instructor were deciding who to accept into their course. They did what most people in their situation do and came up with a list of criteria and rated the students using said criteria.

What they did next broke the mold:

Using these criteria, we scored each candidate on a 1 to 10 scale. The 9s and 10s, we decided, were obviously in. Anyone under a 7 was automatically out. I was then given the unenviable task of evaluating the in-between candidates: the 7s and 8s. As I struggled to determine which of these candidates would be good enough, I had the thought: if something (or in this case someone) is just or almost good enough—that is, a 7 or an 8—then the answer should be a no. It was so liberating.

For McKeown, this revelation became the basis of his 90% Rule. Anything that rates less than 9 out of 10 can be safely removed from your organization, career, or life. Work, chores, relationships, you name it.

But don’t you end up turning down some pretty good stuff along the way? Here’s McKeown:

By definition, applying highly selective criteria is a trade-off; sometimes you will have to turn down a seemingly very good option and have faith that the perfect option will soon come along. Sometimes it will, and sometimes it won’t, but the point is that the very act of applying selective criteria forces you to choose which perfect option to wait for, rather than letting other people, or the universe, choose for you.

Call it the gift of having high standards.

Recommended From — Essentialism: The Disciplined Pursuit of Less by Greg McKeown

Lesson #7: Peacetime Vs. Wartime Leadership

Peacetime and wartime require different management styles. The problem is that most business books, because they study success, only look at the techniques of peacetime.

Wartime requires harsher, more focused tactics:

Peacetime in business means those times when a company has a large advantage over the competition in its core market, and its market is growing. In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths.

In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources, including competition, dramatic macroeconomic change, market change, supply chain change, and so forth.

Andy Grove was a great wartime CEO according to author Ben Horowitz. Grove’s harsh techniques aren’t necessarily compatible with a peacetime leader like Jack Welch’s.

Knowing whether you’re in peacetime or wartime is a key indicator of when to change leadership modes and whether the advice you’re hearing applies to you.

Recommended From — The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz

Lesson #8: Do the “Scary Call” First

Do the Scary Call First

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Here’s a story that resonated with me. It’s about an attorney whose priority list always included intense phone calls each day:

Among those calls there was nearly always one that she dreaded making because she expected it would cause discord, confrontation, or distress. The “scary call” was not always the most urgent call casewise, so it was easy to let it slide. But Katherine noticed that whenever she had such a call to make, it loomed over all of her other activities, draining her initiative and rendering her less productive, and by that measure the “scary call” was the most important call on the list to make.

The attorney resolved to always make the scary call first: “I am more productive and much, much happier at work since I made my resolution. As soon as I get the scary call out of the way I get a huge surge of energy that carries me through the rest of the day.”

This advice to do the “scary call” first comes in a lot of different flavors: “eat that frog” or “Most Important Task (MIT)” first. But the idea is the same: the thing you’re most dreading is probably the thing you need to knock out first if you want any shot of having a productive day.

Recommended From — Small Move, Big Change: Using Microresolutions to Transform Your Life Permanently by Caroline L. Arnold

Lesson #9: You Cannot Oversleep

Here’s a quick one:

Professor of chronobiology (awesome job title BTW) Till Roenneberg says, “We sometimes overeat, but we generally cannot oversleep. When we wake up unprompted, feeling refreshed, we have slept enough.”

Makes you wonder about the 80% of us who wake up to alarm clocks.

Recommended From — Thrive: The Third Metric to Redefining Success and Creating a Life of Well-Being, Wisdom, and Wonder by Arianna Huffington

Lesson #10: Stop Waiting for Waves

Surfer catches a big wave

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You can go to a prestigious university and an even more prestigious grad school and still end up unemployed.

You can develop skills that “can’t be ignored” and still hate what you do for a living if you have no passion for it.

And you can do all the right things and still end up with a life of quiet desperation.

Designing the life that you truly want takes more effort and determination than merely waiting around for good things to happen to you:

Conventional thinking leads talented and driven people to believe that if they simply work hard, luck will eventually strike. That’s like saying if a surfer treads water in the same spot for long enough, a wave will come; it certainly happens to some people, once in a while, but it’s not the most effective strategy for success. Paradoxically, it’s actually a lazier move.

There’s a reason some people practice things for twenty years and never become experts; a golfer can put it 30,000 hours of practice and not improve his game if he’s gripping his clubs wrong the whole time. A business can work five times harder and longer than its neighbors and still lose to rivals that read the market better. Just like a pro surfer never wins by staying in one spot.

Be courageous. Treat life like an experiment. Extraordinary success requires extraordinary efforts.

Waiting to be swept up in the next wave isn’t a strategy.

Recommended From — Smartcuts: How Hackers, Innovators, and Icons Accelerate Success by Shane Snow

Bonus Lesson: Take Advantage of the Hummingbird Effect

The Hummingbird Effect: Why Innovation Spreads in Unexpected Ways

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Okay, this is not technically a business book so I included it as a bonus lesson. Steven Johnson’s How We Got to Now is one-part pop science and two-parts historical retrospective.

But it’s got great ideas we can use to our benefit. One example is the Hummingbird Effect: “An innovation, or cluster of innovations, in one field ends up triggering changes that seem to belong to a different domain altogether.”

In contrast to the better-known butterfly effect, the Hummingbird Effect gets its name from the coevolution of the hummingbird’s unique hovering wings—perfect for nectaring from pollinating plants.

The history of ideas and innovation unfolds the same way. Johannes Gutenberg’s printing press created a surge in demand for spectacles, as the new practice of reading made Europeans across the continent suddenly realize that they were farsighted; the market demand for spectacles encouraged a growing number of people to produce and experiment with lenses, which led to the invention of the microscope, which shortly thereafter enabled us to perceive that our bodies were made up of microscopic cells. You wouldn’t think that printing technology would have anything to do with the expansion of our vision down to the cellular scale, just as you wouldn’t have thought that the evolution of pollen would alter the design of a hummingbird’s wings. But that is the way change happens.

When Apple came out with the iPod, they thought they were changing the way people stored and listened to music. They had no idea that the iPod would lead to the iPhone, which transformed telephony. The iPhone in turn led to the App Store, which in turn led to regular people becoming entrepreneurs and making a living from designing and publishing apps.

That’s a crazy unexpected chain of events when you sit and really think about it.

It also makes you wonder. Where can you take advantage of Hummingbird Effects in your personal and professional life?

Recommended From — How We Got to Now: Six Innovations That Made the Modern World by Steven Johnson

Book covers are copyright their respective publishers. Used under fair use.

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