#007: How will you measure your life

How to live a meaningful life and why that has more in common with Netflix than you think

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TLDR

  • Timeless? ⚠️ published in 2012 but includes timeless lessons

  • Comprehensive? ⚠️ This is Clayton's life's work as an innovation expert and academic but his view nonetheless

  • Mental model? ✅ Has several theories as Clayton calls them. I found the mental models useful on my day to day.

  • Return on investment of reading? ✅ it's a small book but includes a number of mental models from his work.

  • All in all: ⭐️⭐️⭐️(3/5)

  • Should you read it: Maybe, if you're interested in reflecting on purpose and planning life. If you've read Clayton's other books (like Innovator's Dilemma for example) some parts may feel repetitive.

  • Opinion (if you had to explain it at a dinner party): How do you live a good life? How do you make sure you focus on what really matters? Clayton found these questions unnerving as he tried to help his students in Harvard go out into the world and lead meaningful lives. He proposes a number of theories to help. Clayton was likely one of the most influential business theorists of all time, specially relevant in his work in innovation. A book that grants you a few models to use.

The Book

How will you measure your life

by Clayton Christensen

Clayton starts reflecting in the beginning of the book on successful and brilliant colleagues who would appear in college reunions and suddenly stopped showing up. He believes this is because some colleagues were embarrassed and ashamed of their unhappiness. Some even ended up in jail.

Clayton reflects on how individuals achieve and have a happy life. He has 3 fundamental questions for his students:

  1. How can I be sure I will be successful and happy in my career?

  2. My relationship with my spouse, my children and my extended family and close friends become and enduring source of happiness?

  3. I live a life of integrity and stay out of jail?

The book tries to answer these 3 questions. For each question, Clayton provides theories, which helps us in thinking through these questions and generally useful on approaching problems. This idea of how to think about problems, instead of jumping to solutions, is an approach Clayton has taken with key leaders like Andy Grove of Intel. Once Andy asked Clayton, who we went to speak with then CEO of Intel to explain his Innovator’s Dilemma theory, "What does it mean for Intel". Clayton couldn't answer and only helped him in understanding the theory, not suggesting a solution. Generalizing, there are times as leader when a decision or a direction is needed. But in many other times, in order to help people make type II decisions, leaders should help their team think, in an effort to build autonomy.

So we’ll approach this review/summary following the book in answering the 3 most important questions for our lives.

Question 1 - How can I be sure I will be successful and happy in my career?

Clayton shares 3 theories to help you make sense of the process to achieve a successful and happy career.

2 factor theory for motivation

Clayton starts by exploring what drives people professionally. What makes them unhappy or motivated.

The first key insight is that motivation is not a continuous spectrum; it has two tracks: hygienic (or basic) factors and motivating factors. :

  • Hygienic factors (like compensation, title, job stability) will make you dissatisfied if they are not present. But not contribute substantially to your motivation.

  • Motivating factors (like recognition, challenging work, personal growth, meaningful contributions) contribute to feeling satisfied and happy in your work.

Using this theory, this means that you can be happy and unsatisfied at the same time in your role.

The conclusion of applying this to one’s career is: if you only optimize for hygienic factors, you will likely not achieve true happiness in your work. In fact, as Clayton present, you will slowly resent your work.

Sometimes it can even lead to a vicious cycle where you compensate the lack of happiness with a more costly lifestyle, leading you to become more dependent of the hygienic, but ultimately unrewarding, factors.

To read more on this: Frederich Herzberg, 2 factor theory

Emergent and Deliberate Strategy

Another theory that is worth exploring is Emergent vs Deliberate Strategy, which says that there are two types of strategies:

  1. Deliberate: designed, planned, anticipated

  2. Emergent: unanticipated opportunities, found through unplanned chain of events

A key insight here is that almost all companies develop themselves through Emergent strategy. This is fascinating, because from the outside (due to a high dosage of Survivor bias), it seems that companies have linear thought out plans when in fact they learned and iterated as they went along.

Examples:

  • Sam Walton, founder of Walmart, chose a small town to launch his second store because his wife did not want to move and because he thought having the 1st store next to the 2nd would be a good for distribution efficiency. This in turn led him to conclude that there was an opportunity to open large all-in-one shops in small towns (instead of opening said stores in large cities). As a consequence he went town to town winning against small businesses.

  • When Netflix started, after their period of battling against Blockbuster (using Counter positioning), their true inflection point came from their focus on content. First they focused on getting exclusives. However, these could be negotiated by other competitors so they were arbitraged. Their true growth came when they started producing originals. In hindsight it was obvious that originals was a great move, as it created economies of scale, but Netflix did not know this when they first started the company. They had to go through all phases of development to get there.

Following this idea means that many times you can't anticipate the full rollout of events and required decisions before an outcome is achieved. This means that success is path dependent. As you immerse yourself in the problems you're solving, you’ll start understanding what are the best moves to be taken. This connects wonderfully with the idea of Crafting vs Design introduced in 7 Powers.

Resource allocation

Everything in life is about resource allocation. Whether your (or your company's) time, money, people. How you invest your resources is "where the rubber meets the road".

If you optimize your resource allocation for long term, you put yourself in a position to reap potential compounding rewards (these include raising good children, investing, reading, etc). If, alternatively, you only invest your resources in short term objectives (e.g. hygienic factors like salary or titles), you achieve local maxima which might feel minimum after some time.

The way you spend your resources is how you really see what are your priorities.

What you do, how you spend your time, the people you engage with, are the true indicators of your priorities in resource allocation. People say they care about their family, yet spend less time with them vs other areas in their life.

The combination of resource allocation and emergent strategy creates a powerful force. If you design, and consistently evaluate, how you are allocating your resources and then let opportunities emerge, it is a very solid way to live life. I personally find that many of the best opportunities that I had in my life came from seemingly trivial opportunities or decisions that ended up being very important to me (like raising rounds of funding for example).

Answering the question: How can I be sure I will be successful and happy in my career?

Clayton's formula for working towards a successful and happy career:

  1. Don't over-optimize for hygienic factors such as salary or title.

  2. Ask the tough questions

    1. Is this work meaningful to me?

    2. Can I develop myself?

    3. Can I learn new things?

    4. Can I have recognition and achievement?

    5. Am I given responsibility?

  3. If you see yourself in a job that only provides hygienic factors, iterate, get out there, try stuff, get input to form emergent outcomes

    1. Use Discovery Driven Planning to test out new potential jobs - In order to manage the uncertainty of certain key decisions, specially if outcomes can only be validated in the future (like the success of validation of a project which needs prior budget approval), one should ask:

      What are the most important assumptions that need to proven true in order for this to work?

(The question above is truly useful as I’ve tried a number of times in business and it makes teams think in reverse)

2. My relationship with my spouse, my children and my extended family and close friends become and enduring source of happiness?

Work can create fulfillment but it's nothing compared to the long term happiness of intimate relationships. Your relationships are gardens that you must continually water and attend to. If you don't, you can't expect to reap their benefits later on in life.

As previously done, Clayton shares theories to help us think about how to answer this question.

Good money vs Bad money

Capital that seeks growth before profits is bad. This is because companies that grow too fast too soon, increase their cost basis on unproven strategies which increases risk. Companies that try to scale first and find profitability later, it's almost always an ineffective shortcut to success. 93% of companies that become successful had to abandon their original strategy, which means that companies succeed not because they are right but because they live long enough to the to be right.

Even Netflix didn’t bet the house on streaming. Although it started with the ambition of serving content online, counter positioned to Blockbuster, Netflix had no special knowledge of the technology (and this technology was accessible to everyone). Because of this, they tested the water (hedged their bets), investing 1% to 2% of their revenue in streaming. They took a gradual approach.

However, Capital that seeks profitability when growth is required, is also bad. Businesses that need to invest in new products or revenue lines, jeopardize their future in favor of their present.

If you need a machine and didn't buy it, then you will ultimately find that you have paid for it and don't have it
Henry Ford

And just like the business that stopped growing because it didn't invest in new revenuer earlier, it applies to people and relationship as well. We don't nurture our relationships, and when we want to reap benefits, it's too late.

Connecting this theory with raising children

The first 2.5 years of a child are the most important for a child’s development.

A study found that parents spoke on average 1500 words per hour to infant children. "Talkative" parents spoke 2100 and less verbal parens spoke 600. The conclusion is that there is correlation between talkative parents and reading comprehension of children as they go to school. Parents who engage in Language Dancing which is the extra talk parents have with their infant children (like "What if...", "Do you remember...?”, "Wouldn't it be better if…?” as opposed to more business talk like "Eat your dinner," "Brush your teeth," or "Time for bed.") saw higher IQ in their children.

So like the business who received bad capital or didn’t invest at the right time, if you want the ultimate outcome of the success of your children, investing right is critical.

Jobs to be done

We hire products to satisfy a need or the job we need to satisfy or complete. Understanding this comes through answering:"What is the job of this product?". We must look at what the customer is wanting to do with the product.

Clayton Christensen first encountered this theory when helping a company wanting to sell more milkshakes. They made their milkshakes more chocolaty in hopes to entice the customers. However, this didn't work. When Clayton asked customers and saw what they did with the product, he discovered that 50% of customers bought shakes in the morning. What he found was that people were hiring the shakes to keep their long drive commutes interesting while maintaining their stomachs not empty. Bananas or cookies were competitors. So, Clayton recommended to make the shakes larger, thicker and had an automated machine to order them so people didn't waste time.

Examples: IKEA has become very good a particular job: you're moving homes and you need to furnish an entire apartment.

Connecting once again with raising children

Children see school as a way to fulfill 2 jobs: 1) to feel successful 2) to be with their friends. Schools that enable children to feel successful have much lower dropout rates. Nurturing your relationship is understanding what is the job your significant other wants you to do for them. This is difficult because we tend to project what we want as something other people would want.

What is the job my partner/child/family member needs to have done?

Sacrifice deepens commitment

Sacrifice helps to create stronger bonds. You will have higher affection for people who you sacrificed yourself to. People think that sacrifice bestows resentment. But it's possible that sacrifice, when applied to relationships, brings higher commitment. Sacrifice to your family and to your spouse can deepen your relationship.

Capabilities Theory

Here is a framework to understand how a company operates:

  1. Resources: Tangible and easy to understand - people, equipment, tools, real estate, etc

  2. Processes: Apply resources to solve problems and build solutions - standardized ways to operate

  3. Priorities: How a company makes decisions. As people need to make decisions in the field, priorities help to give guidance when you're not there. Successful senior execs spend time articulating priorities.

An example: Dell, as a computer manufacturer, started to outsource components to a taiwanese supplier: Asus. Over time, and although their contract was only for low cost work, Asus did not want to stop at low cost work (because it could be easily replaced. For Dell, the objective was to concentrate on the design of electronics while removing cost lines from their balance sheet. However, Dell outsourced a key part of what made them powerful and stopped themselves of being competitive. Now they have to outsource sophisticated products because they are not able to make them.

Never outsource the future

This theory helps to understand when or not to outsource. To answer the question of when to outsource you should:

  1. Have a dynamic view of your supplier's capabilities

  2. Answer: What capabilities you need to succeed in the future?

Again, this theory can be applied to raising children

  • Resources: what the child uses, what is available to them

  • Processes: How they use the resources

  • Priorities: How a child will make decisions in their life

Parents outsource the growth of their child to external events and people. Parents focus too much of providing the resources without the ability to create processes that would help children later in life (i.e. not building skills that build skills).

Sheltering children from problems hinders them from becoming high functioning adults. From developing the required processes. One of the greatest gifts a father could give a child is the ability and self confidence to solve problems.

You can't control when children learn.

Children will learn when they are ready to learn

Because of this, the best thing is to be present and display through our actions the priorities and values so that they learn in their time. They don't learn when we want them to learn. They learn when they see the world and in their own timing.

Right stuff vs the right experience

Businesses have historically looked for people with the right intrinsic characteristics - or the "Right stuff". McCall's theory favors candidates with experience in building from the ground up instead of candidates with good resumes who have often landed in companies where everything was already figured out.

This mirror my experience. Candidates who I have hired for my company who have gone through the early phases of building a company OR who have not gone through that but have earned the positioned internally, do better than people who had great resumes from working in large companies. This is because larger companies have inertia and momentum: things already happen on their own. In other words, it's harder for people to understand the problems if they haven't gotten through them.

Connecting with raising children, one should reverse engineer the experience we think is important to understand what life courses we need or want. Help your kids aim high, understand and tolerate failure, rebuild and try again.

Culture

Culture is a way of working together toward common goals that have been followed so frequently and so successfully that people don’t even think about trying to do things another way. If a culture has formed, people will autonomously do what they need to do to be successful.

Edgar Schein

Culture is the result of shared learning. When a new problem arises in a company, the way the team solves it (successfully), becomes the M.O., the standard of execution. When employees are solving a problem, they are also learning what matters. Intrinsically formed in the fabric of every day work, culture is formed and becomes, many times, intangible.

Toyota developed an operational system (TPS: Toyota Production System) that was unreproducible. In 1969 Toyota had 0.1% of market share (vs GM's 48.5%). They then developed the TPS. Toyoda-san, the founder, first influenced by Ford, took influence from supermarkets and their systems to restock shelves specially how to reduce waste. Because of TPS, Toyota managed to grow their market share. Even GM did a joint venture with Toyota to train their employees in their system. But to no avail. They couldn't copy it.

Culture is formed by repetition, by patience, by dedication to a standard of execution.

Connecting with your life, one should try to instill a culture in one's family. To define the cultural values one hopes everyone abides by when you’re not there. When you’re not present, that’s the time when culture is valuable. To design a culture, you have to be consistent. When you let go of the standard, that becomes the standard.

3. I live a life of integrity and stay out of jail?

Full vs marginal theory

When making investments or allocating resources, companies traditionally ignore sunk or fixed cost and look to marginal cost and marginal revenue (new costs and new revs). However, you must look at full costs and full revenues, specially when you are in situations where you have a new player coming in your market. This is because, for an incumbent player, they need to look at marginal vs full cost of every new business. For a new player, there is no dilemma as there is no marginal cost/rev (all business is new)

These examples will clarify this theory:

  • When Blockbuster analyzed Netflix's business, they decided it was a niche Market. So they thought this market was smaller than the one they already had. However, the alternative to becoming Netflix was not continuing to be Blockbuster (marginal); it was bankruptcy (full).

  • US Steel vs Nucor. USS was the incumbent and Nucor was focused on the lower level market, which had mini-mills to produce steel. Nucor began to eat into USS as they started going upmarket. The engineers at USS saw this and created a plan to create the same type of mini-mills. Everyone approved the plan except for the CFO who did not agree. He saw that the marginal cost of producing steel in the leftover capacity of their current mills was much lesser, creating a 4x greater marginal profit.

This is core to the innovator’s dilemma. But this theory applies to life choices, people optimize for short term results and suffer many times long term consequences. People need to take into consideration not the marginal benefits they will get from taking certain decisions (which could be some times unethical in nature) but the full cost of those decisions. "Just this once" is dangerous.

Defining purpose

Clayton ends with a way to define purpose for yourself. There are 3 parts to creating purpose:

  • Likeness: the end picture, what you want to become

  • Commitment: to achieve likeness, there needs to be dedication to the vision

  • Metrics: how you will measure progress in getting there.

As an example to what likeness is, here is Clayton Christensen’s:

  • A man who is dedicated to helping improve the lives of other people

  • A kind, honest, forgiving and selfless husband, father and friend

  • A man who just doesn't believe in God, but who believes God

Review thoughts

The book is a journey through theories that Clayton build as an academic and professional, mostly focused on business strategy, applied to individual priorities.

The author has had a filled life but one with challenges. He's had to face cancer. He's also had to face a stroke that left with without speech or ability to write. In fact, this happened while writing this book. This book came after his confrontation with cancer.

Clayton's life is a representation of emergent strategy: he started by taking an MBA with deliberate strategy of becoming an editor at the Wall Street Journal. In his 2nd year, he was invited to be a consultant. At the end of his MBA, he launched a startup, went public and the company's performance wasn't great. So we was fired and replaced by a VC that invested earlier in the company. At 37, he decided to become a PhD student. The last years of Clayton’s life were as a professor.

Clayton suffered a stroke while writing this book. This made his speaking and writing difficult, in fact he's been learning to do both again. As part of writing this review I discovered that Clayton died in January 23, 2020, aged 67. May he rest in peace and thank you for all the wonderful reflections.

Memorable quotes

The happiest moments of my life have been the few which I have passed at home in the bosom of my family. —Thomas Jefferson

The hot water that softens a carrot will harden an egg

Self-esteem comes from achieving something important when it's hard to do

Children will learn when they are ready to learn

That business purpose and business mission are so rarely given adequate thought is perhaps the most important cause of business frustration and failure
Peter Drucker

People and Books mentioned

  • High Flyers, McCall

  • Nolan Archibald, notable CEO

  • Edgar Scheim

  • Frederich Herzberg, 2 factor theory

  • Discovery Driven Planning - MacMillan, McGrath

  • Origin and evolution of new business, Amar Bhide