Governance and Humility

I recently listened to Sen. Ben Sasse read his own challenging book, Them.   In a discussion of the origins of American democracy, he mentions the following quote from James Madison:

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.

The core idea that the human fallibilities that make governance necessary can exist in the governing as well as the governed applies to a lot of other settings too.

In corporate settings, corporate boards provide oversight to executives who lead teams.  Great teams require little directive governance.  Great leaders provide vision and perspective, clear away obstacles and make sure that the right conversations happen at the right times with the right people involved.  Key conversations involve them personally and their own ideas and behaviors are improved as a result.  Sometimes directive leadership is needed or decisions have to be made that can't practically involve the team, but when that happens, great leaders listen carefully and actively solicit opinions of others.  And when they do stupid things, healthy organizations gently but firmly move them back onto a better path.

The basic idea that we are better off when we allow and encourage others to help us overcome our individual fallibilities is common to all of these settings and is at the core of Madison's vision, which Sasse is rightly challenging us to re-embrace.

To do that, we have to restore the humility and consideration for others that in our better moments has characterized American culture and political dialogue.  Sasse illustrates this with another powerful quote, this one from Judge Learned Hand, given in a speech called "The Spirit of Liberty" in 1944:

What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it; no constitution, no law, no court can even do much to help it...The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the minds of other men and women; the spirit of liberty is the spirit which weighs their interests alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of liberty is the spirit of Him who, near two thousand years ago, taught mankind that lesson it has never learned, but has never quite forgotten; that there may be a kingdom where the least shall be heard and considered side by side with the greatest.

Hand and Sasse both ground their commitment to humility and service in their religious views, but the idea of liberty, which both see as core to the idea of America, includes a deep commitment to religious freedom and tolerance for religious views different from their own.

Both also understand that governance cannot bring about the change in perspective needed to right sick organizations or societies.  That change has to happen in the hearts and minds of people.  Political leaders like Sasse can make a difference by setting good examples and I applaud him for writing the book and regularly speaking on what we need to do as a nation to heal; but to "make America great again" we have to all individually become humble again and start really listening to one another.

And that greatness will not be the greatness of a nation with borders and parochial interests, but the greatness of an idea - the idea that all human beings are created equal with inalienable rights.  That idea extends beyond any national borders and whatever greatness America ever had lies in our commitment to that idea.

A little dusting vs. getting buried - why variance matters in ranking risks

Some simple risk management frameworks recommend stack ranking risks based on expected loss should they materialize.  The simple formula $L(r) = P(r) E(C(r))$ is sometimes used, where $P(r)$ is the probability that a risk event of type $r$ materializes and $E(C(r))$ is an estimate of the cost associated with such an event.  So for example, if the cost of a data breach at a company is estimated to be $\$1m$ and the estimated probability of this happening is $.01$, then $L$ is in this case estimated to be $\$10k$.  Given estimates of $P(r)$ and $E(C(r))$ for the different risks faced by a company or individual, a natural way to rank them is by $L$ values.  The problem with this approach is that it fails to take into account the variance in $C$ and it also puts too much emphasis on the point estimate of $L$.

Consider the following example.  Suppose that a company has one risk $r$ with $P(r) = 0.01$ and $E(C(r)) = \$1m$ and another risk $s$ with $P(s) = 0.01$ and $E(C(s))= \$800k$.  Suppose further that a realized loss of more than $\$1.2m$ is catastrophic for the company, meaning losses of this amount or greater cannot be absorbed.  If $C$ has no variance for both $r$ and $s$, neither is a catastrophic threat and it makes sense to prioritize mitigating $r$ over $s$.

The problem is that in real world situations, $C$ always has variance and when what you really care about is guarding against large losses, that variance changes the equation.  In the example above, suppose that $C(r)$ is normally distributed with mean $1m$ and standard deviation $100k$ but $C(s)$ has a uniform distribution with minimum $0$ and maximum $1.6m$.  This means that the values of $C(r)$ should follow a bell-shaped curve clustering around the mean $E(C(r)) = 1m$ but the values of $C(s)$ are randomly spread across the interval $[0,1.6m]$ with no range of values any more likely than any other.

The probability that $r$ results in a catastrophic loss under these assumptions is $P(r) P(C(r) > 1.2m) = .01 \times P(N(1, 0.1) > 1.2)$ where $N(\cdot,\cdot)$ is the normal distribution.  Now $P(N(1, 0.1) > 1.2)$ is approximately $0.023$, so that means the probability that $r$ unmitigated will result in a catastrophic loss is approximately $0.01 \times 0.023 = 0.00023$.

For $s$, $P(C(s) > 1.2) = (1.6 - 1.2) / 1.6 = 0.25$, so the probability that $s$ results in a catastrophic loss is $0.01 \times 0.25 = 0.0025$, which is more than ten times higher. So if what the company wants to do is to minimize the probability of catastrophic loss, $s$ is actually a much more important risk to mitigate.  

The practical problem is that in general the distributions of the cost functions are unknown as are their expected values.  But just asking the question of how bad a loss can be and how likely a tail event is can lead to better risk prioritization decisions.  The example above is mathematically extreme.  The uniform distribution is just one big tail.  But it does illustrate what happens when there is a lot of probability mass in the bad part of the cost distribution.

I recently ran across this tragic, but beautiful post that illustrates the main point here very well.  The author puts it simply,

"There are three distinct sides of risk 

The odds you will get hit

The average consequences of getting hit

The tail-end consequences of getting hit" 

The odds of getting hit are $P(r)$, the average consequences are $E(C(r))$ and the tail-end consequences of getting hit are the upper tail of the distribution of $C(r)$.

Five things I look for in Product Managers

SaaS companies live or die by the quality of their product managers.  Great ones really power the future of their companies.  Not-so-great ones waste precious time and investment resources.

It’s very hard to tell from a resume, however, who is going to be a great PM. Great product managers can work for not-so-great companies and vice versa. And what people with this job title actually do varies wildly from company to company.

 

I have been involved in hiring product managers for the past 10+ years. I have hired some great ones and I have made some mistakes. Over the years, I have learned that there five key things that really make a difference:

 

1. Ability to think like someone else

 

Product managers are trained to identify user types or personas. These include information about users’ day-to-day experience, mindset and needs. It’s important to be able to do this, but to be a really great PM, you have to be able to take the next step and actually think like customers, and internal stakeholders as well.

 

I want to see that they can actually put themselves in the position of a user, of a salesperson, a support agent, or other product stakeholder in their company. That they can get into their heads, almost as if they were actors in a play.

 

The best product managers have a tremendous amount of empathy for other people. They can forget about what they think they know about how to use, sell, or support their product and put themselves in the mind of someone who lacks all of that context and has a very different set of day-to-day concerns than they do.

 

During an interview, I test for this by asking the candidate about how users and other stakeholders thought about the products and product development ideas that they worked on. I ask them what surprised them and what they learned from it. It’s not hard to tell who has this ability because those who do exercise it regularly and those who don’t find it hard to come up with examples.

 

2. Determination

 

The most effective product managers are creative and innovative thinkers with positive mindsets. They do not give up. They see the positive outcome as expected and they are surprised by failure. And they see every partial failure as success in need of small refinements - even when there are gaping holes to fill.

 

A lot of today’s most popular products should have died a dozen deaths, but somehow they made it. They made it because their PMs would not give up.

 

Often in an interview, I will give the candidate an example problem of a now-famous payments product that had so many obstacles to overcome in its original conception that people laughed at the idea.

 

I ask the candidate to imagine what it might have been like in the early days of that product, and what problems may have arisen and how they would have tackled them. Their answers show me both their analytical ability and their ability to suspend disbelief and persevere.

 

3. Cultivator of great ideas

 

In most of my product manager interviews, I ask the candidate to tell me some of the top ideas in which they’ve been involved.

 

What I’m looking for here isn’t a detailed explanation of what the person has come up with themselves. Instead, I want to hear about the ideas and products that they helped develop. The best product managers have an uncanny ability to be part of conversations that lead to great ideas. To use a sports analogy, I am less interested in how many points they score individually. Instead, I’m more interested in how much their team scores when they are in the game.

 

To test for this, I ask them to describe the process for developing the top ideas that they mention. I probe to learn about how others were involved and how they helped make sure diverse perspectives and expertise were brought in. If all I hear is “I” and simple logic (talking about done ideas), I know I do not have a great PM in front of me.  Similarly, if all I hear is “we” and I don’t pick up any original contribution from the person I am talking to, I know I am not dealing with a potential game changer.

 

4. Organizing force

 

Great product managers are organizing forces. Note that this is not the same as "being organized." It means that they help define problems in a way that they can be solved with simple solutions and they help develop designs, requirements, and plans so that the teams they are part of can be organized. How product development work is organized and how team members understand the structure of the work is critical. Great PMs can make a night and day difference to the performance of their teams just due to the fact that they help them structure their work better.

 

To test this in an interview, I ask candidates how they would handle a complex product development challenge from my past experience. I ask them to come up with options for how to structure and sequence work, what information they would need to choose among them, and how different stakeholders would understand the approaches.

 

5. Inspiring

 

One of the biggest challenges faced by product managers is how to inspire people who aren’t their direct reports to do things in support of product development efforts. Product managers work across organizations, from engineering to marketing, support, finance, and beyond. It is imperative that they are able to connect and motivate people cross-functionally.

 

In an interview, I will ask them to share past challenges they had with people who had different priorities, and how they were able to motivate the team to get things done. I look for the signs of earned authority - the ability to build followership and commitment to shared goals.

Finding all of these qualities in one person is rare, but I have found that if I probe into each of them I can get a nice well-rounded picture of where a product manager is in their development.  And those who are strong in each of them are a joy to work with and great assets to their teams.

Put on your own mask first

Difficult times are the ultimate test of leadership. These are the times when lifelong bonds can be established or connections can be lost. Deep human connections are all ultimately based on faith. Faith that through them strength, security and growth will come. Leaders need to ground that faith in confidence, consistency and an unfailing positive attitude.  

At this moment, many leaders have been put in the impossible position of having to show confidence when the foundations of their businesses, their markets and the global economy are being challenged. It doesn’t work to try to hide things or to spin things or to simply put on a happy face. What people need from their leaders today is authentic confidence. That is what leaders have to reach deep down to find right now. The great ones always find it and their connections are strengthened as a result.