Peter Sims is an author, speaker, and entrepreneur. He is the author of Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, from Simon & Schuster: Free Press. Previously, he was the co-author with Bill George of True North, the Wall Street Journal and BusinessWeek best-selling book, and he worked in venture capital with Summit Partners, a leading investment company, including as part of the team that established the firm’s London Office.
His work has appeared in Harvard Business Review, Tech Crunch, and Fortune and he’s a contributor to the Reuters, Fast Company, and Harvard Business Review blogs. He received an M.B.A. from Stanford Business School where he and several classmates established a popular course on leadership and has had a long collaboration with faculty at Stanford’s Institute of Design (the d.school). He frequently speaks or advises at corporations, associations, and universities, including Google, Eli Lilly, Cisco, ConAgra, Pixar, and Stanford University.
He lives in San Francisco and his great-great-great grandfather, Jacob Gundlach, founded Gundlach Bundschu (GunBun) in Sonoma, California’s oldest family-owned winery, which is run today by his cousins who, unlike Peter, know a lot about wine.
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Morris: Before discussing any if your books, a few general questions. First, when and why did you begin your association with Stanford’s Institute of Design (the d.school)?
Sims: I was introduced to George Kembel, the cofounder and Executive Director of the d.school in 2002. George became my design thinking teacher and mentor, while I shared about my experiences as an entrepreneur, investor, and student of leadership and entrepreneurship with George and his d.school colleagues. Understanding design methods literally changed the way I think; all of a sudden, I was immensely more creative, and the key insight I had was that those methods overlapped with the way entrepreneurs worked in the unknown. That became the basis for Little Bets.
Morris: What business lessons have you since learned from that association that have direct relevance to successful change initiatives in almost any organization, whatever its size and nature may be? For example, is it possible to design initiatives that will avoid or overcome cultural resistance?
Sims: There are a few principles from design that will influence the business world for years to come. The first is the ability to do rapid, low-cost prototyping at the early stages of developing ideas. We never learned that in business school, yet planning in PowerPoint and Excel is often a terrible waste of time when the answers exist outside the office, in the unarticulated needs of potential users of that idea. That’s where ethnographic observation and need-finding techniques from design, the kind used by anthropologists, play an important role. People in business are surprisingly bad at truly understanding their customers’ needs. Market research doesn’t work for identifying unarticulated needs; just ask Steve Jobs who often says, “People don’t know what they want if they haven’t seen it.”
Morris: Thomas Edison once observed, “Vision without execution is hallucination.” Here’s my question: Even after having designed the best strategy, what should leaders do if there is no buy-in?
Sims: I’ve experienced this; it happens all the time. If there is no buy-in, leaders should wonder if they are hallucinating. That’s one reason I’m very happy to see the rise of a number of schools of thought featured in Little Bets, such as design, lean startups, and counterinsurgency that advocate failing quickly to learn fast, in order to test assumptions and build on gains that work. We’re living in an era that rewards bottom up innovation, yet top-down thinking is still the dominant management norm, an outgrowth of industrial management. The world is far too uncertain for top-down management – just ask Generals in the Army as they’ve learned in the Middle East, where they don’t know the problems they’ll encounter each day. They have to be able to rapidly adapt.
Morris: In your opinion, are investment opportunities for venture capital firms better, worse, or about the same today as they were when you were associated with Summit Partners? Please explain.
Sims: The market is far more competitive and saturated with capital today than it was several years ago. As the investment hold periods get longer, and the return profiles fall, venture capital as an industry is going through a recalibration, where name brand firms will make it, while a lot of dumb money will go away. In addition, the social media valuations we see today, such as Linked In at 30+ times revenue, or Facebook valued the way it is indicates a bubble. The only question I cannot answer is how long that bubble will last.
Morris: Now please shift your attention to True North, a book you co-authored with Bill George. For those who have not as yet read it, what is “true north” and what is its significance?
Sims: Your True North represents your most deeply held values and aspirations.
Morris: What are the defining characteristics of “authentic leadership”?
Sims: Bill George defined authentic leadership along five dimensions in his book Authentic Leadership, most importantly leading from an ethical set of values, and a sense of purpose.
Morris: Throughout history, who do you think offer the best examples of an “authentic” leader? Please explain.
Sims: Abraham Lincoln, Nelson Mandela, Jane Adams, Bill Hewlett and Dave Packard. Oprah and Pixar’s Ed Catmull is a great modern day example, as are the leaders Jim Collins profiles as Level 5 Leaders in Good to Great.
Morris: Were Hitler and Stalin authentic leaders? Please explain.
Sims: No, because they weren’t ethical.
Morris: Now please focus on Little Bets. First, what lessons can be learned from the dozens of exemplars you discuss (who include Chris Rock, Larry Page and Sergey Brin, Jeff Bezos) about how to – and how not to – generate breakthrough ideas from small discoveries
Sims: The most important thing is to understand that instantaneous ingenious ideas are completely at odds with reality. Mozart was an exception, a prodigy. Chris Rock, Larry Page, Sergey Brin, and Jeff Bezos are masters at discovery, that is the ability to experiment, tinker, be inquisitive and combine possibilities with problems in order to solve them in new and valuable ways. Somehow, this fact has long been misunderstood due to myths about creative genius. The genius is in the discovery process.
Morris: What is the core thesis of Little Bets?
Sims: When you’re doing something new or uncertain, you should use little bets – that is small, affordable actions – in order to discover what to do. Interestingly, that thesis has been extremely robust across a range of disciplines – from business to science to artificial intelligence to filmmaking.
Morris: To what extent (if any) is the book published by Free Press different from the one you originally envisioned?
Sims: I wrote the book working closely with my editor, Emily Loose, using the approach and principles described in the book, so it evolved throughout the research and writing process most importantly away from a hard and fast process toward a set of insights that anyone can use to think differently. Emily was a great partner and supporter in this regard; the book was discovered through tireless iteration. As I tell aspiring authors, writing is editing!
Morris: I share your high regard for Saras Sarasvathy and her research. For those unfamil8ar with her work, please explain what she has discovered about the decision-making paths that expert entrepreneurs take to build a hypothetical business.
Sims: Sarasvathy’s a very insightful person and researcher and her core finding is this: MBA trained managers try to control every variable in order to get to an expected to gain using the fastest, cheapest means possible. Meanwhile, entrepreneurs don’t try to avoid surprises or errors, but instead use whatever means they have (networks, skills, resources, etc) and create something from that based on what they can afford to lose. So, for example, Jeff Bezos says that you can’t put into an Excel spreadsheet how customers will respond to a new idea. So instead of going after the next billion dollar idea, he advocates going after new opportunities that the senior team finds interesting, and that could plausibly get to $10 million in revenue. Sarasvathy’s research is the best I’ve found on how expert entrepreneurs actually work.
Morris: Here’s a related questions. What are the major benefits of building a hypothetical business?
Sims: Other than to observe cognitive decision-making patterns, I’m not sure there is one for expert entrepreneurs, although MBA students would be well served to get outside of the business plans and spreadsheets when learning about entrepreneurship. The answers are out in the world, and fortunately the low cost of the web and backend infrastructure allows for the type of rapid iteration, testing, and development of new ideas. MBA programs are way behind the curve when it comes to teaching entrepreneurship. As Reid Hoffman, founder of LinkedIn and investor said at a dinner the other night, when he meets aspiring entrepreneurs, the ones who have to overcome his hurdle tests are those who got an MBA or those who worked in management consulting.
Morris: What are the fundamental components of the little bets approach? Is any one of them more important than the others?
Sims: Experiment: Learn by doing. Fail quickly to learn fast. Develop experiments and prototypes to gather insights, identify problems, and build up to creative ideas. Play: A playful, improvisational, and humorous atmosphere quiets our inhibitions when ideas are incubating or newly hatched, and prevents creative ideas from being snuffed out or prematurely judged. Immerse: Take time to get out into the world to gather fresh ideas and insights, in order to understand deeper human motivations and desires, and absorb how things work from the ground up. Define: Use insights gathered throughout the process to define specific problems and needs before solving them. Reorient: Be flexible in pursuit of larger goals and aspirations, making good use of small wins to make necessary pivots and chart the course to completion. Iterate: Repeat, refine, and test frequently armed with better insights, information, and assumptions as time goes on. The most important thing is to start taking action.
Morris: What is “the illusion of rationality” and why is it (at least potentially) so perilous?
Sims: I describe the illusion of rationality as happening when ideas or assumptions seem logical in a plan, spreadsheet model, PowerPoint, or memo, yet they haven’t been validated on the ground or in the real world. It’s an enormous, enormous problem because leaders especially make a lot of big decisions and resource allocations based on giant abstractions. We hire a consultant or take advice from a market study in order to gain comfort about a decision, but it’s all just smoke and mirrors. Anyone who as worked as a consultant, as I did after college, knows that data can be spliced a million different ways to support a particular decision. It’s astonishing how often we get swayed by these illusions.
Morris: What is “the counterinsurgency approach” to warfare? What is its specific relevance to the business world?
Sims: That’s a very complicated, in-depth question, but to simplify it, rather than relying on targeted raids of presumed enemies, such as insurgents, counterinsurgency relies on a bottom-up problem solving approach in order to empower the civilian population to retake control from insurgents. So, counterinsurgency places a premium on understanding local power structures, experimenting with a range of ways to counter the insurgents, and consolidating small gains over an extended period until the control has shifted back to civilian populations. Critically, there’s no master plan; it evolves as the problems are framed and reframed.
Morris: I was especially interested in your extended discussion of the Pixar organization because it seems to combine the “best of two worlds”: a major global corporation with a small, hard-charging “guerilla” market-buster. Do you agree?
Sims: To some extent. Pixar’s leaders do encourage dissent, and the atmosphere is very constructive, so people unanimously feel empowered to voice their opinions, and power hierarchies are minimal. Although the directors make final decisions, Pixar doesn’t emphasize hierarchy. I wouldn’t say that there are heaps of what Pixar director Brad Bird calls “black sheep,” the malcontents that challenge the status quo at each step, although I will say that Ed Camull seeks after and encourages these types of people and thinkers. Pixar will be tested as its leadership transitions in the next several years, from Catmull, John Lasseter, and others to the next generation, a generation that hasn’t had it as hard as the original founders did. They’ll continue to produce one or maybe two blockbusters a year for the next several years, but achieving that transition successfully will be Catmull and Lasseter’s greatest remaining challenge.
Morris: What is the “affordable loss principle” and why can it so valuable when business leaders are involved in a decision-making process?
Sims: It’s the principle that you should decide what you should afford to lose when doing something new, rather than projecting what you can expect to gain. If you are operating in an uncertain or new situation where the data literally doesn’t exist, you need to create data, bound by what you can afford to lose.
Morris: What is “failing forward”? How specifically can it help breakthrough ideas emerge from small discoveries?
Sims: Failing forward means that the best way to test your assumptions and learn how to develop your ideas is to get out into the world and try something tangible, however shitty or sucky it is at first. That’s why Chris Rock reels off lots of joke ideas in front of small audiences – he discovers his best material by trying tangible possibilities through the process that exposes ideas and opportunities he could not have predicted in advance.
Morris: What are the major benefits of achieving and then sustaining what Mihaly Csikszentmihaly characterizes as “a mental state of flow”?
Sims: Csikszentmihalyi has defined flow as: “Being completely involved in an activity for its own sake. The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one, like playing jazz. Your whole being is involved, and you’re using your skills to the utmost.”
Morris: Given your response to the previous question, here’s a follow-up question: How do you explain the fact that, on average, about 70% of a workforce in the U.S. are either passively engaged or actively disengaged?
Sims: That’s a very frustrating statistic, what a loss of productivity and creativity, as Dan Pink writes about so well in Drive. As Dan argues, we know enough about the sources of motivation to know how to engage people. Just read his book.
Morris: In your opinion, what is the purpose of formal education?
Sims: In my discussions with leading education researchers and historians, including Sir Ken Robinson and Keith Sawyer, their conclusion is that the purpose of education is to teach us knowledge. It should be to teach us how to learn and constantly discover, but that’s another book.
Morris: Here’s a hypothetical situation. You have been invited to address the board members, C-level administrators, principals, and PTA presidents representing all of the public schools in the 50 largest public school districts in the U.S. Here’s what they have asked you to address: the most important lessons to be learned about learning from the breakthrough thinkers you focus on in your book. What are these lessons?
Sims: It’s very simple. To thrive as creators or innovators, we have to be able to constantly learn and discover. Memorization serves us virtually no value in this respect. Ask Jeff Bezos, the Google founders, or Frank Gehry: it’s much more important to be able to ask the right questions than to have the right answers.
Morris: Which “strikingly similar methods” do experimental innovators use inside their work processes?
Sims: Being very inquisitive and asking the right questions, experimentation, using constraints, framing and reframing problems, using small wins or consolidating gains, tireless iteration, and a growth mindset. The chapters of Little Bets lays these out.
Morris: While you were writing Little Bets, were there any head-snapping revelations that increased your understanding of who you are…and who you aren’t?
Sims: Again, once I learned the little bets approach, it changed the way I think, and I’m far more creative than I ever thought. For a left brained trained guy, it opened up a whole new world. Anyone can use little bets to be more creative.
Morris: Have you decided what your next book will be about and what you hope to accomplish by writing it?
Sims: I have not.
Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?
Sims: To say we’ve covered it is an understatement! Thanks, Bob.
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Peter Sims cordially invites you to check out the resources at these websites: