Lewis Schiff is the executive director of Inc. Business Owners Council, a membership organization for Inc. Magazine’s top entrepreneurs and owners of closely-held family businesses and maintains a blog about behavioral entrepreneurship on Inc.com.
His new book, Business Brilliant: Surprising Lessons from the Greatest Self-Made Business Icons, which focuses on the wealth-creating behaviors and attitudes that work best in the new economy, was published by Harper Collins in March 2013.
Schiff has co-authored two books: The Influence of Affluence: How The Rich Are Changing America charts the rise of America’s growing affluent middle-class through original research and analysis. The Armchair Millionaire describes a wealth-creation system that leverages Nobel-Prize winning methodologies.
Here is Part 2 of my interview of him.
To read Part 1, please click here.
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Morris: When and why did you decide to write Business Brilliant?
Schiff: I believe that people can be more successful than they already are. They can put themselves in the path of money and luck and success more. They can derive more pleasure by honing in on what they’re best at. They can uplift and educate themselves by cultivating better social networks. But most don’t. They just don’t know how to do it. So, I wrote Business Brilliant with the plainest of intentions and with the simplest of missions: first identify what very successful people do to be successful. Then show “regular” people what they do in the same instances. Then identify the gap between these two behavior patterns and finally show them how they can make changes to their behavior to better emulate the outcomes of successful people. Pretty simple, really.
Look, if you’re a middle-class person today, you have two choices. You can cloak yourself in the narrative shared by most of the middle-class who ask for protection from all the institutions around them (business, government, Wall Street) in exchange for conformity. Or, you can take steps to improve your own situation so you can help your family, your friends and yourself achieve something better, something bigger. In the course of doing so, you may affect the whole world in a positive way. Or maybe just your neighborhood. Either way, there’s value in accurately identifying the macro issues that define your situation but there’s no value in stopping there. Whenever I spend time with entrepreneurs or those just starting out, after we’ve talked and learned something from one another, I ask one question: What are you going to do about it?
Morris: Were there any head-snapping revelations while writing it? Please explain.
Schiff: There were a lot of head-snapping revelations but here’s a big one: very successful people have a way of cultivating networks that is very nuanced yet very powerful. They want to know people who know people. That sounds simple enough but actually, within that simple statement comes a premise that leads not only to a lot of their own success but to the phenomenon of luck. It’s hard to explain in any brief way but here’s how the most successful networks work: you have strong relationships with a few people, maybe five to six. And I mean “strong.” (Since these are business relationships, I’ll focus on money…do you know what they are worth? How much they want to be worth in one year or five years? Do you know how much money they want to make this year? If so, how much have they made?).
Those people need similar networks. So, if you have a strong relationship with five people and they have a strong relationship with five people and those five have similar relationships, that puts the number in your network at 125 people. The next part is a function called “transitivity” which is a measure of how many people in your network already know each other. The less, the better.
Put these two together and you have the environment in which “luck” can take place. For example, you hear of a person who wants to open a new store town and you know a person who wants to rent out a retail space. You are now in a position to be the connector between these two people who both need each other but don’t know each other. That’s what luck looks like. Now imagine doing that on a grand scale. Steve Jobs knew the kinds of creative people who wanted tools to take their creativity farther and he knew the engineers who could build those tools. But those engineers didn’t consort with those creative people. Steve Jobs was the nexus. He saw the opportunity and he turned himself and Apple into the tollbooth between these two groups. That’s how the best people network.
Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?
Schiff: Well, I’m happy to say that when I go into these projects, I really don’t know the answers to the questions the book poses. If we’re lucky, we find those answers and a good book comes out of it. That being said, I started the book coincidentally at the beginning of the Great Recession and it came out as we are (arguably) emerging from that Great Recession. So, the urgency for the book increased considerably. The very trends that were started in the 1970s-90s, such as globalization and technology have been hastened by The Great Recession. Nowadays, most of the innovation capital (people and money) is going towards productivity innovation. That means that anyone who has a good idea which can get work done faster and with fewer resources is going to get a lot of attention. That’s bad for the middle- and working classes. It’s a trend that’s been happening for years but now it’s simply irrefutable. You’d have to have your head in the sand to not realize that becoming Business Brilliant (learning how to emulate the practices of those who have had great success in this extremely disruptive economy) is not only a way to aspire to a great goal; for many, it’s a path to solvency and survival.
Morris: For those about to read the book, who is Russ Prince and what is his special significance to the material that you provide?
Schiff: While I said that I don’t know the answers to the questions before I started Business Brilliant, Russ Prince did. Russ and I spent a lot of time together at the beginning of the book. He tells me — TELLS ME — he doesn’t converse with me — how rich people think. He knows this because he works with them all the time and because his greatest skill set is empathizing with that population. And so, when he tells me how rich people operate and think and think differently than everyone else, I am hearing practically a divine truth (yes, I’m a big Prince fan, Russ Prince!). But what we don’t know when we start the book is how we can successfully tell that story to the middle class. Russ doesn’t think you can. He’s worked with regular people long enough to know that they don’t get “it” — they don’t understand what the self-made wealthy do. He may be right but my aspirations weren’t so lofty. I thought that everyone who reads Business Brilliant could do better financially, professionally, than they are doing. Just a little better. Maybe even more than a little better.
But if you are that just right person who really wants to be very wealthy and is willing to do anything (legal) to get there, you should come to Russ with a briefcase full of cash and ask him to help you. He can do it. For two reasons, he only does it with people who are already wealthy — first, they can afford him and second, they’ve proven they have what it takes to reach a goal. So, for the client who has $200 million and wants $1 billion, Russ can help them because they’ve already tested their mettle. For the person who has $200,000 and wants $1 million? Even if you became a pro-bono client of Russ’ (no such thing exists and here’s why), you’d probably not be able to implement his ideas. You’d probably be too afraid to disrupt or risk what you already have. For Russ’ clients, staying at $200 million is the big risk they can’t afford to take. They have to keep going.
Still, he is the sage of all sages when it comes to wealth creation. And reading Business Brilliant is about as close as most of us will ever get to him.
Morris: As you developed what became the seven principles for wealth creation, what (if anything) did you learn about human nature that you did not know before?
Schiff: Honestly, the entire book allowed me to learn more about human nature. Each aspect of the seven principles touches on an important area of personal development and I consider myself very lucky to live in a time where I’m able to prioritize self-improvement. If I lived in a war-torn country or one where food and electricity wasn’t plentiful, I’m sure I’d have to turn my attention to more clear and present dangers. But I don’t so I think learning about myself is about the most exciting thing I can do.
Morris: As you know, The title of Alice Schroeder’s biography of Warren Buffett, The Snowball, refers to a sort of epiphany he had in childhood when he realized the power of compound interest. In your opinion, what is the relevance of that insight to wealth creation today?
Schiff: There are two kinds of wealth creation: financial security and financial independence. Make no mistake, Business Brilliant is about financial independence. That’s about having enough money that you no longer have to worry about money anymore. Financial security is what most of us hope for. Most of us are not greedy and we don’t crave private jets and mansions. We just want to be able to afford our current lives and live out a basic version of the America dream. Compound interest is a tool of financial security. And it works. I wrote a book called The Armchair Millionaire that, too, turns on the importance of compound interest. And I, too, value financial security for myself and my family. But I’m also interested in financial independence and that’s a whole other exercise of personal development that’s unlike the personal development I underwent in my 20s to implement many of Warren Buffett’s favorite principles. I have had a mutual fund portfolio based primarily in low-cost index funds since I was 18 years old. That was 25 years ago. That has grown to a lot of money and has made me more financially secure. But it’s not going to get me to financial independence.
Morris: How do you explain the fact that children receive almost no formal or even informal education in basic economics, such as compound interest?
Schiff: Wealth creation is seen as an ugly concept. When we talk about money and the things money buys, it’s usually presented as a form of greed. As a result, it’s not held at the same level of importance as other social phenomena. That stinks but it’s just made it easier for me to figure it out because those in the community of people who love the topic are very willing to share. I’ve had the privilege of talking directly to luminaries such as John Bogle and Peter Lynch. They’re pretty generous with sharing their wisdom because not enough young people even think to ask.
Morris: You say that this book “is the product of all seven of the Business Brilliant principles it explores.” How so?
Schiff: When I start a book project, I start with something I want to learn more about. I don’t usually tell that to my editors because they assume I’m the expert in the topic already. But there’s nothing like 4 years of research to make you into an expert! And that’s what it takes to write a book. In the meantime, it’s a business contract and you’ve made promises to your publishing partner and others around you. So you have to be focused on deadlines and meeting expectations. Throw in a Great Recession where your own professional life is turned upside down and it’s a wonderful mixture for learning how to manage risk better. And that’s what Business Brilliant is about. It’s about learning how to manage the increasingly risky world we all live in by emulating those who have already learned a lot about managing risk and making it work for them.
Morris: You suggest that the Business Brilliant system you describe in this book is characterized by a “synergy” of various parts. Please explain.
Schiff: There’s a danger in oversimplifying things. Look on any website today and everything is “3 things to do this…,” and “5 ways to do that” (when I blog, I’m guilty of this, too). In truth, the methods that are used by very successful people are far from linear. It’s not, do this, then this, then this and voila. To be truly Business Brilliant, you have to see these seven principles as if it’s in a sphere and you’re in the middle of the sphere. You have to combine the elements in different amounts all the time, drawing more on one and less on another. In that regard, it is difficult and requires a level of mastery to excel. But each one represents an opportunity to try out independently. For example, learning how to ask for a raise. That’s in the book and it’s one small part of what it takes to succeed. To be able to ask for a lot, get back less than you hoped for and move on. That’s a core lesson in Business Brilliant. Most people don’t ask or if they do, they don’t ask for enough or if they ask for too much, they feel bad when they don’t get it. But that’s just one small part of the synergistic program. When you mix mastering how to ask with developing a high-functioning social network, then even more success happens. When you do so in an area where you’ve already honed your execution abilities, even more good stuff happens. Do that in a situation where you have an ownership stake and now you’re really burning with gas! It’s a synergistic system. Each one is interesting in its own right but it’s combining them that produces the best results.
Morris: Of all the beliefs and behaviors that separate the mass middle class from the affluent, which — in your opinion — which will be most surprising to those who read the book? Please explain.
Schiff: “Do what you love and the money will follow” is a falsehood passed down to us from well-meaning parents and grandparents. For very successful people, you have to do what you and you have to follow the money.
Morris: As I indicate in my review of the book for various Amazon websites, there are dozens of passages throughout your narrative that caught my eye. For those who have not as yet read the book, please explain what you view as the key take-away in each of these. First, “The Magic of the Mundane” (Pages 9-11)
Schiff: People are conditioned to believe that better ways have to be new, involve technology or something dramatic. In many instances, small and ordinary changes can have a profound effect on the outcome. Especially when they are executed consistently.
Morris: “The Billionaire Busker” (23-26)
Schiff: In this story, a clown of all people shows us that it takes a keen eye on the business to succeed. That’s in stark contrast with the story that is often told about success stories like clowns, artists, singers. We are told that they are so committed to their craft and so talented that money flowed to them. Not so. Guy Laliberte is the founder of Cirque du Soliel. His story shows us that the success of his mega-circus is the product of passion for the circus arts as well as keen business savvy.
Morris: “The Peterman Principle” (40-43)
Schiff: This is a similar example to the one about the founder of Cirque du Soliel. John O’Hurley was the actor who played J. Peterman on Seinfeld. Even though he was a small player in the show, he has managed to create a cottage industry around that character. Ultimately, the actor ended up owning part of the J. Peterman catalog. In Business Brilliant, we wonder, why did he choose to pursue this character when most other actors do everything they can to avoid being typecast in any one role. What did John O’Hurley understand about following the money that the other well-known characters from this show don’t?
Morris: “The Wonder Bread Way to Wealth” (47-51)
Schiff: For years, many personal wealth gurus have preached the virtues of saving, buying and holding stock in order to create a nest egg that provides future financial security. In fact, I was, and still am, one of them. But Suze Orman, one of the most famous of the money gurus takes the message a step farther in a way that actually leads her viewers and listeners farther away from business brilliance (and farther from what she does to create wealth, too). The net effect is a slow deterioration and downgrading of the quality of life for those who take her advice under the false pretense that this is what the wealthy do. The wealthy don’t scrimp and save. They earn and then they earn some more. Find a path to a bigger payday rather than diminish the quality of your life to fund some future retirement nest. It comes down to the difference between financial security and business brilliance. Financial security is about having just enough (problem is that real wages are stagnant so the only way to have just enough is to reduce what “enough” is for you). Business Brilliance is about realizing the American financial dream of creating wealth for yourself.
Morris: In the final chapter, you offer your own four-point program for Business Brilliance. You call it “LEAP.” Please explain the essence of each component. First, Learning
Schiff: Most of us are think we’re good at several things while very successful people know they’re GREAT at just a few things. The wealthiest of our survey respondents tell us they’re great at just one or two things. Don’t spread yourself thin. Discover what you’re best at…and do more of it!
Morris: Next, Earning
Schiff: When you sell your time by the hour (a salary, an hourly wage) your earnings are capped. The truly business brilliant know that you have to put yourself in the line of money in order to realize significant wealth.
Morris: Then, Assistance
Schiff: Building an ecosystem of people that helps you find opportunity and creates moments of luck is not a casual byproduct of networking. For the Business Brilliant, it’s the practical outcome of carefully selecting who adds the most value to your network at any given time. For many of the Business Brilliant, composing their network with intent to leverage it is the essence of what they’re best at (see “Learn”)
Morris: Finally, Persistence
Schiff: There’s clear evidence that the process which leads to business brilliance is a game of endurance. Can you survive (financially, emotionally, professionally) the throes of testing and refining what you’re best at when finding out what your best at helps you
Morris: I share your high regard for Lemov and his breakthrough research on teaching and learning. For those unfamiliar with the 49 techniques that he explains in Teach Like a Champion, one of them is “Tight Transitions.” Please explain what it is and why you think it is so important.
Schiff: Most classrooms performance on standardized tests is within a range that’s correlated to that neighborhood’s family incomes. In other words, low-income school districts perform in a certain range and high-income school districts tend to perform in a higher range. How, then, do you explain one classroom that’s doing better than other classrooms in a given school district? Douglas Lemov visited some of these classrooms that deviated from the norm to find out what they were doing differently from others. In one, he found a teacher who performed what the teacher called, “Tight Transitions.” In this classroom, the students were taught how to pass out papers throughout the class, a seemingly mundane exercise that takes place many times per day in every classroom.
But in most classrooms, this is a time when the students move around, talk to each other and generally disrupt the flow of teaching. In this classroom, where the students were taught to pass out papers silently and quickly, several minutes per day were re-captured by the teacher. These minutes added up to full days by the end of the school year. So this classroom effectively had several extra teaching days per year, which accounts for the better than normal test results. This is described in Business Brilliant as a way to show how small, seemingly unimportant rituals can help people produce outsized results.
Morris: You advise your reader to “double down on what you do best.” For example?
Schiff: Most of us are taught to be “well-rounded” — our teachers, our parents and our corporate employers teach this to us. The very successful are not well-rounded. They try to find something they are good at and then do as much of that as possible. They don’t dwell on, nor do they try to fix their weaknesses. Instead, they find other people who have similarly focused on their strengths. In this regard, success is a bit like gambling. Find your strongest hand and then double down on it. Make your biggest bets around your own strengths.
Morris:There’s a corollary to doubling down which Katherine Hepburn once identified when explaining her success: elimination. “I eliminated everyone and everything in my life, including my dear sweet husband Luddie, who stood between me and where I wanted to go.” In your opinion, how important is elimination to personal growth as well as professional development?
Schiff: Yes, it’s true that the act of prioritization is making some things important and other things unimportant. This explains why some folks have money and others don’t. They aren’t necessarily smarter than anyone else, but they prioritize wealth creation above other things. But this characterization ignores something important. People like Katherine Hepburn, who are doing something they feel strongly about, are energized by their own prioritization. They feel good when they work hard at something that’s important to them. While it may come at the expense of other things they care about, they value the opportunity to excel at something that they enjoy.
Morris: Let’s say that a CEO has read and then (hopefully) re-read Business Brilliant and is now determined to apply the “surprising lessons” you share in the book at all levels and in all areas of the given enterprise. Where to begin?
Schiff: This is a great question because the truth is, it’s very challenging to have a company full of “Business Brilliants” running around, causing havoc. You need, as the saying goes, ditch diggers. But if a CEO were inspired by Business Brilliant and wanted to cascade this way of thinking throughout his/her organization, I think it would be wise to start the practice with the most important people in the organization. Every organization has a group of people that are essential, let’s call them the “A”s. These are the folks that should be encouraged to define their own job description and follow the principles of Business Brilliance. Eventually, there could be a second wave of folks that are worth emphasizing Business Brilliant with. These are the up-and-comers who could add more value to the organization if they were shown how to. Think of these as the “B”s.
Then you have the “C”s–who could probably see some measurable increase in their ability to perform if you helped train them on the 17 strategies of Business Brilliance. For them, you’d see the least impact, because these are folks who are the least willing to get out of their comfort zone for the sake of realizing a goal. But you could help them make minor improvements which could add up to a sizable impact in the organization. The best example of this would be the “receptionist” position. This is a person who could have a big impact on the organization if he/she is the right person in the right job with the right motivation even though, at first glance, this is a person who has a relatively small contribution to an organization’s strategic goals.
Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the “lessons from the greatest self-made business icons” that you share in Business Brilliant, which do you think will be of greatest value to leaders in small companies? Please explain.
Schiff: I, too, have the pleasure of working with this group of people and I think Business Brilliant is essentially describing them. People who have built companies of this size have done something very difficult. They have already proven themselves as having Business Brilliance but they probably need to refine this skill set in order to take a quantum leap in their outcomes. So, I think they could benefit from all the lessons. But if I had to pick one above all, I would say it’s “Spread the Work, Spread the Wealth.” This population suffers from the “success paradox” where they keep doing the same things that made them successful to begin with. They need to change the way they contribute to their organizations to leverage the skills of others. That’s hard for anyone but it’s even harder when what you’ve done so far has made you enormously successful and then someone comes along with data that suggests that you have to change how you add value.
Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?
Schiff: Phew! Are you kidding?
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Ton read part 1, please click here.
Lewis cordially invites you to check out the resources at these websites:
The Inc. Business Owners Council home page
Lewis’ Inc. articles link
His Amazon page
Business Brilliant page