3 States of Your Business: In Flow, Stuck, and Waiting.

In this episode Corey asks Chris, “The other leaders that you’ve observed from being an investor or executive or being you know board member CEO, do you want to surround the issue and debate for the sake of maximizing all the different off-ramps that you could take or is it genuinely from a science level scientific level that you have your flag?”

This leads to Chris talking about the three stages of your business or career, he says, “I’d like to think of myself as the guy who insists that we go science first. And if you’re going to go science first. That means you have to be ready to do experiments and experiments are very well understood. We know how to do experiments been doing a lot of science for a long time. That means you’ve got to be math first because doing experiments that don’t have a shot mathematically is ridiculous and you shouldn’t do that.

So you got to keep the number of experiments down to a minimum and cram them in a small amount of time for a small amount of cost. I’m not a fan of internal debate for a long period of time. I think you debate just long enough to determine one of three states. And I think we should all consider this as a way to run our lives. Not that I’m here to tell people how to run their lives, but what the heck. So we’re in one of three states. I think this is sort of mathematical truth or truth of life state number one is we’re in flow. And when we’re in flow, we should stay in flow.

That’s, that’s just a great policy when it’s working. To start to invent new thoughts or new strategies or new ways of holding the racquet in tennis, you need to adjust, you go change your shoes so you can play better. You’re in flow, and you stay in flow.

What would be the point of developing great skills and I’m not continuing to use them.
When the road keeps paving itself in front of you, all you have to do is stay on the path.

Don’t fall, don’t talk about it. Don’t think about it, just go do it and keep your eyes open, but go ahead and crash into something that’s okay. That takes us to the second state we’re in often. That is a state that I call stuck. I love the word stuck because it actually colloquially means what the state means which is, ‘I’m stuck.’ I actually can’t move forward, but it’s not normally because I’ve lost my motive power. It’s not like my legs fell off. It’s because I don’t know which way to go. And when we’re stuck. We can do something and it’s really clean and organizations have a hard time doing and individuals have a hard time doing it but organizations have a harder time because we have to admit, we’re stuck and stuck is synonymous with. We don’t know. We don’t know what to do. And if there’s anything that I would advise young entrepreneurs. to get comfortable with, it’s the fact that often you don’t know what to do and a thing to do. That’s incredibly effective when we’re stuck is to say we’re stuck.”

Speaker 3 (00:32):

Imagine a dog sled, how many dogs would have to pull sideways to ruin a dog sled. It’s only one. You got to lead dog and you got a second dog. If the second dog pull sideways, you are toast. You don’t have a chance because there’s a lot of leverage up there from a parasite anywhere near the top is tough, so keep those out. And then take in folks who have a proven track record of talking sense into other people. You don’t want to know their answers. You want to get access to their impression and their negative wisdom and positive wisdom, but you want the negative wisdom first. You certainly want them to say something too. It’s like, it seems to me, somebody who says “it seems to me” is probably a pretty good bet. Somebody who says, “I think you should” probably a pretty bad bet.

It seems to me that the way that you’re anticipating deploying capital, you’re going to run out well before you achieve dominance. So what do you think is the right thing to do at that point? And you’re going to answer them. “Well, I’ll go raise more money”. Okay, so what’s that going to look like? What’s that going to feel like? So saying it takes twice as long to get there as you usually would, as you plant. Right? So now it’s a two X time and now you’re raising money. So some folks are tired and it’s not. What’s that like? “Oh man, that is not so great”. So you kind of have to work your way into, well, what might we do differently today? And it’s almost always in the model and there’s only kind of three things to do, right? One is to reduce my burn, my overhead.

Another is to accelerate my acquisition of new customers that are going to bring value over time. And the third is make my product fit the situation better so that it provides more value or is easier to buy, or one of those various things, like three dimensions to the whole problem. The fourth one, which is just add money, is almost never a right answer, almost never.

Speaker 4 (02:26):

But yet you see that in so many companies that are struggling or stagnant stalled, they may have a negative burn rate and their answer isn’t necessarily to focus on product market fit, or certainly they’ve nibbled, maybe some costs here and there, but it’s usually focused on, we need to raise more money. Otherwise, we got to pop smoke and get a chapter to lift us out of here.

Speaker 3 (02:48):

Right? Well, folks, I think there’s a kind of person, kind of entrepreneur, but they’re really working for VC Inc.

And that’s what the audit do. Okay, figure out how to raise some money. Some sort of a bridge somewhere and somewhere might be a salvage and I might be a lucky hit, but at least then they go on and get another job with another VC company. And that’s perfectly fine. It’s the career choice. There’s nothing wrong with it. It’s like working for a big company is just different. It’s working for a series of small companies and occasionally you get a win and it’s lots of fun. You get to have small teams and all that smallness is great. It’s not quite the same as being an entrepreneur who is trying to build something and it’s strapped to the bumper and driving in traffic, that’s a different thing entirely. And in that case, you’ve got to look at those three dimensions. And if it does turn out, you need to raise money, then raise money.

It’s much better to raise money, to take advantage of an unexpected opportunity than to cover up an unexpected hole in your finances. A case like this right now, we have this horrible thing going on in the world at this month. We’re recording this in the time of COVID and lots of things are different. So is it a great opportunity or not for any given company? So actually the first question you should ask about any change is not what’s this going to do to me, but does this present a great opportunity and an unprecedented opportunity for us? Because if you don’t ask that first, you’ll never get around to it because everything offers lots of problems. So once you start talking about the problems, you just talk about the problems forever, right? The answer to that question tells you, “Well, what should my stance be? What should we be looking for?”.

If it’s possibly a great opportunity situation, how can we explore that inexpensively and quickly? How can we find out if it’s a great opportunity? So for our company, for instance, it connects and sell. This whole COVID-19 thing is probably a great opportunity. Why? Well, because hundreds of thousands of salespeople got sent home and their managers can’t tell what they’re doing. And people have crazy ideas, like security cameras to spy on people and click trackers and all this nonsense, right? Which everybody thinks for 10 seconds, notice is never going to fly. You can’t compete for talent and say, “And by the way, the number one thing we do is spy on you”. That’s not really going to work, right? Because some competitor will say, “No, we’ll trust you”. It’s like, I’m working for that guy. You missed your spike.

Right? But it is important to see what folks are doing or you can’t help them. So when there’s change though, big change and business is all about adaptation and change. What we need to do first is ask, “Is this a big opportunity?” and if so, “How do we characterize it quickly?” and then ask the question, “Does it advise us to get some capital together in order to take advantage of that opportunity?”. That’s a great reason to raise a little bit of money. Maybe even a lot. You never know, maybe something. And so the changes I tend to create my problems by addressing are the ones that are, I call them, kind of model level at some people might call them paradigmatic. It’s such a loop that even seems like we got the model wrong here. Nobody ever wants to hear that kind of crap. Right?

I mean, really, who wants to even think about that. But every once in a while you do have a model wrong. They’re a hundred percent fatal when you get the model wrong, which is why I’m kind of risk averse. So oddly enough, you know what I used to do for fun, right? I used to climb mountains and stuff like that. And I still do certain things that people would think are not zero risk. Risk averse, people can do those things. That’s how you get to the age of 65 and you’re still alive if you do stuff like that, you better be fundamentally risk averse, which means oddly, you need to be open-minded to the possibility that what you’re doing is wrong, because that’s where the big risks hide and continuing down a path that goes off Niagara falls.

And you just thought it was a rock concert that you were going to, right? Well, it was the rocks were at the bottom of the falls and you will be in concert with them rather correctly. So anyway, the other is I can be a little bit argumentative. I don’t think in a negative way. I just don’t roll over very easily in the face of what I think is an illogical argument.

Speaker 4 (07:04):

Do you want to debate? As a leadership style from, again, not just you, but certainly we’ll pick on you, but all the other leaders that you’ve observed from being an investor or executive or being board member CEO, do you want to surround the issue and debate for the sake of maximizing all the different off-ramps that you could take? Or is it genuinely from a science level scientific level that you have your flag, you have your banner and you want to teach and the stakes are highest for you, so to speak?

Speaker 3 (07:35):

Well, I’d like to think of myself as the guy who insist, we go science first. And if you’re going to go science first, that means you have to be ready to do experiments and experiments are very well understood. And we know how to do experiments, been doing a lot of science for a long time. And that means you’ve got to be math first because doing experiments that don’t have a shot, mathematically is ridiculous. It shouldn’t do that. So you’ve got to keep the number of experiments down to a minimum and cram them in a small amount of time, small amount of cost. But to do that, [inaudible 00:08:06] stuff away with logic. And I’m not a fan of internal debate for a long period of time. I think you’d debate just long enough to determine one of three States and I think we should all consider this as a way to run our own lives.

Speaker 3 (09:21):

Not that I’m here to tell people how to run their lives, but what the heck? Right? So we’re in one of three States, I think this is sort of mathematical truth or truth of life. State number one is, we’re in flow. And when we’re in flow, we should stay in flow. That’s just a great policy when it’s working. If you’re on the tennis court and you’re lacing those down the line backhands, and those cross-court forehands that are winners over and over and over, it’s a bad time to start to invent new thoughts or new strategies or new ways of holding the rack or go change your shoes. You’re in flow, you stay in flow. Again, I’ll go to our product. One of the great things I love about ConnectAndSell is, it lets you get into flow with regard to conversations and stay there for hours because you’re either having one or you’re hyped up about to have one that’s not very far off.

So staying in flow is the key to performance, right? What would be the point of developing great skills and then not continuing to use them when the road keeps paving itself in front of you. It just, “Drive, baby”. Right?

Speaker 4 (10:27):

All you have to do is not fall out.

Speaker 3 (10:29):

Don’t fall. Yeah. And just don’t talk about it, don’t think about it. Just go do it and keep your eyes open, but go ahead and crash into something. That’s okay. The second state we’re in often is a state that I call stuck. I love the word stuck because it actually colloquially means what the state means, which is “I’m stuck. I actually can’t move forward”, but it’s not normally because I’ve lost my motive power. It’s not like my legs fell off. It’s because I don’t know which way to go.

And when we’re stuck, we can do something and it is real clean and organizations have a hard time doing, and individuals have a hard time doing it, but organizations have a harder time because we have to admit we’re stuck and stuck as synonymous with we don’t know what to do. And if there’s anything that I would advise young entrepreneurs to get comfortable with, it’s the fact that often you don’t know what to do and a thing to do that’s incredibly effective when we’re stuck is to say, we’re stuck. Just verbalize it, “We’re stuck”. It means we don’t know what to do. And if somebody says, “no, no, I know what to do”. They’re probably not right. They’re probably guessing. And there is a role for guessing and we’ll get to that in a moment. But the first thing we do when we’re stuck, as we stop pretending we’re in flow. Stop pretending we’re in flow.

Sure. We still got to eat. We got to sleep and do a bunch of these necessary things. We still have to sell stuff. We’re going to keep the wheels turning on the business, but let’s recognize we’re stuck. And this COVID thing actually for a bunch of companies suddenly made them stuck. And instead of saying, “we don’t know what to do”, they said, “Well, let’s start doing stuff”. But that leads to the next part of stuck, which is you have to ask yourself then, if it’s as bad as it looks, whatever that is, that means my overhead is burning my capital and it’s burning it at a higher rate, so I might run out of money. That’s the worst one. Look at the date when that might happen and ask yourself the question, “Is that the amount of time we have to get unstuck. And if it is the amount of time we have to get unstuck and it’s long, then let’s go learn.

When you don’t know, learning is the way to know, how do you learn through science? We do experiments. So the next natural question is what experiment is going to yield the most information about our stuck situation in which direction we might go the fastest at the lowest cost. And that’s a very concrete question to debate. And when you get down to the debate being difficult, then you no longer have to debate anymore. Cause as soon as it’s difficult, whatever it is, it’s two options. Well, as soon as it’s hard to decide between them, it’s easy to decide between them. There’s nothing to it. Just pick one. And that’s the role of the CEO. That’s the role of the boss. The role of the boss is to guess when you don’t know, and there’s more value in making a decision now than there is and making a marginally better decision later.

And that could be even a big decision where you have no information, but you have no tie, so the CEO guesses. That’s why I call the CEO role, “The Guesser”. And when I hire people, I say, one thing you got to know is in our organization, I’m the Guesser. And this is really bad because it’s also corrupt. It’s completely corrupt because the Guesser guesses when we’re out of time and we don’t have enough information, must make a decision. And the Guesser who are also declares that we’re out of time, we don’t have enough information, must make a decision. So it’s a totally corrupt role. And I’m sorry, but it’s like a mathematical singularity. We can’t get away from it. There’s no escape. As Edward Abbey once said, “We’ll find out who a philosopher is compared to a practical person. When you throw a brick at the head of a true philosopher, he doesn’t duck”. Well, the rest of us duck, right?

And so you’re depending on the head, no one wanted to dock. And that’s why you put a person in the CEO position that you trust to guess. That’s the one thing, they’re not going to steal that is do things for themselves and they’re not going to guess. I mean, they are going to guess when the time is right, but then there’s the third stage that’s really important. And this is the one that people just blow a hundred percent of the time. You never see anybody put this right, ever. And it’s the state many, many companies are in right now. And it’s kind of an ironic state. It’s a state of waiting. We should wait for something. Now I’m not saying the COVID thing means we should all be just sitting around, waiting in the foxhole. All contrary, we’re burning, right?

Most companies can’t afford to wait, but certain big companies can wait. They got the capital to wait. And if you don’t know what to do or you know what to do, but you have to wait for a resource. It’s like trying to go through a door before you’ve opened the door is a dumb plan. If somebody else is going to open the door and that’s a great idea is to have them open the door. You have to wait. Now there’s a wonderful thing about waiting. Unless you’re single threaded on everything in your world, you can take the wait time and you can use it to go learn about some other things you’re stuck on. So waiting is truly waiting and it’s the hardest of them all because it’s an emotional impossibility for a group to wait, cause somebody is antsy and wants to go and that person’s going to agitate for it. So go find something else for you all to go and stuck on and research.

Speaker 4 (15:35):

It’s not progress even. It’s not the implied mode of progress, either moving forward or playing your arms or activity. Activity, sometimes in a business, just connotes you’re doing something. Waiting is, I feel like I’m being overpaid as to wait, but I’m reminded of Tom Watson, the founder of IBM, I think at 1947. When he started, I think I seem to read somewhere that he had a simple phrase written on all of his executive board room, whiteboards or green boards at the time chalkboards at the time. It was one word and it just said, “Think”.

Just to the point where sometimes just thinking or waiting or processing is working and you don’t have to have this implied or perceived activity to be justified by the powers that are earned in your key. Sometimes it’s simply waiting for the door to open. I think that’s beautiful, Chris. So in other words, and also it seems like from a starter perspective, state number two of being stuck where you talk about, “I don’t know which way to go”, “We should probably test”, “We’re definitely not in flow”, “I need to evaluate how much capital I have”, that’s the state of most startup businesses as it’s a force needs to become in motion versus a force already in motion tends to remain in motion,

Speaker 3 (16:55):

All startups start stuck.

Speaker 5 (16:58):

All startups start stuck. I love that.

Speaker 3 (17:00):

All startups start stuck. That’s the starting state of all startups. The flow state you want to get into is the flow within the first experiment. And when the first experiment yields enough information, stop, then you go back into a state of being stuck and you design the second experiment. Maybe you already have it designed, but I hope not because if you don’t take the information for the first experiment, use it to design the second, you are sort of throwing away the primary resource you’re trying to gather, which is information about what the market, as a list might want and pay for in order to solve a problem that they have today and we’ll continue to have in some future. If we don’t recognize that startups start stuck, it’s a beautiful place to start. It’s why actually most startups fail. They start stuck and they unstuck. And in between, they flail around thinking that activity is going to get them unstuck.

But what gets you unstuck is experiments, because that’s the only way to find out about the world, what’s true. So the tendency is to have internal debate. I’ve had a lot of founders tell me, “I spent six weeks working on this business plan and I’ve thought of everything”. And I always think back to a company that we did call finished line floors, where the idea came to several of us on a Friday by looking at a floor that was outside of a Starbucks in Des Moines, Iowa. And somebody asking a question of somebody else, “How long do you think this beautiful, shiny floor has been down here?”. I said, “What does that even mean?”. I was the somebody else. And the answer to that question back and forth revealed a possibility of a multi-billion dollar business. So I went home and wrote a business plan.

It was pretty detailed. Big spreadsheets going on and on and on because what I wanted to know was if we do it, is it worth it? Cause I don’t know anything about floors. And by Sunday evening I convinced myself that it was worth presenting to somebody with some money to who might be interested to say, “Yeah, I think this, if we can pull it off, I think it’s hard, but I think it’d be worth it. What do you think?”. And he wrote me a check at dinner for about 300,000 bucks and we started the company on the spot and started operating the next day. So that was between a Friday and a Monday with the drive back and forth to Boulder, Colorado and Des Moines, each way. I had a very fast car. So it was all right. But that’s an appropriate amount of time to build a business plan and appropriate number of people, which is one, after all, it’s only an exercise to answer this question, “If this works out, would it have been worth doing?”.

At that point we could say, “Okay, now we’re stuck, right? Isn’t that great? We’re stuck”. Here’s what we don’t know. We don’t know actually how to put one of these floors down. Okay, well let’s do some experiments. So, who’s the manufacturer of the product? What do they recommend? Can we get some experts who put other kinds of floor finish down? It was a water-based Euro thing. What environmental controls do we do they think we need, can we set that up? When we set up in two days and experimental test bed of a floor with some control over airflow and stuff like that. When an expert roll the floor in our cycle time for, is it working was one day, cause it took six hours to dry. And then we were getting information, right? And we got that information in a series of experiments. And at the end of a week and a half, it’s like, all right, this can be done under these circumstances. “Just be open about it, man. You’re stuck. Get good at being stuck.

Speaker 4 (20:28):

Ray reminded Chris of Ray Dalio’s book principles here. And he has this image of the proper evolution of a business, which sounds exactly what you’re talking about here, right? Is in flow and stuck and then keep experimenting. And one thing Ray says here is evolution is the single greatest force of the universe. It is the only thing that is permanent and drives everything. And it consists of adaptation as inventions that provide spurts of benefits that decline in value. So these benefits or values seem to have a half-life that what got you in flow state doesn’t necessarily maintain that flow state permanently.

Speaker 3 (21:10):

High flow can never be permanent. It’s wise to treat it as permanent while you’re in it. And it’s also wise to keep financial buffers and emotional buffers against its inevitable failure. It’s just like the business cycle. The business cycle is built into the very nature of how we invest in businesses. At the beginning of a business cycle, it seems like there are some opportunities. So investors come in and they do some investing and the investment has returned. So there are some opportunities. So there’s more investment. That’s not the issue. The issue is how much risk? Well, if it keeps working out, we must be able to buy more risk. So keep buying risk, combined risk. But the information about how much risk we have doesn’t come into the future. So when it does come in the form of failures, then we go, “Oh my God, we must have gotten past the edge of the risk” and all investments stops and the economy freezes up and then look, it’s rethought by like capital liquidity coming usually from government.

And we go through it, right? We got to the same thing. That’s the same cycles. I love Ray Dalio’s picture there. And we go through them in life. Look at how we work as animals. We’re not particularly active in the night as a species, right? Some people are, I mean, not so much now because they can’t go to bars or maybe they are gone to bars. I hear in some places they do that again. But there’s a period during which we’re not stuck. We don’t need to do experiments and we’re not in flow. We’re actually waiting. We’re waiting for our body to get back into a state where we can execute and we have to wait. We call it sleep, kind of close. Right? And it looks just like that, right? Because the value of the activity decays over time. And by the way, those decays often look like cliffs because this is another fact of the world.

There are very, very, very, very many ways for a system to fail a system that consists of 10 interacting parts has more ways to fail than there are atoms in the universe. There are very, very few ways for a system to work. Everything’s got to work. So even small amounts of friction or little misalignments, or you take a big machine, that’s got a bunch of gears and you take one gear out, you shave the teeth off of it, or you freeze it up. All of us who’ve ever worked as mechanics. And as you know, I used to do that at one point in my life on air cooled engines. You know that the whole thing has to work. And in most random States, it doesn’t. Right? It just doesn’t. If you throw out a cup of sugar into a gas tank, [inaudible 00:23:42].

Adding carbohydrates to other carbohydrates looks good to me. I get an engine that doesn’t work anymore. And there’s just one of the very little water. Water’s good. Gasoline’s water, waters. I mean, water is a fluid. Let’s put them together, maybe there’ll be great. Well, it doesn’t work anymore. Right? Almost everything doesn’t work. And everything of value as a system, every execution unit of value is the system. Companies are systems. So companies have a marvelously large number of ways to not work. And they have almost one way to work. And when they stop working, sometimes you need to just oil them. Cool them down on oil, like sleep. You cool it down, you oil it, you put a little fuel in it, right? Make sure it can go the next little bit. And that’s just fine. Sometimes you got to replace a part and sometimes you realize that the system is no longer designed for the terrain it finds itself in.

And you’ve got to put more wheels on or paddles instead of wheels or tracks instead of paddles or rotors, so you can get above the terrain or something in the design cause it doesn’t work anymore because the circumstances for which it was designed are no longer those that obtain. And without having these paradigms to think about, these comparisons. I think the stuff’s really, really hard. I mean, if somebody says, I.

Sometimes people complain about me a lot is what’s with all the damned analogies, right? Well,

Speaker 4 (25:06):

You’ve had so many jobs and from the age of a lemon, I think you can draw from most people think it’s an analogy. It’s actually a basis in reality. Let me tell you, it looks like an air cooled engine or it’s like a can of bug spray. You ever use a can of bug spray for a black widow? There’s no light. There’s no metaphor. It really is. Right? It’s a simile.

Speaker 3 (25:27):

It’s like being held up at gunpoint, at a theater that you work at North Tucson.

We’ll leave that one alone.

Speaker 4 (25:38):

I haven’t heard that one before.

Speaker 3 (25:40):

We’ll [inaudible 00:25:41] that out sometime, but there’s some, I found out that insurance investigators are superior to the police when it comes to solving certain classes of crimes.

Speaker 4 (25:48):

Well, they have a higher motivation. They have a higher value to motivation to do as such, so.

Speaker 3 (25:53):

And greater freedom of action.

Speaker 4 (25:55):

And greater freedom action. True. True.

Well, I like this. I like all market nondominant companies are equally uninteresting and all startups start equally stuck. And I think that will go into the lore as well.

Speaker 3 (26:08):

Well, thanks Chris. I think this episode, I knew we were going to draw plenty of nuggets from hearkening to your past to help other people in their future, particularly when it comes to getting their businesses off the ground. So again, we’ll just keep throwing up those questions and keep milking that wisdom. This is great stuff.

Speaker 4 (26:27):

So until next time on the market dominance guys, this is Chris Beall and

Speaker 3 (26:32):

Corey Frank.