Open Mind: Metrics… or Peril?

I’m Alexander
Heffner, your host on The Open Mind. We have a rare
opportunity today to explore principles of
entrepreneurship with one of the nation’s leading
and most innovative business leaders. Former Chairman of
Tribeca Flashpoint Media Arts Academy, Howard
Tullman is the CEO of Chicago based 1871, where
260 digital start ups are building their
businesses every day. He’s also General Managing
Partner of Chicago High-Tech Investors, an
early stage venture fund and an adjunct Professor
at the Kellogg Graduate School of Management. As a tech upheaval shook
the traditional media market and wider
business arena, Howard Tullman was
inventing dozens of Internet based companies,
creating thousands of new jobs and breeding
a culture of honest entrepreneurship. In his regular Inc
magazine column Tullman considers the high stakes
and high demands of the contemporary
start up venture. Intelligent device
driven interactions, Tullman writes, “are key
to greater productivity in a future that he says
is exciting and still challenging and
constantly changing. Tullman describes
the cornerstones of his philosophy in
three P’s … purpose, perspective,
and proportion. And while he’s bullish
on the value of a metric driven economy
to spur growth, Tullman understands
the important of real knowledge. “Not knowing isn’t a
bad excuse any more, it’s a death sentence
for your business, he writes. So, I want to begin by
asking this business titan when leaders in the
community are drowning in so-called strategy, how
do they mine the maze of today’s
information culture? And thank you
so much, Howard, for being here today. TULLMAN: I’m
happy to be here. HEFFNER: So, in the
plethora of information in which business
leaders are inundated, how do they find and
winnow through all of this data to make the
most important decisions. TULLMAN: You know, I
would say that there’s sort of three ideas …
the first is filters, you know we … you
know we get 800 to 1,000 emails a day, obviously
we try to be responsive, but filters help a lot,
so the idea of filtering what’s inbound is really
critical in terms of the glut of information
just as you say. The second one is triage
which is to absolutely prioritize what you
can pay attention to and nobody can be all
things to all people. Nobody can be a mile
wide and an inch deep. You really have to pick
your shots and go deep on a few things and
really sort of focus your attention there. And then last
is, is snacking. I mean, snacking in the
sense that you do want to dip in because if
you’re only looking at a standard set of
inputs, you’re never going to discover
anything new. So I think there’s
an obligation to look beyond that. One of the frightening
things about Google is the whole idea of the
efficiency of “Search” is counter-intuitive,
because it doesn’t let us discover
anything new. It feeds back to us … it’s
basically … instead of a window on the world, it’s
basically a mirror that just feeds back to us
exactly what we look for and what we ask for. And one of the great
things … I hate to use this word … about
reading a newspaper, god forbid, in
this digital world, is the serendipity that
occurs in the broadsheet. You know, all of a
sudden you discover you’re reading an article
that you would never have imagined about, you know,
reptile intercourse or something bizarre,
wonderful thing … HEFFNER: (Laugh) TULLMAN: And it’s
purely the joy of discovering new
information and knowledge. HEFFNER: Do you find
that same sense of discovery on Wikipedia? TULLMAN: No, I
don’t because I think, you now,
Wikipedia has become so, sort of neutralized. I mean if you let
everybody vote on every piece of wisdom, you
probably end up with a bunch of sort of
neutral, you know, sort of not particularly
informative information. And I remember in
the earliest days of Wikipedia, you know, I’ve
known him for a long time, Jimmy … (laugh) …
you know, when it first started …
first of all Eric Schmidt when it first
began called it, you know, a poor
man’s email … okay, just goes to show you
that Eric Schmidt isn’t always right,
you know. But I think the idea
of Wikipedia was … you’d put something
out there and then people would say, “Well, I don’t agree that
that’s necessarily your birthday.” You know, I was
like “Wait a minute, you know, I sort of
control my own facts:.” You can, you know,
dispute all you want … my opinions, but
facts are facts. And Wikipedia is very
complicated these days it’s, you know,
there are 74, 00 people working every
day to edit it and on the one hand that leads to a
very interesting process. And on the other hand, I’m
not sure what the quality of information listed is … HEFFNER: Are you afraid
that by tapping too much exclusively into the
treasure trove of data, the metric economy, that
we’re going to lose sight of really the
creative impulse? TULLMAN: Well,
look, you know, metrics can only
take you so far. And one of the interesting
things about a metric driven process is that
it tends to move toward a point, let’s say
you’re 96% effective. You think the
goal is 100%, and so you focus
you energies on closing that gap. What you don’t understand
is that the game might be 150% and so, if we’re
too focused on metrics and on that kind of
measurement, we never think about disruption, we never think
about sort of leaping the gap or innovating in
new and different ways. So I think we can
definitely be sort of mislead to being too
limited in our thinking by too much of an
emphasis on pure metrics. Now having said that, I
would tell you as well that in education
and in health care, in particular, the two
words that you’re going to hear for the next
decade are going to be transparency and efficacy. Today in the, in the
world we live because we can measure
virtually everything, there are no
excuses, there are no places to hide. And we say that today
there’s a guy named John Wannamaker a
million years ago, who said that half of his
advertising was wasted. He just didn’t
know which half. Okay, today, it’s “shame
on you” if you haven’t figured out how to measure
the efficiency and the “bang for the buck” that
you’re getting with any kind of communication. And having said
that, you know, I think that what’s,
what’s really going on is if you’re doing
traditional advertising these days, that’s sort
of a penalty you pay for not being inventive
and creative. HEFFNER: It’s one thing
to measure your success by efficiency. It’s another thing
to measure it … TULLMAN: Well efficacy is
different from efficiency. Efficacy means
you’re combining cost effectiveness with
results … HEFFNER: Right. TULLMAN: Efficiency,
you know, that means you’re saving
a buck in terms of how you deliver a
process or a service. HEFFNER: So that’s a
nuance that I think you would want to seep into
the American business communities’
consciousness. TULLMAN: Absolutely,
because if you’re just trying to save your
way … I like to say, “you can’t save
your way to success.” HEFFNER: MmmHmm. TULLMAN: You know, in
every downturn in economy we’ve had for
the last 50 years, the people who invested
in the down cycle were the ones whose business grew
when the world came back, when the economy improved. The people who tried to
cut costs only and didn’t invest, discovered that
you never gain share in an up market, you gain
share in a down market. And it was the people who
actually invested in the toughest times that were
able to bounce back much more effectively when we
came out of even the last recession,
absolutely the case. HEFFNER: Well, would you
say that post recession we are not, as a, as
an American business constituency so glued to
the profit making as the central impetus
and imperative. Is that … TULLMAN: No,
I think that the big corporations really
haven’t learned anything. I think that (laugh) they
haven’t figured that out. Now I can tell
you a company, for example, like Kraft,
has said going forward 10% of the budget of each
of our divisions is going to be devoted to innovation
and learning new things. But implementation-wise,
we have no idea what that means, and nor do they. And so it’s nice
that they’re making the gesture, we need to
figure out how to make it effective. HEFFNER: In many
business models, the research and
development end, which you allude to,
is, is an after thought. How do you bring that
into the core purpose of a business enterprise? TULLMAN: Well, it’s, it’s
coming back because for almost 20 years the way
to save money in terms of this measurement of
profitability was in fact a cut back on
R&D as you say, and in the … particularly
in the CPG area, consumer products, if
you don’t invest in replenishing your
new product offerings, it’s about a five year
cycle in which case your products start to stall
out on the shelves and if you’re not
bringing new products, you’re going to discover
that you’re screwed in terms of that. So, the, the smartest
companies are doing R&D. It’s coming back,
they’re trying to do that. But here’s, here’s what
I would say about that whole score and that
M&A is the new R&D. Because M&A has
the charm of being off balance sheet. You know, you sit back and
you have a pile of money, but you don’t have a lot
of good ideas and you look at a place like 1871
… and by the way, we now have 280 companies
… because on any given day our statistics only last
like through the end of that day. But the idea is that you
look off balance sheet, you look at five or six
companies … you watch them grow, maybe you
even engage with them and then you acquire
them and as a result, you haven’t
increased your payroll, you haven’t
increased anything. And even if you
invest in them initially, that’s not something
that punishes your P&L and gives you a look over
the horizon to new ideas and new changes that are
coming down the pike. HEFFNER: Now you’ve
reached an informed readership at Inc magazine
and in terms of the community that is
Chicago … the city, the nation … you identify
in one of your columns, one of the greatest
obstacles you say to progress is this idea of
ignorance … you say it will lead to a kind
oblivion … and you, you elaborate … “Your real
knowledge is as much about knowing the extent of your
ignorance as it is about what you
actually do know.” And, and I highlighted
this passage in particular because it seems to me
that what is going on in 1871 is the exception,
it’s not the rule. How do you try to foster
that climate and we got at it with the
example of Kraft. TULLMAN: Sure. HEFFNER: But beyond Kraft? TULLMAN: Well, look I
think … first of all, you know, that’s the
idea that today saying “I don’t know” is an
unacceptable phrase and that we’ve sort of
outlawed it in 1871. Because today it doesn’t
mean you lack knowledge, today it means
you’re lazy. And the reason for that
is because it means you didn’t take advantage
of all the resources, all the information, all
the tools we have to find out the answers to
whatever you’re looking for, so this, this idea of
inquiry is part of what’s going on every single day
at 1871 and that culture is going to
expend beyond 1871. You know most of … we have
a couple of start ups and they are trying
to improve the way that education in, even, you know, in
the grammar schools is going on. And their, the thrust
of their methodology is about evidence
based learning, it’s about problem solving,
it’s not memorizing facts, it’s not rote anything. And so I, I have some
faith in the future and that we will
inject these new, sort of processes into
education and particularly into health care. In both of those cases the
biggest initial save of technology will be …that
if you talk to a teacher today or you
talk to a doctor, they say the exact same
thing … which is that the documentation and the
paperwork gets in the way of care or gets in
the way of education. And so technology
will eliminate that, then we’ll be a the next,
much higher hurtle and this the quality of
the instruction once the teachers are actually
free to spend their time instructing. And the risk there is one
size will never fit all, and so if you
have 25 students, you can’t be the sage
on the stage and sort of pontificate and assume
that they’re all learning. We’ll see a classroom
that is all about differentiated learning
and what that will mean is 25 kids will be sitting
in front of 25 devices, these kids will be
doing extra credit, these kids
will be remedial, these kids will be on par. The teacher will have
really what looks like a dashboard or an air
traffic controller, literally watching
the progress of these individual students. And that’s the only model
that matters because the school system
hasn’t changed since the industrial, you know,
sort of era when it was designed as a factory. And that’s not the way
anyone learns today. HEFFNER: Can you tell our
viewers a little bit more about 1871 … because I
think the idea of learning how to perfect and
master your business, as a unified collective … TULLMAN: The whole idea
of bringing together a critical mass was
to permit this shared knowledge … HEFFNER: Right. TULLMAN: … and reason that
you can only learn so much in a vacuum, that you
can only learn so much if you’re trying to build
your one business in your basement, is … apart from
the fact that it’s lonely and, and awful, is that a
lot of people are one step or two steps or ten steps
ahead of you and they’re learning can be shared. They don’t, you know, you
don’t have to be the 33rd pioneer to figure out who
at CPS you need to talk to in order to get certain
kinds of approvals … you … And this, of course,
good news and bad news. I mean we live in a world
today of fast followers, of people who are
constantly riffing on new ideas. And honestly anything
you launch today, if somebody isn’t
doing it quicker, faster, more productively
in weeks and months … it would surprise me. And so there’s this
prospect of constant iteration and constantly
moving the bar if you want to stay ahead of the game. That we also spend a
great deal of time on, focusing at 1871. It’s like if you’re just
standing still today in the world that we
live in, you’re moving backwards. HEFFNER: I ask that
question because I’m thinking of
your analogy of a, of a dashboard … if you
were to imagine the future of American education. And, and I ask what
ventures are more or less successful because it, it
gives an insight into what our culture is. And one of the things
you write about is, you know, we’re not
always going to be the, the masses. The wisdom of the
crowd is overrated. TULLMAN: So, these days I
say that the crowd is crap and, and the reason I
say that is because we’ve learned that
the vast accumulated knowledge of a bunch of
people that are mostly engaged in watching
cat videos … HEFFNER: (Laugh) TULLMAN: … may or
may not have a sustaining value. Okay? So, so I don’t think
anybody cares about easily influenced
individuals any more. I think we care
about highly influential individuals and reaching
them and engaging them and motivating them and
so, it’s not the crowd, it’s really the advent of
niches and the, the … HEFFNER: Specialized
knowledge … TULLMAN: … the thing
about, you know, niches is really that
they’re not small any more. I mean, you know,
there are millions and millions of people. There are millions of
opportunities and so focusing on an
engaged audience, focusing on people who
value the opinion of a small number of people who
they know and why they, and who’s
opinions they respect, is much more the
way of the future. It’s not going to be
that the crowd gets to vote on everything. Now, having said that,
there are some things that the crowd can do
better than anyone. And, we’re
still seeing that. We’re also seeing, sort
of the return of human intelligence because there
are still some functions that no machine can do and
so we’re seeing “Turkers” which is a mechanical
“Turk” … is a service set up by Amazon to let you
recruit people at a fixed cost to do all
kinds of tasks, pretty much
anywhere in the world. And we’re seeing more
and more of this sharing economy and more and
more of this distributed economy where
work will be done, ah, by any body in
any location all over the world. HEFFNER: There’s been an
adaptation and so Amazon drones a concept that
once would seem radical, if not, you know,
outright scary, is something
that, you know, after they watch a 60
Minutes segment … TULLMAN: Sure. Sure. HEFFNER: … is,
something, well that I can get my product in … TULLMAN: Well, listen … HEFFNER: … ten minutes … TULLMAN: … the
scary part is not, it’s not that, it’s
that Amazon is actually shipping product to
warehouses near you that you’re going to buy,
not that you’ve bought. And, how are they
doing that … HEFFNER: Right … TULLMAN: … they’re
doing that by actually watching your cursor
movements while you’re shopping and
mostly while you’re looking around … HEFFNER: Do you
have ethical objections to this? TULLMAN: Well, first of
all I call that “digital drooling” because
that means that I’m, I’m sort of about
to buy something, but I haven’t. What they then do is
accompany that by a, an incentive, a coupon
that says “You can have it tomorrow morning”
and if you don’t think that we live in a world
of instant gratification, we absolutely do. So, so I’m just writing
about this as we speak on a slightly
different note, which is when you talk about the drones, when you
talk about the dash-wand which is an Amazon
tool that let’s you automatically re-order
something you were about to throw away and you
scan it and it will add it to your grocery
list … that Amazon will ship to you, you know, every week …
one of the things that really interesting is …
better than 70% of our grocery basket
every month or every week when we go to the grocery
store is the same. And that’s a, that’s a
set up for something that is ideal for Amazon
which is, “If I’m going to buy the same thing
every week, why bother go t the store, right, why bother doing
anything if I can have a scheduled replenishment
program and the 20%, or whatever the number is
… that we newly discover and that is
discretionary, you know, those are opportunities. But what that tells you is
that if big box stories, if traditional retail
doesn’t want to simply be a showroom for
Amazon in the future, they’re going to have to
engage us in new ways. And they’re going to
have t engage us in two interesting ways. Number 1 is
discovery and, you know, if you go into Costco
or Walmart they have a … first of all they brought
back entertainment as shopping. Certainly for husbands. But the other thing that
they’ve done is they’ve created … they have rule
that the end caps will never be the
same, you know, two weeks in a row. And the idea is to
convince you that there’s a lot of novelty, there’s
a lot of new things. That’s not even the
most important driver. I mean the new behaviorial
driver is FOMO and FOMO stands for “Fear
Of Missing Out”. And what this means is
that when you go into Costco today, if you see
the Christmas decorations today, you have been sort
incentive and convinced of an amazing fact
… which is that if you don’t buy them today, they won’t
be there next week. Now, every other store in
the history of time has said, “We’ve got a zillion
of these things (laugh) our inventory is
bigger than anything.” Costco is like, “No, no,
no … if you don’t buy it like today, next time you
cme back you’ll be sorely disappointed and you’ll
hate yourself and your wife or husband
will say, ‘You idiot, you know we could have
bought the Christmas decorations already’.” So that plays to this
idea that we want what we want and we
want it right now. I mean there’s this
immediacy that’s just staggering in terms of how
everybody’s expectations are constantly
progressive … HEFFNER: Right. TULLMAN: … in
terms of these things. HEFFNER: You talk
about efficacy, I mean one of the
things that in, in New York and
I’m sure Chicago, as well, but Fresh
Direct has emerged … TULLMAN: Absolutely. HEFFNER: … on the scene
and led to practically the extinction of the
contemporary supermarket … TULLMAN: Yup. HEFFNER: … as a service
that can provide groceries and, and … TULLMAN: And,
and again … because of this redundancy, because
of the fact that we know that, you know, our
purchases have become institutional. Our staples are things
that we just assume we have automatically. I mean one of the most
successful companies in the history of medicine,
medical supplies was American Hospital and
they developed the “never empty”
supply closet. And the way they did
that was almost like POS systems, point of
purchase or point of use, systems and they would
just automatically restock the, the closet. So the staff was of the
view that the closet was never empty. And it wasn’t
ever really empty. But imagine how difficult
it was for a competing sales organization
to come in and say, “We want to do “x”
or we want to do “y”, or we want to sell
you these things. Or change the procedures.” And everybody
was like, “Gee, I don’t know, it seems
like it works (laugh) perfectly, the closet’s
never empty and nobody every asked about price
because price was not the driver, it was the
reliability and the availability of these
products at the times they needed them. And so they were
price insensitive, which, of course, the
best kind of customer in the world to have. HEFFNER: You’ve been on
the cutting edge of new technology since before
the dawn of Twitter and the new age of
social media. What is the end goal
in terms of the kind of economy and the kind
of “tech” culture that you’re
striving towards? TULLMAN: Well,
first of all, I think that
we’re going to, you know, we’re going to
step back in some ways because there are whole
sectors of the economy that the technology has
not even touched yet. You know digital
manufacturing is a perfect example of … when you
think of the average car dealership … about 30% of
the plastic parts in the dealership, cost more to
ship to the dealership than the part costs. And so when we, when you
think about 3-D printing and on-demand printing
and that kind of supply, we know that those devices
will now be present in the dealership
and you’ll press a button and it will manufacture the
little thing you need when you need. Now that’s a
skilled operating job, that’s not a robot. And it’s not a … so I
think the future is about knowledge workers,
information based workers, about a lot of things
where we definitely are getting rid of the middle
man … we going to have a bunch of laborers and
then we’re going to have a bunch of smart people. And the people who are
going to be punished in that new kind of
economy are the people who are average. And average is over. Average is just not
acceptable on the global scale in the global
marketplaces where we’re competing and so, I
think, you need to be lifetime learner. I think you need to
constantly be building your skills and enhancing
your skills because there’s no telling what’s
coming around the corner. But that
economy is coming. I mean, I honestly hope
that we continue to create precious objects and
things that have great utility. I mean I’m sort of afraid
that if our principle exports are, you know,
crappy movies and things like that, that, you know,
that it doesn’t bode very well for the United
States as an economy. But, I’m hopeful that
we’ll do more than that, I’m hopeful that we’ll
re-gain some leadership in education, that
we’ll certainly push the envelope in health care
and then all the other things that were
doing are all similar in one respect. They’re all about
innovation which is the incremental improvement
in processes that have existed for a
long, long time. But those create
enormous economic values, those create huge
businesses and they’re pretty accessible. And Chicago,
in particular, has really, has been the
home of so many different industries, that it’s a
really exciting prospect to be here at this time. HEFFNER: Certainly
there have been cycles of corruption and corporate
crime in a nation that was questioning its values. And you’re an
example of the opposite, of the highest ideal and
values and standing up for integrity in the
business process. But we’ve really, in
order to create a business culture that is going
to sustain those values, we have to start at
first and second grade. TULLMAN: Well, I think we
have to start with values. I mean I think you can’t
create value unless you have a set of values. HEFFNER: Right. TULLMAN: And I think this
gets more complicated than you would imagine
because big companies can afford a set of values,
that are a lot different from a start-up. I mean a start up is
trying to survive and a start up is about
immediacy and urgency and, you know, mediocre
projects can persist in large corporations … no
body wants to be the bad in someone else’s day. But their existential
for a start up, you actually have to
build something and someone to
buy something. So, so part of
it, there’s a, a sense of immediacy,
but the other thing is, what we’ve said at 1871
is if your dream is just about making money, you’re
in the wrong place. If it’s about
making a difference, making a real contribution
and that’s somebody we want to talk to, then
that’s were we’re really focused. HEFFNER: Howard Tullman
thank you so much for being on The
Open Mind today. TULLMAN: Happy to do it. And thanks to you
in the audience. I hope you join us
again next time… for a thoughtful excursion
into the world of ideas. Until then,
keep an open mind. Please visit the
Open Mind Website at to
view this program online or to access over
1,500 other Open Mind interviews. And check us out on
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on future programming.

One thought on “Open Mind: Metrics… or Peril?

  1. All due respect, but anyone who bans "I don't know" from discourse has a lot to learn.  Just one example . . .the conviction that Fresh Direct has led to the extinction of the contemporary supermarket as a service that can provide groceries?  Are you serious?  Maybe it has led to the extinction of the supermarket in your experience, but there is a great big country on the other side of those bridges and tunnels!  And an entire planet beyond that. "I know one thing: that I know nothing!"

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