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The Value Creators Podcast Episode #31. Christian Sandstrom: How Entrepreneurial Initiatives Beat Government-Backed Missions

In this episode of the Value Creators Podcast, dive deep into the classic battle between market-driven innovation and centrally planned industrial policy with our esteemed guest, Christian Sandstrom, a leading voice for individualism and free-market solutions and author and professor at Jönköping International Business School and the Ratio Institute in Sweden.

In this conversation, we unpack the government’s grand “moonshots” and “missions” which claim to solve societal challenges but always miss the mark due to bureaucratic inefficiency and a central planning approach that negates the potential of market dynamics.

Learn why centralized missions such as the cancer moonshot or the war on homelessness can become drains on public funds while failing to deliver meaningful progress, and the importance of fostering an entrepreneurial society where markets create value and select the best solutions organically, rather than imposing ‘one-size-fits-all’ government-led directives.

This episode is a treasure trove for anyone interested in the interplay between innovation, the economy, policy, and technological advancement!

Resources:

Christian Sandstrom’s Books:
Moonshots and the New Industrial Policy
Questioning the Entrepreneurial State

Episodes Mentioned:
Christian Sandström: Why Governments Can’t Act Entrepreneurially

Show notes:

0:00 | Intro
03:09 | Mission Economy: MOIP
05:16 | Attraction Perspective: Is the Mission Economy Same for all Governments?
06:33 | Book: Behavior of Economics
08:26 | Three Broad Headings: Sequence
10:50 | Public Intellectuals: These Are Not Serious Economists, These Are Celebrities
13:48 | Empirical Evidence Defined
17:04 | Apollo Mission: Examples
19:20 | Example: Home Building Challenge
21:07 | Alternative: Aim for Entrepreneurial Society 
27:26 | Challenge: Separating the Entrepreneurial Component from the Bureaucratic Government Entangle Component 
29:46 | Technology Can Decentralize Economic Activities
31:33 | Moral Beliefs and Imperatives 
34:04 | Entrepreneur Ecosystem
36:13 | Books Campaigns: Spreading Word Beyond Books
39:40 | Wrap up: Christian is Optimist OR Not?

Knowledge Capsule:

  1. Entrepreneurial Society vs. Mission Economy:
    • Societal goals are achieved when Individuals take personal responsibility,, translating abstract ideas into actionable steps.
    • Decentralized, bottom-up approaches are always superior to top-down, government-driven solutions.
    • Professor Sandstrom advocates for minimizing government restrictions and regulations to allow markets to evolve and find solutions organically.
  2. Challenges with Mission-Oriented Policies:
    • Complex problems (sometimes called “wicked problems”) can’t be solved by government-led missions.
    • They require decentralized, collaborative solutions rather than centralized control.
    • There is always the problem of government officials pursuing self-interest or being influenced by interest groups, leading to inefficient and muddled outcomes.
    • Mission-oriented policies can distort competition, neglect opportunity costs, and fail to address root causes of issues.
  3. Empirical Evidence Against Mission-Oriented Policies:
    • Historical case studies and literature review show limited success and unintended consequences of mission-oriented policies.
    • Examples like the Apollo program and the atomic bomb highlight engineering successes rather than entrepreneurial ones.
    • Such policies often fail to address systemic issues effectively, such as homelessness or economic revitalization.
  4. Role of Public Intellectuals and Behavioral Economics:
    • Public intellectuals often simplify complex economic concepts, leading to oversimplified policy prescriptions.
    • Behavioral economics can criticize markets but sometimes overlooks biases and inefficiencies in government decision-making.
    • There is a need for a more nuanced understanding of economic principles and policy implications.
  5. Alternative: Entrepreneurial Ecosystem and Technological Advancements:
    • Technological advancements enable smaller-scale entrepreneurship and decentralized economic activities.
    • Focus on building collaborative, complementary networks across firms and technologies for innovation.
    • Markets are seen as collaborative ecosystems rather than purely competitive arenas, emphasizing the role of cooperation and innovation in achieving great outcomes.
  6. Moral Beliefs and Imperatives in Policy Making:
    • Public perception often drives policy decisions, creating what are seen as moral imperatives for government action.
    • Balancing these supposed moral imperatives with practical, market-driven solutions is crucial for effective policy making.
    • Need to consider unintended consequences and trade-offs of policies driven by moral beliefs.
  7. Optimism for the Future:
    • Despite challenges, there is optimism that technology and entrepreneurial ecosystems can drive positive change.
    • Global interconnectedness and creativity offer opportunities for entrepreneurial solutions to societal challenges.
    • The potential for decentralized, collaborative problem-solving gives hope for addressing complex societal issues more effectively.

The Value Creators Podcast Episode #27. Mark McGrath on Entrepreneurship Versus Managerialism

Adaptive entrepreneurship refers to a dynamic approach to business leadership and business practice that embraces continuous learning, rapid adaptation, and the creation of novel ideas. Mark McGrath and Hunter Hastings discuss the critical aspects of adaptiveness in dynamic environments. They explore the aftermath of failure to adapt to nonlinear external change. The conversation emphasizes the importance of the shift from traditional management to adaptive leadership, as defined by a fusion of entrepreneurial economics and John Boyd’s unique approach to “the whirl of reorientation”, and focusing on the importance of influencing and inspiring collaboration, as contrasted with managerial control.

Mark McGrath highlights the role of appreciation leadership, recognizing the worth of ideas, and fostering human interaction. He advocates for continuous reinvention and the active creation of mismatches to outpace competitors. Entrepreneurs need to embrace adaptive systems, prioritize human-centric leadership, and leverage novel ideas for sustained success in ever-changing business landscapes.

Resources: 

AGLX – Consulting & Coaching Group:

aglx.com

The Adaptive Entrepreneurial Business Model Graphic:

Mark McGrath on LinkedIn:

https://www.linkedin.com/in/markjmcgrath1/

Show Notes:

0:00 | Intro

01:50 | Rethinking Management Amid Uncertainty

04:23 | Entrepreneurship: Navigating Uncertainty for Value Creation

06:38 | Entrepreneurship as a Continuous, Never-Ending Process

08:50 | Massive Mismatch: Preserving vs. Exploring New Futures

14:16 | Disruptive Innovation

15:19 | Entrepreneurial Method as Continuous Ongoing Loop of Value Creation

20:21 | Idea of Entrepreneurial Intent

22:42 | Positive and Negative Feedback: Feedback Loop

25:12 | Organizational Structure and Empowerment in Business and the Military

34:56 | Quantification VS Qualitative Analysis

38:02 | Rethinking Management VS Embracing Adaptive Systems

39:20 | Wrap-Up: Mark McGrath’s Concept of Leadership

Knowledge Capsule:

Defeating Linear Thinking::

  • Failure in business often stems from an inability to adapt to nonlinear external change.
  • Possessing resources is insufficient without the right frame of thinking.
  • Success requires constant adaptation to unpredictable challenges.

Boyd’s Leadership Philosophy:

  • Emphasis on leadership quality over command and control.
  • Leadership is defined as the art of influencing and inspiring collaboration.
  • Appreciation leadership focuses on recognizing worth and understanding how things work.

Reinventing Management:

  • Hunter Hastings proposes to replace the term “management” with an adaptive system.
  • Mark’s response: we don’t use the term “management” and don’t think about it. Leadership quality, not a title in a hierarchy, is crucial for success.
  • Advocacy for a mindset shift away from traditional management approaches.

Continuous Adaptation:

  • Organizations must continually reinvent themselves for sustained success.
  • Industry leaders like Steve Jobs and Warren Buffett exemplify the importance of creating novel ideas.
  • The ability to adapt to changing landscapes is paramount for thriving in dynamic environments.

Human-Centric Leadership:

  • Appreciation leadership promotes human-to-human interactions.
  • Recognition of worth and understanding of how things work are crucial.
  • Contrasts with isolating command and control approaches.

Creating Mismatches for Success:

  • Mark McGrath encourages the cultivation of mismatches or novel ideas. 
  • Adaptive systems recognizing value and fostering continuous learning are keys to success.
  • Gaining a competitive edge involves disrupting the status quo with innovative thinking.

The Value Creators Podcast Episode #26. 11 New Mental Models for Business

Mental models are defined as fundamental assumptions that shape the way individuals perceive and interact with the world. When our mental models are wrong, we can’t see the world as it really is. New mental models introduce a new and better understanding. This episode of the Value Creators podcast introduces eleven fundamental mental models, ranging from understanding value as a subjective creation within the minds of customers, to the strategic accumulation of knowledge within a firm, to the pivotal role of empathy and the transformative nature of marketing as behavior. Each mental model contributes to a new holistic paradigm designed to guide entrepreneurs in creating sustained value.

Mental models contribute to the necessary shift in business mindsets towards a dynamic approach that emphasizes the continuous flow of experimentation and the ongoing refinement of knowledge through error correction. 

Resources: Hunterhastings.com

Shownotes:

0:00 | Intro: Choosing Right Mental Model for Success

02:43 | Mental model Number 1: Value is Created by the Customer

04:07 | Mental Model Number 2: Knowledge

05:13 | Mental Model Number 3: Empathy 

06:23 | Mental Model Number 4: Marketing

07:26 | Mental Model Number 5: Design

08:15 | Mental Model Number 6: Innovation

09:30 | Mental Model Number 7: Entrepreneurship

11:08 | Mental Model Number 8: Finance and Accounting

12:13 | Mental Model Number 9: Organization

13:08 | Mental Model Number 10: Business is a Flow

14:05 | Mental Model Number 11: Knowledge Accumulation

15:20 | Wrap-Up: Value Creation For Customers

Knowledge Capsule:

Mental Models for Success:

  • Mental models as fundamental assumptions about how the world works…
  • Correct mental models lead to valid conclusions, while incorrect ones result in mistakes.

Mental Model Number 1: Value Creation Paradigm

  • The customer is the creator of value.
  • Challenge the traditional view of businesses creating value; instead, recognize customers as value creators – since value is subjective and is generated in their minds.

Mental Model Number 2: Customer knowledge is the source of competitive advantage

  • A lasting competitive advantage for firms comes from accumulating and compounding customer knowledge and understanding..

Mental Model Number 3: Empathy as a business tool

  • The tool for building customer understanding is empathy.
  • Empathy is not “thinking as they think” – it is a simulation of the customer’s experience and how the customer evaluates it.
  •  The simulation enables businesses to understand and address customers’ unmet needs.

Mental Model Number 4: Marketing is behavior not communication

  • Marketing is not communication and persuasion.
  • Marketing is behavior, an act of love towards customers.

Mental Model Number 5: Reverse the flow of design

  • Design is working backwards not forwards – backward from the customer and their experiences and desires., 
  • By working backwards, design ensures that customer wants are integrated seamlessly into products and services.

Mental Model Number 6: Innovation is continuous

  • Innovation is not an event – it must be continuous, unceasing experimentation and improvement.
  • The greatest innovation lies in innovating new business models..

Mental Model Number 7: Entrepreneurship is the only route to value creation

  • The value creation process is enabled through entrepreneurship, not management.
  • Entrepreneurship translates customer’s genius in sensing that things could be better (How do they know?) into innovative products or services through continuous new action.

Mental Model Number 8: Finance and Accounting should look forwards as well as backwards

  • Traditional accounting can’t accommodate value creation – the intangibles that create customer value.
  • Make sure your accounting balances backward-looking tracking with forward-looking economic calculation.

Mental Model Number 9: Rethink organization

  • Don’t organize!
  • Encourage self-organization and autonomy for employees interfacing with customers.

Mental Model Number 10: Business as a Flow

  • Don’t plan!
  • Adopt a continuous flow approach in business and individual work.

Mental Model Number 11: Unceasing knowledge Accumulation

  • Constantly critique and improve knowledge through collaborative open-minded critique and error correction.

The Value Creators Podcast Episode #23. Moshik Temkin on Leadership By Warriors, Rebels, and Saints – Leadership Wisdom from the Pages of History

Moshik Temkin is a historian who offers an alternative perspective on leadership. He asks, do leaders make history or does history make leaders? Those two forces can’t be separated. While leaders contribute to shaping history, they are also molded by powerful historical forces. This nuanced perspective is evident in analyses of historical figures like FDR, Margaret Thatcher, Martin Luther King Jr., and Malcolm X, emphasizing the role of circumstances in leadership’s response to complex historical challenges, ultimately leading to significant changes in their respective nations. The conversation explores moral leadership in the civil rights movement, comparing the approaches of Martin Luther King Jr. and Malcolm X. Despite their distinct styles, both leaders shared a commitment to collective progress and justice, challenging the prevailing emphasis on individual success. Temkin addresses the ethical dilemmas leaders encounter during crises, prompting reflection on the justifiability of extreme measures for the sake of victory.

How does this discussion contribute to the question of leadership in business? Leadership is subjective. We look to those who we feel can guide us, whether in politics or business. There are principles that cross both fields.

Resources: https://www.moshiktemkin.com/warriors-rebels-saints

https://www.moshiktemkin.com/

Knowledge Capsule:

Leadership Perspectives:

  • Moshik Temkin explores the complex relationship between leaders and historical context, emphasizing that leaders both make history and are influenced by historical forces.
  • Rejecting a simplistic view of leadership, Temkin suggests that circumstances and historical momentum often shape the significance of individual leaders.

Individual Leaders in Historical Events:

  • Examining historical figures like FDR, Margaret Thatcher, Martin Luther King Jr., and Malcolm X, Temkin highlights how leaders interact with historical events and crises.
  • While acknowledging the impact of individuals, he emphasizes the role of historical circumstances in determining the success or failure of leadership.

Moral Leadership and Collective Progress:

  • Delving into the civil rights movement, Temkin discusses the contrasting leadership styles of Martin Luther King Jr. and Malcolm X.
  • Both leaders, despite their differences, shared a commitment to collective progress and justice, emphasizing the importance of leaders focusing on the well-being of the entire community rather than individual success.

Transformative Leadership:

  • Temkin underscores the concept of “transformational leadership” by citing examples such as FDR and Margaret Thatcher, leaders who brought significant changes to their respective nations during critical periods.
  • These leaders exhibited the ability to transform existing structures and navigate through complex historical challenges.

Leadership and Decision-Making in Crises:

  • Temkin explores the difficult decisions leaders face in times of crisis, referencing instances like the decision to drop atomic bombs on Japan during World War II.
  • The conversation touches on the ethical dilemmas leaders encounter, questioning the justifiability of extreme measures in the pursuit of victory in war.

Leadership’s Collective Impact:

  • Acknowledging that leaders play a role in shaping history, Temkin emphasizes the collective impact of historical forces and societal structures on the emergence and effectiveness of leadership.
  • The conversation prompts reflection on how understanding historical context is crucial for comprehending the complexities of leadership.

The Value Creators Podcast Episode #22 Cynthia Kay on Small Business, Big Success

We live in a video age, which opens up a vast array of entrepreneurial pathways. Video is a field for open-ended free creative expression, as well as for tightly managed business tools built for ROI. It’s the ideal field for creative entrepreneurial small business innovators. Cynthia Kay of CK and CO is both a business founder and CEO of a video production business, and a consultant and advisor to small businesses. She shared some of her insights and a preview of her 2024 book Small Business Big Success. 

Resources: 

CK’s business resources site: https://cynthiakaybiz.com/

Books you can buy now: https://cynthiakaybiz.com/books/

Cynthia Kay’s upcoming 2024 Book – Small Business, Big Success:
https://www.amazon.com/gp/aw/d/B0CFWFZQTS/ref=tmm_kin_swatch_0?ie=UTF8&qid=1700618573&sr=8-3

Knowledge Capsule:

Value Proposition:

  • Like any other entrepreneurial business, a video production business needs a compelling value proposition.
  • A value proposition is always about meeting customer needs – what need are they filling by paying for video production?
  • No matter how creative, video production must offer a customer value that exceeds perceived costs. It must make customers feel proud and fulfilled, and give them a sense of standing out from the crowd.
  • This often includes educating them on how to use a supplier’s services, e.g. the many different benefits and values available from one video shoot.

Operational Excellence:

  • High creativity does not in any way reduce the need for a video production business – or any small businesses –  to prioritise operational excellence.
  • Customer expectations of excellence are high, no matter the size of the supplier they choose.
  • CK advocates the use of top notch systems, procedures, and automation to enhance overall efficiency. Build the back room to be as strong and dependable as possible. Every business can deploy the best systems.
  • Owners must be in the operational trenches.

Return on Investment (ROI) Challenges:

  • Calculating  ROI in creative fields is a challenge – but must be done as part of the customer value proposition.
  • There’s such a thing as subjective calculation – e.g. recognizing the role of anecdotal evidence in demonstrating the value of creative services.
  • Focus ROI on the things that matter for customers.

Being the Best in Business:

  • Whatever business you are in, set out to be the best.
  • Making – and living up to – such a claim can be based on multifaceted performance.
  • Consider factors such as understanding client needs, building strong relationships, and optimising the utilisation of budgetary resources.
  • One of CK’s propositions is to be the best at getting the most of a client’s budget, whatever size it is. That’s an excellent “best” claim.

Small Business Success Strategies:

  • Pick your customers carefully – pick those who will love you and those you can grow with.
  • Commit to building relationships over time.
  • Build great teams that are right for the client, and turn them loose.

Supporting Small Businesses:

  • Cynthia Kay not only runs a small business,she plays a big role in helping others and in supporting small businesses in general.
  • She’s actively involved in associations and support groups, and urges other small businesses to do the same.
  • She gives her time to the facilitation of roundtable discussions, and offering advice on common challenges faced by small businesses, including scaling and team development. These kinds of discussions can yield enormous value for participants just by sharing experiences.
  • It’s good for small businesses to support other small businesses and build the business backbone of the neighbourhood, the town, the city, the state and the nation.

The Value Creators Podcast Episode #21. Forging New Relationships Between Entrepreneurs and Capital with LaSean Smith

LaSean Smith outlines a business investment partnership built on permanent capital, emphasizing long-term commitment and trust-building between an investor/source of capital and a business. The discussion covers disciplined methodologies, leadership transitions, and a unique compensation approach using Phantom Stock Shares. LaSean predicts a rise in smaller, values-based companies, and underscores the significance of audience and automation in acquiring and revitalizing brands. 

There can be a shift towards stable, smaller businesses connected to communities, challenging the trend of dominance by larger and larger corporations.


Resources:
CAGR Investments: https://cagr.com/

Knowledge Capsule:

Permanent Capital Strategy:

  • There’s an investment strategy and a business strategy based permanent capital. It’s not widely used but has broad potential. It emphasizes the importance of long-term commitment by both the investor and the business. Short-term operational demands are entirely left to the business CEO.
  • LaSean Smith explains the advantages of having an investment structure that accommodates a longed shared journey, building a high degree of trust and confidence.

Operational Approach:

  • LaSean highlights a disciplined methodology to tighten business processes and leverage content-based marketing to assist companies. 
  • Small and mid-sized businesses often miss the great efficiencies available by automating processes. And they waste resources on direct sales and inappropriate marketing tactics.

Leadership Transition:

  • Permanent capital is a long-term investment; it works when there is a corresponding long-term commitment of current operators.
  • Some CEOs may want to avoid continuing in the business, especially in cases where technical founders find themselves dealing with aspects like sales and marketing, which they may not enjoy. Relieving them of that burden may extend their tenure.

Phantom Stock Shares:

  • Permanent capital embraces a unique approach to leadership compensation using Phantom Stock Shares – aligning incentives by granting bonus or dividend shares that compound in value until the leader leaves the company. This helps in providing a simple ownership structure and shared incentives without diluting ownership equity for the investor.

Cash Flow and Value Creation:

  • The conversation delves into the concept of cash flow and value creation, discussing how businesses can fade over time if not innovating. Lasean emphasizes the importance of adding technology and content marketing layers to ensure longevity.

Audience and Automation:

  • The concept of audience and automation is highlighted as a critical factor in the success of businesses, especially those acquiring old brands. Engaging content marketing towards a target audience allows for driving brands through existing supply chains, reducing customer acquisition costs.